The pressure is all the greater since, despite October's bounty of a pounds 7.3bn corporation tax inflow, the Treasury had expected still more this year and may face a shortfall of pounds 2bn. Worse still, the increase in the corporation tax take is set to tail off sharply in the next financial year, as receipts respond to this year's profit slowdown. The Institute for Fiscal Studies is projecting a much more modest increase for 1996/7.
With Tony Blair currently wooing business, the Chancellor cannot afford to be seen increasing the burden on the corporate sector by smash and grab.What is more likely is that he will exploit timing technicalities to boost revenue next year by sleight of hand.
One option would be to reduce the advance corporation tax credit paid to tax-exempt institutions such as pension funds by another notch, from 20 to 15 per cent, while leaving the ACT rate at 20 per cent. The Chancellor could combine this measure with another cut in corporation tax from 33 to 32 per cent. The revenue gain and loss of about pounds 1bn would roughly cancel each other out - with one significant rider. The revenue gain would be immediate because ACT is payable at the same time as dividends. The revenue loss, however, would not be felt until 1997-8 because of the nine- month delay in paying mainstream corporation tax.
Meanwhile the Government could present such a change as a much more effective boost to investment than Gordon Brown's proposals three weeks ago, by claiming it addresses the bias in the tax system towards high dividend payouts at the expense of retained profits.
When Norman Lamont took pounds 1bn off the pension funds the same way, by reducing the ACT tax credit to 20 per cent, share prices fell sharply, there was uproar in the City and there has been a long campaign since then to forestall a repeat. The institutions argue quite rightly that if their total flow of dividend receipts falls then so does the actuarial value of the pension funds, which eventually have to be topped up again, largely by companies rather than employees. One way or another, the Government would be playing with pension money.
However, the tactic of off-setting the ACT change with a cut in corporation tax rates, to rebuild the resources of the corporate sector again, is probably the only way the Chancellor could seriously defend the move without losing his remaining friends in the City.
Another technical option would be to change the timing of mainstream corporation tax. At present, this is paid nine months after the end of the company year. However, in several other countries, payments are made on a quarterly basis during the course of the company year. If the Treasury were to move to such a system in one year flat, the effect would be a staggering temporary boost to revenues of approaching pounds 20bn. In practice, such a change would be phased in, in order to soften the cashflow impact on companies. He could easily get several billions out of the manoeuvre - sufficient to finance more than 1p off the basic rate. Most voters would have a hard time understanding where he found it.
Doubts as electricity row comes to a head
The political row over the reorganisation of the electricity industry comes to a head next week when Ian Lang, President of the Board of Trade, decides whether to refer the bids by PowerGen for Midlands Electricity and National Power for Southern to the Monopolies Commission. Many believe his clearance of all the other bids so far indicates he will confirm open season by approving these two as well.
But there is a niggling doubt, at least partly because Mr Lang remains adamant that he really is treating the bids case by case, on their merits. It is still possible that these two bids, the most dramatic moves yet towards vertical integration between generators and electricity distributors, will be kicked into touch.
Since a monopolies inquiry would be a complex one, focusing on matters such as the operation of the electricity pool - a subject few pretend to grasp - it would be surprising to see an outcome before the early spring. By then, the two target companies are more than likely to have been carried off by other predators.
Since there is no case for referring bids by foreign companies, Midlands and Southern will have no protection at all. This threat of a foreign walkover has been widely canvassed by PowerGen and National Power in their campaign to avoid a reference.
If there is one, Midlands and Southern would then have to pull an instant alternative out of the hat. The obvious step would be to create the first merger between two regional electricity companies. Southern has certainly said in the past it might be interested in such a move, which is the one to watch out for if Mr Lang does refer the current bids.
Railway timetable steaming ahead
It may be hard for the Opposition and the train-spotter brigade to accept, but the Government has privatised nearly half the railways already by value, with the pounds 1.8bn sale of the rolling stock leasing companies. Claims yesterday that it is about to delay the flotation of Railtrack from the April or May date now slotted in appear to be based on strategy documents written by advisers before the Tory Party conference, when Sir George Young, the Transport Secretary, bit the bullet and announced the flotation date. Delay was an option that he discarded.
With the railway timetable steaming ahead, the more interesting question is whether the British Energy sale, slotted in for early summer, a few weeks after Railtrack, is still on schedule. The two most difficult privatisations the Government has attempted are set up for the same brief window in the summer.
British Energy, the merged nuclear company, has told ministers that it could not possibly ready itself for an earlier sale in the spring, because of the mountain of paperwork required to transfer nuclear site licences to the new organisation.
There are other big issues still to be settled, including the debt burden. The Government is likely to keep this high deliberately - perhaps as much as pounds 4bn - to prevent the company splashing out on takeover bids for electricity distribution companies. But that decision is a technicality beside the task of preparing a convincing valuation of the company's long- term waste liabilities for a City prospectus. If one of these sales is to be delayed or called off, nuclear is the likelier candidate.Reuse content