Mr Clarke has been engaged in a one-man campaign to persuade both the City and his own party that nobody should be looking for a big tax bonanza this year. If you believe this - and half the City does, while the other half reckons it is simply news management to prepare the ground for a big giveaway - then the health and education spending deal reinforces the message.
For the Budget arithmetic looks pretty unforgiving. The Government's borrowing requirement this financial year, the fifth of the recovery, is likely to be a couple of billion higher than the Treasury's latest forecast of pounds 26.9bn. The massive deficits at hospitals across the country highlight how tough a task the Chancellor set in last year's spending plans. Expenditure control is never easy. In the 12 months before an election, it becomes virtually impossible.
The fact that inflation has been lower than expected this year means that the existing cash limits allow for a bit more growth in real terms than expected. But it will be difficult to recoup the extra pounds 500m-pounds 1bn for health and any extra for education just agreed by the Cabinet through cuts in other departments' spending totals. It would not be plausible for Mr Clarke to announce cuts in the overall spending figure when he stands up on 26 November. Even an unchanged total will strain credibility.
The Chancellor's other priority is to keep the profile of government borrowing on a downward path without the embarrassment of having to postpone a balanced budget until the next millennium. That leaves just two options on the tax front. Mr Clarke is either looking at a very modest reduction of a billion or two, perhaps a penny off the basic rate of income tax. Alternatively he could achieve a bit more with perhaps the abolition of inheritance tax thrown in for good measure by raising corporate taxes. Why leave that option open for Labour's first budget, after all?
All this forgets the rabbit lurking in the bottom of the Chancellor's hat. His current forecasts for tax revenues are extremely cautious, revised down after the notorious shortfall in VAT and corporation tax receipts last year. Close some loopholes, point to the very buoyant economy, and hey presto! Suddenly the circle is squared. Mr Clarke can allow higher spending on hospitals and schools, succeed in producing prudent borrowing forecasts and justify a couple of billion off taxes as well. Magic.
BA may fly under a flag of convenience
This is your captain speaking. British Airways flight 100 to Bombay is about to depart. Those passengers with onward connections should contact our global ticketing headquarters in Kuala Lumpur, those with lost luggage complaints should direct their enquiries to our worldwide baggage centre in Taipei and those requiring hotel reservations will find our central marketing department in Lahore only too willing to help.
In the event of a sudden loss of cabin pressure, you will find that this aircraft is registered in Liberia and all the flight attendants are Greek, unless they are Chinese. We hope you enjoy the flight and thank you for choosing British Airways, unless of course you were unlucky enough to work in the accounts department.
BA's decision to outsource 10 per cent of its accounting operations to the Indian subcontinent, where qualified staff are plentiful and the wages are only a fifth of those back home, will be met with an understandable mix of fear and trepidation among the rest of the workforce.
If this is what becoming a "virtual airline" means, then the sky is truly the limit. If the books can be kept just as easily in Bombay as Brentford, then why not outsource every other backroom function? Indeed, why stop there? Engineering and aircraft maintenance could be done just as easily somewhere in the Asia Pacific where the wage rates are low and they don't have the burden of all those social wage costs. Even the flight attendants need not be employed and paid according to British working practices and salary levels since they spend half their time in international airspace.
It may be that the only way BA can achieve its target of pounds 1bn in savings is through such draconian action. It does not stop at accounts clerks. Ground handling staff have already been told they will lose their jobs unless they take pay cuts, and the same fate is awaiting regional cabin crew. BA is an exceptional airline. But in its pursuit of cost cuts it is in danger of inadvertently turning itself into an airline flying under a flag of convenience. The effect would be to devalue the brand and create more problems than it solves.
Schroders could derail the gravy train
Cartel? What cartel? Yesterday's pounds 48m rights issue for More Group was the second time in less than a week that Schroders has successfully tried out its new auction system for sub-underwriting commissions. Until now, the City has operated a fixed commission system that has been eyed with deep suspicion by the Office of Fair Trading, which sees it as a nice little gravy train for merchant banks and institutions.
Schroders has demonstrated that there are savings to be made - though not enormous ones - and it plans to continue fine-tuning the auction method in the light of experience with the first two. Meanwhile, fund managers - the people who benefit most from fixed commissions - are lining up solidly behind the initiative, not out of altruism but because it looks like the best way of persuading the OFT not to refer the whole matter to the Monopolies and Mergers Commission.
Meanwhile, there is a second, less well publicised but related initiative that could prove equally potent a tool in defence of the underwriting system, and the closely related matter of pre-emption rights, the mechanism that gives shareholders first call on any new issue. One reason rights issues often look expensive as a way of raising capital is that companies invariably maintain or even raise the dividend at the same time, to keep investors sweet.
The discount in a rights issue is equivalent to a free issue of shares, and so the dividend really ought to be cut rather than maintained or raised. Otherwise, the critics have a point when they say rights issues are expensive ways of raising capital. The National Association of Pension Funds and the Association of British Insurers say they are receptive to flexible dividends, as well as lower fees. Now it is up to companies to act on the suggestion.