The business - Patrick Hosking

If Gordon Brown were to put VAT on food, it would be exactly what he needs to balance his Budget. Bu

The Institute for Fiscal Studies has spoken. The high priests of the dismal science, after much prodding about in the entrails of the public finances, have reached a conclusion: the Chancellor will need to raise £11bn in extra tax after the general election to finance his spending plans and stick within his self-imposed rules of fiscal prudence.

Ministers have dismissed the institute's annual Green Budget as mere punditry - hardly fair, for one of the country's most authoritative and independent think-tanks. But the Chancellor has proved gloomy forecasters wrong in the past. He also has some wriggle room: he has to meet his rules only "over the economic cycle", and it is he who decides when the cycle is complete.

On the other hand, his projections for the tax take are pretty optimistic, especially for corporation tax receipts, which will have to rise in leaps and bounds if they are to keep the Exchequer happy. The Treasury select committee hints strongly that it is having difficulty in seeing how the numbers add up.

What the institute doesn't say is where the government would find the extra tax if it did prove necessary. There are no obvious answers: £11bn may not sound much considering that total taxes will bring in something like £450bn this year. Yet it is equivalent to 3p on basic-rate income tax, or 10p on the higher rate, or 11 per cent on corporation tax, taking it to 41 per cent, or more than doubling stamp duties - none of them palatable or remotely likely options.

The Chancellor could commit electoral suicide and extend VAT to food, which curiously enough would raise almost exactly the requisite sum. Alternatively, he could raise all fuel duties by about 50 per cent - which would do the trick, assuming demand stayed the same. Yet that, too, is politically impossible. My outside bet is that, if the Chancellor were to go for one big measure to solve his problems, he would raise VAT from 17.5 per cent to 20 per cent.

Political madness? I'm not so sure. Norman Lamont raised VAT from 15 per cent to 17.5 per cent in 1991 and it was seen as a bit of a political coup. The extra money allowed him to soften the poll tax and it completely took the wind out of Neil Kinnock's sails on Budget Day. Cue an election victory for John Major a year later.

Windfall taxes on the oil industry and the banks are an option. Stand by for some spectacular profit figures from the likes of HSBC and Shell over the next few days. But Brown seems unlikely to damage his pro-business credentials any further. So he is much more likely to spread the pain about with more modest, stealthier measures, such as freezing allowances and tackling avoidance. I hear officials at the Inland Revenue are under huge pressure to come up with new ideas to wrong-foot those clever bean-counters in the big accounting firms.

One new idea that is creeping more confidently on to the agenda (and one for which the NS launched a campaign last autumn) is a land tax of some kind. John Prescott, announcing his plans for sustainable communities the other day, said he accepted the proposals in Kate Barker's report last year on the housing shortage. One kite that Barker flew was a land tax designed to encourage landowners to sell for development.

Two decades after insider dealing became a criminal offence, a perpetrator has at last had the book thrown at him. Asif Butt, a former compliance officer at the investment bank Credit Suisse First Boston, has just been jailed for five years. I think that's a record, but I can't find anyone to confirm it. The maximum is seven years.

Jail sentences for insider dealers have been rare and sentences of more than a few months rarer still. Only the other day, the Financial Services Authority found a stockbroker guilty of insider dealing and fined him £18,000 under its civil powers. Given that he'd made a profit of at least £4,942 on the illicit deal, the actual pain was more like £13,000.

That is not the most persuasive way of stamping out a disease still apparently rife in the City. Rarely is a takeover bid tabled without the target company's share price soaring before the bid is announced. Recent bids or approaches for Novar, Woolworths, Aggregate Industries and the London Stock Exchange have all been preceded by such telltale signs.

Butt, known as the Walrus, knew about imminent takeover bids because of his job at CSFB. He would tell his four co-conspirators - also jailed - who would place money with spread-betting firms. Their mistake was never to place the occasional losing bet, to throw investigators off the scent. The stiff sentence is a good start in deterring insider dealing. But the big rings that plague the City are, I fear, run by smarter and bigger animals than the Walrus.

Patrick Hosking is investment editor of the Times

This article first appeared in the 07 February 2005 issue of the New Statesman, Push here