Javid’s Carry On budget

You have to admire the sublime confidence of Sajid Javid and the Boris Johnson Government. It is a case of: ‘Don’t worry about Brexit and a minority in the Commons – let’s get on with governing.’

We now have it all: a budget three weeks away on November 6, post-BHS pension reforms and a promise to finally sort out social care funding.

All of this will be a nightmare for Robert Chote and his team at the office for Budget Responsibility (oBR) which prepares budget forecasts.

There are some immediate ‘knowns’, including the 4.1pc rise in department spending budgets for 2020- 21 already unveiled by the Chancellor. But the forecasting gaps arising from different Brexit outcomes are enormous.

If, miraculously, a politically viable Brexit deal were to happen, the Javid/Johnson plans – an early glimpse of the Tory manifesto – would have a decent chance.

Javid might even think about some supply-side tax cuts, such as bringing corporation tax down near to Irish levels. That might help prevent some of the hollowing out of uK intellectual property ( see below).

A positive outcome of the uS-China trade talks would also help. But there is no escaping the downsides. An estimate by thinktank The uK In A Changing Europe of a 7pc loss of output over the longer term if we leave the Eu shows why it is critical to get a deal. In spite of the nasty headlines, these numbers don’t look very different to those provided by the IMF almost a year ago.

What Javid will have to fight against on November 6 are the fiscal guardians. The supposed headroom, once estimated at £25bn or so, has already vanished in a cloud of accounting changes, including those for student loans.

If current budget ceilings are abandoned, the credit-rating agencies and holders of sterling assets will need to be convinced there is a credible replacement. Allowing fiscal policy to take up some of the slack in uncertain times is wise. But throwing away the budgetary and debt gains of a decade of hard times should not be handled lightly.

Cyber exit

BRITAIN is marking the uS’s Columbus Day holiday by probably allowing another byte of technology to fall into American hands.

The scenario is not unfamiliar. oxfordshire-based Sophos, a self-described ‘world leader in next generation cyber security’, finds the public markets hard after several profit warnings and falls into the hands of ‘tech-expert’ private equity. Promises are made by new proprietors, San Franciscobased Thoma Bravo, to protect uK jobs. The share price soars and investors cheer from the side-lines.

In this £3.1bn deal, currency risk is hedged by dollar pricing. But hang on a moment. When there was a glimpse of a Brexit deal on Friday, we saw how undervalued much of corporate Britain has become. The FTSE 250 index soared, the pound climbed and in the blink of an eye some of the premiums being paid for uK firms by American private equity – Cobham and Inmarsat for a start – suddenly look far less generous.

Then there is the damage to the future. The ownership of ARM Holdings by Softbank looks far less enticing now than before the sell-out of the China arm and the We Work fiasco, where it invested $10bn.

Thoma Bravo may want to take Sophos global, but it has been doing quite well on its own in ground-breaking ‘cloud’ security. Cyber is a brilliant space to occupy, and the kind of next generation tech which fits in with Britain’s security and aerospace strengths. At risk in such bids are R&D, brain power and patents.

Private equity is based on quick turnarounds and the magic of leverage and low interest rates. Blackstone’s feet have barely touched the ground with selling on Refinitiv to the London Stock Exchange.

None of this is very elevating.

Timely prize

WHAT a good start to the IMF/World Bank week in Washington. Three development experts – Abhijit Banerjee, Esther Duflo and Michael Kremer – have jointly won the Nobel Prize in economics for their original approach to alleviating global poverty.

Mr Banerjee and Miss Duflo – a team both at work and in private – are professors at MIT. Instead of just pouring money into, say, primary education, they test different learning systems in a scientific way using the kind of techniques deployed by big pharma.

It could make foreign aid look a less contentious way of spending taxpayer funds.

Alex Brummer