Sticky Brown fingers are all over this mess

There is a case, if only out of desperation, for letting the Government's deficit balloon, but the best way to rebuild confidence is to put more money into the pockets of the workers. The best way to slow the rise in unemployment is to make it cheaper for employers to provide jobs. The cut in VAT does neither. The savings, if there are any, will simply dribble away into the sand.

The proposal to raise it to 18.5% in a couple of years' time would at least have spared us the rise in employer's National Insurance contribution, a straight tax on employment. As it is, the income-tax rises will accelerate the rise in unemployment and encourage more high earners to go and earn elsewhere.

Our Dear Leader's position as the worst Chancellor of the last half-century would be under threat if we believe that his successor is really making these stupid mistakes on his own. This week's emergency Budget - Darling's third - has sticky Brown fingers all over it. Rather than give us a little of our own money back, there is the now-familiar raft of marginal measures. Firms will be bombarded with the sort of help few want, while the small-business finance scheme promises (some time next year) to be a make-work project for the only part of the workforce who are unaffected by the crisis - the public servants.

Yet none of these measures, each of which makes our economic machine slightly less efficient, would be unbearable, if only the machine was basically sound. Stephen Lewis at Monument Securities shows why it's not. Of the £294 billion of extra borrowing the Treasury now envisages over the next five years, only £30 billion can be attributed to this week's tax cuts.

In other words, the Treasury's guess at the gap between what Labour plans to spend, and what it expects to raise, had grown by £264 billion since March. The tax rises, designed to fool foreign investors into not deserting gilts and the pound, add up to £45 billion. They are too small and too far away to be credible.

If you want some truly terrifying sums, here are some from the Institute for Economic Affairs. Its latest calculation puts public-sector liabilities at over £4000 billion, including off-balance sheet items like public-sector pensions. The borrowing bill can be paid only by massive devaluation of the debt raised to cover it, or a final realisation that the public sector is much too big for the productive economy to support.

There really is no other way. Experience over the last half-century has proved that it is not possible to raise more than 40% of national output in taxes; the biggest taxpayers leave, and the rest of us devote more time and energy to get round them.

There are some pleasant, affluent and quite successful high-tax economies, mostly in Scandinavia. The tax funds independent schools and clean hospitals, rather than lesbian outreach co-ordinators, ethnic diversity officers and all the other nonsensical public-sector posts which fill The Guardian's classified columns. If our public services worked, we wouldn't mind so much. They don't, and we do. As the pain of this recession gets worse, the state's employees are going to have to bear it, too.

* Lateral thinker Edward de Bono has had a lateral thought about the housing market. Buyers hold off because prices are falling, so the market falls further because forced sellers lower their price.

"We need a new type of contract. You sell at today's price but contract with the buyer that in a year (or two), if the house price index has fallen by x%, then you refund that x% to the buyer.

"There is now no point in waiting. So the market stops falling and you may not have to refund anything."

It's an attractive thought, but I don't really buy it. If the seller is also buying (most are) he must put some of the proceeds aside, leaving him less for the new house, and further complicating housing chains.

The real problem is that for too long we have considered our houses not as places to live which cost money to maintain, but as investments.

This bear market, once it's run its course, may disabuse us of that curious notion.

Rio Tinto falls foul of my law

It was very decent of the Chinese to mop up so many shares in Rio Tinto at the top of the market, even if minor shareholders in the miner had to be quick to realise the £60 the big sellers got. The deal rang the bell for the top of the commodities boom, just when the bulls were banging on about a "supercycle" in commodity prices thanks to insatiable demand from the emerging economies.

It looks rather different now, and Collins' first law of commodities has proved itself again: Today's shortage is tomorrow's glut. The realisation that we weren't going to run out of iron ore, copper or any of the other metals that Rio wrings from the ground was enough to bring the share price down to £20. But the long-running contested bid from BHP had served to obscure Rio's real mistake, its takeover of Alcan for cash just before the top of the market.

Now that BHP has taken its diggers away, the full extent of the damage to Rio's balance-sheet has become apparent, and despite a flood of increasingly desperate "buy" circulars this week, the share price has fallen below £15. Rather than the excitement of a takeover bid, Rio faces the tedious grind of paying down the debt while the cash flow from its sales is shrinking.

