Ah, electric cars. Just imagine. Quieter cities, cleaner air, and motorway service stations even more ghastly as bored drivers mooch about waiting for their car to charge. Volvo drivers can look forward to being super-smug after Geely, the marque’s owner, announced that it would stop making non-electric models in 2019. The idealistic Macroniste government in France wants to go all-electric by 2030.

By 2025, we are told, a third of car sales in Europe will be electric, with world sales totalling 13m, according to one of those exponential graphs which forecasters love. All-electric cars are inherently simpler, and thus cheaper to build than today’s internal combustion vehicles. Batteries are improving, always assuming there’s enough lithium and cobalt to meet demand.

It’s a pretty picture, but there are a few stones in the road. For a start, UK fuel tax on those beastly petrol and diesel cars raises £28bn a year, about the same as council tax, and is projected to rise to £40bn by 2030.

Electric cars, by contrast, depend on government help. Miraculously, it seems they do not cause congestion, which is why Toyota’s Prius hybrid is the Uber driver’s car of choice in London. In Denmark the removal of grants to buyers has seen a sharp fall in sales.

The subsidies don’t stop there. Wind farms and solar power generators also attract taxpayers’ money, while electricity from nuclear fission will never make a commercial return.

Even if all the incentives are phased out, the challenge of remaking the national grid to cope with demand from charging points has hardly been considered. The energy transfer at a busy filling station is about equivalent to the output of a mid-sized power station.

Electric cars are nowhere near as green as they are painted. The process of turning a primary fuel into electricity, transporting it to the power point, charging the battery and finally turning the wheels, uses much more energy than refining and burning oil. Electric cars are clearly gathering speed, but it is thanks to politics, rather than economics. Their arrival as a mass consumer item promises a severe pain in the wallet for all those who are not actually driving them.

When is a loan not a loan?

Public Finance #1: You are the UK Chancellor, and you replace student grants with loans. Does this a) cut government spending b) store up big trouble for your successors or c) ensure that students will suddenly decide to vote (against you)? Candidates answering a) will fail, while those answering c) are invited to consider switching to Politics.

It seems obvious that replacing a grant with a loan must help the public finances. A grant is money gone, while a loan should come back. Thanks to a little care in structuring them, the loans wipe £5.7bn a year from Britain’s public sector deficit, while the cash has boosted university finances and allowed vice-chancellors to pay themselves like business executives.

The Institute for Fiscal Studies has been picking these loans apart. The debt now stands at over £100bn, rising at £17bn a year, of which less than £1bn counts as government spending. The average graduate sets out for employment with a debt of £50,000 bearing an interest rate that beats inflation. Repayments are structured so that the lowest-earning graduates will see the debt written off provided they stay poor for 30 years.

The IFS reckons that only a quarter of graduates will ever pay off their loans in full. The rest will struggle to qualify for a mortgage, while finding ever more ingenious ways to avoid payment, including voting for a party that promises to scrap them, at a cost of £11bn a year. Full marks, then, for Answer b).

Psst…there’s a takeover coming

Four-fifths of last year’s takeover announcements caught the market by surprise, with no suspicious trades ahead of the news. That is the PR spin the Financial Conduct Authority might put on its findings that 19 per cent of deals were preceded by activity which smelled of insider trading. Everybody believes that this business still goes on, despite the FCA’s efforts at “market cleanliness”. Sadly, there are no statistics for suspicious trades which moved prices in anticipation of takeover stories which turned out to be untrue.

This is my FT column from Saturday

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