CITY AND SUBURBAN
Collapsed policies, improvised replacements after sterling, it's taxing and spending
CHRISTOPHER FILDES
This week threatened the ugly sight of a Conservative Chancellor with his party's hounds on his traces, baying for blood. In the event, the markets took the first bite at his heels — so that he narrowly escaped the unnerving experience of pretending to his conference that all was well, while trying to contend with a new run on sterling. His monetary policy has, of course, collapsed. To say (as ministers have) that it was the Prime Minister's policy or the whole Cabi- net's policy only makes matters worse. To say (as I have) that it was a misconceived policy does not mend them. An improvised replacement is now being prefabricated in the Treasury, and we must hope that when it is assembled it comes out the right way up, but this is not now what matters most. All eyes must now be on the Chancellor's fiscal policy, which in its turn is collapsing. He has spent his term of office trying to Balance a tight monetary policy with a lax fiscal policy, high interest rates with high public borrowings, in the mistaken hope that two wrongs would make a right. His monetary squeeze has so compressed the economy and the tax base that all his fore- casts of revenue and growth have been fal- sified. Now he finds himself needing to finance huge borrowings — f100 billion, perhaps, over three years — from incredu- lous markets. It cannot be done. It means tearing up his projections for taxing and spending — shredding his party's election promises and starting again. As for his own credit as Chancellor, though (as debtors do) he puts on a bold face, he is bust.
The Treasury Connection
THE HEAT IS ON the Treasury Connec- tion. It has dominated John Major's Gov- ernment and, even more, his friendships and alliances. When he became Prime Min- ister, he had spent all but three months of his Cabinet life at the Treasury, joining as Chief Secretary and coming back as Chan- cellor. Norman Lamont got there earlier and has stayed longer, as Financial Secre- tary and then as Chief Secretary, before backing Mr Major for the highest office and collecting his reward. His Chief Secre- tary was Mr Major's footballing friend David Mellor, who then got his promotion, and had been tipped as the next Chancellor before his fatal venture into the last chance saloon. Francis Maude, Financial Secre- tary, was supposed to follow Mr Mellor as Chief Secretary but did not survive the election. Gillian Shephard jumped from Minister of State, a modest form of Trea- sury life, straight into the Cabinet. Peter Brooke, Minister of State and then Pay- master-General, has slid smoothly back, replacing Mr Mellor to look after the national heritage. (Mr Brooke is, indeed, so obviously a part of that heritage that he ought to declare an interest in himself.) It leads to a kind of osmosis, by which man- darins and ministers too readily agree on what can and cannot happen. No private finance for public works. No new role for the central bank. No allowance for mone- tary influences when making forecasts which is why the forecasts went so wrong. No turning back from Europe — until we were forced to turn and run. Now the man- darins are under fire, but the responsibility belongs to ministers, who must take it. The next Chancellor must break the connection.
Helmut, meet Nigel
NIGEL (`Hold the back page') Lawson must be writing new endings to his memoirs every day. The version published last week- end blames Europe's currency debacle on those who, he says, undermined the credi- bility of the Exchange Rate Mechanism, by vesting it with the incredibility of economic and monetary union. Self-designated good Europeans see no difference, which is why Lord Lawson is so cross with them. The ERM for which he fought Margaret Thatcher was a European Bretton Woods — meaning that exchange rates would remain fixed until governments agreed that change was needed. No sooner had his suc- cessor put us into it than it was relabelled (by Jacques Delors) as the first stage of EMU — meaning that any attempt at change would be retrograde and should be avoided. So, when it could not be avoided, the wheels came off the machine and we
came out. Helmut Schlesinger in his own ham-fisted way has now said the same thing, which is one reason why his leaked note caused so much annoyance. The ERM to which the Bundesbank thinks it belongs is the ERM which Lord Lawson bet his job on joining. They should meet.
Ritz on the menu
NOW, AT THE hour of need, I can unveil a brilliant innovation in financial engineer- ing: my plan to save the Ritz Hotel, The Ritz and I have long been friends, and I was a shareholder — owning, to be precise, one share, and accepting my dividend in cock- tail olives — until Trafalgar House bid for it and took over. Sir Nigel Broackes, Trafal- gar's chairman, is another old friend of the Ritz, and has handled it with care and love. Now Trafalgar itself has been raided, with the Keswick family, lords of the East, swarming aboard from Hongkong Land. Henry Keswick, I am bound to say, was an admirable chairman of The Spectator — `like riding a tiger,' he told me, 'the most difficult bit is getting off.' Equally, the Mandarin in Hong Kong is an admirable hotel, closely tied to Hongkong Land, and would make a natural soulmate for the Ritz. I have a better idea, though. I see this as a perfect opportunity for the first ever customer buy-out. Shares in the Ritz should be offered to friends of the Ritz. It could be done quite simply, over a glass of cham- pagne or towards the end of lunch. Michael or Franco or Ray would approach the table courteously, asking: 'Shall I put the hotel on the bill?' We would sign, happily, and In no time the vendors would have money and the buyers would have control. Refresh- ments after the annual general meeting would be quite something. I offer my idea free of charge, but if Sir Nigel likes it he might let me have my share back.
One day soon
THE PROSPECTS for our economy, for the governing party and for the country were summed up years ago by Huey (King" fish) Long, the autocratic governor of Louisiana, speaking of his own feudal state. `One of these days,' said the Kingfish, the people of Louisiana are going to get good government. And they ain't going to like If.
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