It may not be a problem for long for Paul Skinner, the chairman who let through the Alcan deal. It's an open secret that he's going to be the next chairman of BP, allowing him to depart, carrying the Alcan, to let someone else do the hard work of restoring a decent rating to Rio.

Solve the riddle of the Sands

Just coincidence, of course, that Peter Sands picked a good day to bury bad news. The Standard Chartered Bank chief executive, pictured, tossed his own contribution to the global recapitalisation into a distracted market on Monday.

He's stinging shareholders for £1.8 billion and the same dividend will now be spread over a third more shares. The new money is much more expensive than it would have been earlier this year, and there is no guidance for future payments.

While this is better than the "scrip dividend" cons from the other big banks, it is still a dividend cut, and the rest of the refrain was also pretty standard.

In February we were told that the bank had never been in better shape. It was the same story at the annual meeting, and in August, after an "outstanding half-year", the interim dividend was raised by a hubristic 11%. A month ago, when the Government was forcing the banks to tell the truth (or at least to stop denying their problems), Standard disdainfully pointed out that it had no need of public money, adding that "the group is well capitalised and highly liquid".

Well, not capitalised or liquid enough, it seems. Look back at the statements made by our other banks, and the same pattern is evident. Both Royal Bank of Scotland and HBOS hit the wall even before their increased final dividends had been paid. Lloyds TSB raised its 2008 interim payment just weeks before scrapping future divis as part of the Government bailout. In short, you can't believe a word these bankers say, because they don't know what's been going on inside their own organisations.

Standard is not as other UK banks, but the problems that have brought the Western financial institutions to their knees are going to damage its Asian clients, too. They have invested heavily in factories to make things for the West, and the West no longer has the money to buy them. Many businesses are going to fail.

Standard's cut leaves HSBC with the last dividend standing among the UK banks. Shareholders should brace themselves for bad news next year.

Ten pence to join in Minerva's lucky dip

Someone likes Minerva, the penny-stock property developer. Ivan Ezekiel, for a start. The company's finance director bought 50,000 of the company's shares at 10.5p apiece on Monday.

Bizarrely, another fan is a Japanese car-parts company, Ki International, which paid 15p for 15% of the share capital on Tuesday. Perhaps Ki sees Minerva as a useful diversification.

City folk watch with wonder as the bulging bays of its mammoth block opposite Cannon Street station climb ever higher, while at the other end of town the planners have just approved its revised proposals for redeveloping the Kensington Odeon.

Add in another City block at St Botolph's, a residential scheme at Lancaster Gate, the Ram Brewery in Wandsworth and Park Place in Croydon and Minerva offers an all-in-one shot at the best of London's future real estate. The directors sound cheerful. A fortnight ago chairman Oliver Whitehead spoke of a robust balance sheet, funding in place for key developments and a strong cash position.

The market clearly didn't believe a word. After takeover talks at 160p a share with the satirically-named Limitless World of Dubai collapsed in September, the shares plunged to 10.5p, valuing the equity at £16 million. This was little more than option money, although the price has twitched a bit thanks to the Ki purchase. If it drifts back, there's the comfort of the finance director's modest purchase. Mind you, he paid 96.5p last March, which goes to show what a shock this year has been, even to the experts.

Vote early, but not too often at HBOS

The directors of HBOS would like you shareholders to vote at the forthcoming meeting, called to rubber-stamp the state-backed rescue of the bank by Lloyds TSB. They're spending lots of money advertising, but the rules prevent them from saying Please vote in favour, and the same rules may cause terrible trouble if enough people do actually vote.

The meeting next month is to approve a scheme of arrangement; in return for winning a 75% majority of shares voting, the merger can be imposed on all shareholders. However, to succeed, the vote also requires a simple majority of voting shareholders in favour. In this test, a holder of one share has the same weighting as one with a million.

Given the resentment in Scotland and Halifax at the Lloyds deal, and the racing certainty of big job losses in both places, small shareholders might vote the merger down. Many of them have near-worthless shareholdings anyway, given the meltdown in the share price, so they have little more to lose. The HBOS directors should be careful what they wish for...