The chancellor proposed merging the budget with the autumn statement. This would be his last, and in future a single annual review would cover both taxes and spending, as in most well-run countries. The prime minister fully agreed:”The right budget, at the right time, from the right chancellor”.

No, not 2016, but 1993. Norman Lamont was fired a few weeks later, carrying the can for Britain’s ignominious exit from the Exchange Rate Mechanism. Philip Hammond must hope that it’s different this time, and that he will be allowed to play out the old game of bad news now, followed by pleasant surprises ahead of the next election.

The bad news is quite bad. The showy (future) rises in income tax thresholds obscure the rises in National Insurance, which is becoming every chancellor’s go-to stealth tax. A trivial change in rates of contributions disguised the NI attack on perks, which the tax experts at Smith & Williamson reckon will raise nearly £40bn more revenue over five years.

Every chancellor needs a slice of luck, and Mr Hammond’s is to be in charge when investors hardly seem to care about how much the government borrows. At today’s rates, it seems rude for the state not to ask for more. While the grands projets like Hinkley Point and HS2 will actively destroy the nation’s wealth, the low-key infrastructure improvements that our low-key chancellor is funding will earn more than their cost of capital, and thus contribute to future growth.

Getting these projects over the hurdles of bureaucracy, conservation rules and local protests,  and then finding the skilled labour needed for roads and houses promises to be much harder than Mr Hammond seems to think. Still, at least the money is there to try.

Sound thinking

At last, a secondary equity fund-raising that avoids lining the pockets of the rentier bankers. Oil explorer Sound Energy has raised 5 per cent of its market value by issuing new shares at the same price as the old, while giving private shareholders a (fleeting) chance to subscribe alongside the professionals. The mechanism has been developed by Primary Bid, an outfit set up for just this sort of deal. Retail money allowed the offer to be expanded significantly.

Crucially, the fund-raising was underwritten, not at some massive discount, but at 81p, the market price. Rather than simply helping themselves to a riskless fee, the underwriters had to convince themselves that Sound shares were worth having if others failed to buy them. In other words, this offer was much more like an old-fashioned rights issue, with the underwriters showing their confidence in the business.

Unlike a rights issue, this was all done at high speed; investors who were not paying attention last Thursday will have missed out. However, they should not complain too loudly: if they like the sound of Sound, they can buy the shares in the market at (almost) the same price.

This act has to go, Darling

Another nail for the coffin that one day awaits the 2008 Climate Change Act. Well, more of a drawing pin, really, but every little helps. This one was driven by Alistair Darling, Labour’s best post-war chancellor, and now sticking a sharp point into Ofgem’s chief executive, Dermot Nolan.

With the clarity of distance, Lord Darling can see the looming disaster that is Britain’s energy policy. As he put it, there is no longer anything resembling a market in energy. Years of subsidies, regulation and intervention has left pricing “completely opaque“. The result is expensive electricity at a time when natural gas has never been more plentiful and widely available.

This is hardly Mr Nolan’s fault, and he ruefully agreed with Lord Darling that the mishmash of wind farms, solar panel arrays and wood-chip burning power stations, liberally sprayed with subsidies,  has all but destroyed competition.

There is no easy way out of this maze, and a bonfire of the subsidies would doubtless be prevented by environmental restrictions on bonfires. The fundemental cause is the wretched Act, with its fantasy commitment to cut CO2 emissions by 80 per cent by 2050. There is no realistic possibility of achieving this, and one day the act will have to go. It’s a pity, though, that Lord Darling was not one of the five MPs who had the courage to vote against the Bill in 2008.

This an expanded version of my FT column from Saturday.

 

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