Jason Nissé: Gordon's duck could be blown out of the water

UK plc has to fork out once again as the Chancellor balances his books
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The Independent Online

They call him Teflon Tony. And well they might. Our Prime Minister survived one of the most astonishing and damaging financial scandals of his - or any prime minister's - career last week. While banks might lend you money at usurious rates, a £35 charge for an unauthorised overdraft is as nothing to the payment for peerages deal the Labour Party has agreed with the tycoons who bailed it out last year.

The fact that Mr Blair is still in the job is assumed to be down to two factors - first, that he is going soon anyway so why force the issue; and second, that Gordon Brown could have stabbed him in the back, but decided now was not the time.

After all, the heir apparent has a Budget to deliver this Wednesday. And while he might be tempted to pass the buck to Alistair Darling or even Ed Balls, it wouldn't be a Gordon thing to do. There is, of course, a bit more tinkering required.

The Chancellor will present this Budget as a triumph. Tax take, thanks to the timing of corporation tax revenues and the extra levy put on North Sea oil, will look healthy, allowing him to say proudly that he is within his Golden Rule. Now I know I've said in the past that this is far too complex to explain, but it's actually become more complex in the past couple of years as Mr Brown has stretched its meaning to avoid breaching it. If any of you really want an explanation, see me after class.

Hamish McRae (see page 15) recalls the famous quote about plucking geese when talking about the Chancellor's taxation strategy. I prefer a different poultry analogy - that of a duck travelling across a lake. Gordon likes the headline tax bands to look like the duck - calm and serene, with no sudden jerks. Underneath there is frantic movement - changing allowances, tinkering with credits, launching anti-avoidance measures.

To keep his finances on track, he will need to raise between £2bn and £3bn this Budget. This means we can whistle if we expect any serious reform of stamp duty or inheritance tax. What we will get is another set of extra taxes on business, dressed up as attacks on tax avoidance. But the more tax business has to pay, the more incentive there is to set up in a low-tax environment, such as Ireland, Switzerland or even France.

However, Gordon's big success is that he won't have to revise down his growth forecasts in this Budget. This can wait until the next pre-Budget statement, at least eight and a half months away. By then it could be someone else's problem.

BAA in the bullring

Don't mess with BAA. When Ferrovial proposed a mano-a-mano chat with the airports monopoly - which might have led to a £8.8bn offer - it found itself bounced into an announcement. All fair in love and bid defences, I suppose. But where do we go from here?

If the Spanish are serious about getting BAA, then more money will have to be put on the table. Get close to the magical 900p a share - or £9.7bn in old money - and attention will fall on Ferrovial's financial structure.

It has vowed to abide by BAA's investment promises at Heathrow, Stansted et al. But BAA will argue that if Ferrovial has to borrow heavily to finance a deal, it will be under pressure to defer a lot of this investment to pay down debt.

This battle could well get dirty.

If the FSA won't do it ...

The Financial Services Authority said on Friday that insider dealing is getting worse in the City. This reminds me of my mother's reaction when my English teacher told her my handwriting and spelling were poor. "What are you going to do about it?" she demanded. "He's been at this school for seven years."

Well, John Tiner. What are you going to do about this insider dealing? You - or your constituent organisations - have been regulating the City since the mid-1980s.

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