London super-sewer is a waste of money

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Chris Binnie would like to save every household in London £80 a year. The capital’s construction kings would like him to keep his ideas to himself. They are preparing to dig a super-sewer, which they would rather we called the Thames Tunnel, under the river, and have successfully spooked the local authorities with stories of a return to the big stink unless it gets built.

The tunnellers want work after completing Crossrail, and in September won planning permission for this £4.2bn venture. Westminster politicians are delighted that one of their long list of infrastructure projects might actually get built, especially since they will not have to find the money. That £80 a year will go on Thames Water’s bills.

Not for the first time, Prof Binnie disagrees. He chaired the committee that recommended the tunnel in 2005, but technology has moved quite a long way since then, even in the water industry. His latest 84-page review, with information prised from the Environment Agency, concludes essentially that the super-sewer is a waste of money.

The EA can find only a single dead fish in the past decade as a result of events the super-sewer would prevent. Once the current more modest upgrades are complete, the river should meet the standards for dissolved oxygen. The Health Protection Agency found that rowers on the river suffer one-tenth the gastric illnesses of the general population. And so on.

Prof Binnie may not have a monopoly on wisdom. However, £4.2bn is serious money, and builders’ estimates generally err on the side of optimism. A price of £80 a year per household seems awfully high for a marginally cleaner river.

Too many tax breaks?

Venture capital trusts are the Cinderellas of the stock market. Frightfully risky, with investments in tiny companies liable to fall over at the slightest breeze, it is only the tax breaks that have kept them alive. Yet in the past decade the best VCTs have, quietly, had a ball. All the top 20 have doubled their shareholders’ money. Not only is that gain tax-free, but shareholders also enjoyed income tax relief when they subscribed.

It turns out those tiny companies are not quite as fragile as was supposed. Most survived the financial crisis, and other investments more than outweighed the losses from the failures. Income & Growth, the VCT that tops the latest Association of Investment Companies chart, has turned £100 into £343 in 10 years, including 73p of (tax-free) dividends.

With £67m of assets in its latest balance sheet, I&G is a substantial business with stakes in established companies. Leading VCTs now resemble tax-assisted investment trusts, and dividend cuts are becoming rarer. To us shareholders they look rather like moderately risky, tax-free annuities. The dire wealth warnings that accompany the VCT literature look increasingly inappropriate.

So do the tax breaks. VCTs have provided capital to little firms which might otherwise have failed to get it, and the managers never tire of telling us about exciting prospects ahead. But today many have cash looking for a home, and capital is plentiful. Next year marks the 20th anniversary of the launch of the VCT. Time to review whether the support from the taxpayer is still warranted.

Last-minute purchase

Ah, Lastminute.com, a name redolent with nostalgia for observers of the last dotcom crash. You probably thought it had sunk without trace, but an outfit entertainingly called Bravofly Rumbo seems to think it is worth $120m, and there is an impressive list of underbidders, too.

The original public offer, timed almost to the day of the top in March 2000, attracted so much money that private investors were allocated just 35 shares each at 380p apiece, a price that valued the company at £570m, and which after the first day was never seen again. Five years later the current vendors paid almost that price to buy it, after the number of shares in issue had more than doubled.

The 250,000 shareholders who subscribed £133 each were grateful to get back £58. Had their stampede not forced the price (and thus the issue’s proceeds) up so far, Lastminute would have failed long ago. Thus did their dotcom madness get the right answer, of sorts, for the wrong reason.

neil.collins@ft.com

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