11 MARCH 1966, Page 27

Ul f - RI St © n




The City and the Election


FOR the City, a general election is always a bore. It tends to hold up financial deals and postpone market issues. It also makes in- vestors think harder about the future, which is an exhausting business. No one in the City seems to admit the possibility of a Conservative vic- tory. The only debate is about the size of the Labour victory. What is worrying many investors is the talk they hear about the disintegration of the Liberal vote and a landslide for Labour. They are terrified lest a majority of over one hundred should bring back a government baring its yellow socialist teeth and hungry for capi- talist flesh. A brokers' report lying on my desk refers with heavy sarcasm to the second ad- ministration of Harold Wilson as 'the golden age of the gannex.' The poi:Mar phrase, `to wear a gannex,' it says, means `to conceal your true opinions, to carry out one policy while proclaim- ing the opposite.' What they are afraid of is that in proclaiming the modernisation of Britain in a mixed economy Mr. Wilson means to carry out an unmixed and old-fashioned socialisation of Britain. It is this sort of irrational fear which is bound to be voiced in the City with increasing vehemence in these election weeks.

The Labour manifesto is likely to increase this anxiety. Steel is to have an early Bill transferring this 'private monopoly into public ownership' and rationalising 'the structure of the industry.' (Mr. George Brown confessed to an interviewer that some clauses of the old White Paper might have to be reconsidered—such as the terms of compensation—but Mr. Wilson in another inter- view denied it.) There is also to be public par- ticipation in the aircraft industry and possibly in machine tools and computers. Coming after the Industrial Reorganisation Corporation en- dowed with £150 million to promote industrial mergers with state finance this is certain to ex- cite suspicion of the 'modernisation' proposals of the Government. This suspicion will be con- firmed when the clause in the manifesto is read promising the removal of the statutory restric- tions on the publicly-owned industries, so that they can branch out into other trading and manu- facturing activities. Clearly, the public sector —regardless of the feelings of the CBI—is to be enlarged. That may be no bad thing if genuine competition between public and pri- vate sectors is to be encouraged, but what does the clause mean which runs: 'We shall encourage go-ahead firms by changes in the tax laws and by securing a larger say in the affairs of com- panies for full-time working directors'? Does this actually mean that salaried directors will be enabled to flout the policy decisions of their pro- prietors? If so, the legal basis of the capitalist system will be undermined and the whole pri- vate sector of the economy thrown into con- fusion. What makes it tick today is the ingenious device of the owner-equity share to which all residual profits or losses belong, the legal device which enables a company to procure 'risk' finance from the open capital market. If this is tampered with, there will be great alarm and despondency in the capitalist world.

I cannot help thinking that this suspicion of Labour intentions towards the private sector is responsible for the increasing bitterness of the speeches recently made by Sir Paul Chambers, the chairman of our greatest industrial group, Imperial Chemical Industries. Sir Paul has great influence and great experience in company affairs and if he really thinks that the Government eco- nomic and industrial policy. is unsound, it will undoubtedly turn business opinion against Mr. Wilson. I noticed that Mr. Andrew Shonfield, in his BBC talks on economic collaboration, while being impressed by the number of busi- nessmen, under the leadership of Mr. Fred Catherwood, helping Mr. George Brown-in the new machinery of economic planning, did admit that the friendly reiationship between the Labour government and business was still a fragile thing. He seemed to think that it depended on the Government establishing its reputation as a reluctant `nationaliser.' The Government. he said, had done its best to convince the other party that it was not seeking domination or the cap- ture of property rights on the side. That may be so, but if Mr. Shonfield believes that Mr. Wilson has had any real success in this approach, he is grievously mistaken. The feeling is growing that the Government is anti-business.

Yet the Government does deserve better under- standing than it is getting in the City. If any broker or investor were to take the trouble to read and understand the last chapter in Labour party history, he could not fail to be impressed by the rout of the left wing and the collapse of the old Marxian socialism. The party has been definitely committed—since the Statement of Aims of 1960, which modified Clause 4—to the development of a mixed economy. 'Recognising,' the Statement ran. 'that both public and private enterprise have a place in the economy, it believes that further extension of common ownership should be decided from time to time in the light of these objectives.' As the ministers chiefly con- cerned with carrying out this new policy—Messrs. Brown, Callaghan and Jay—are certainly not from the left wing of the party, we all ought to feel reasonably confident that the IRC will not be used as an instrument for 'back-door socialism.' Indeed, the White Paper made it clear that it was not a strategy for state ownership, but solely a tactic for industrial rationalisation. The IRC, it said, should sell its financial interests quickly when it saw a profit and get ready to use its resources for the next merger deal. The City knows very well that the computer industry, the machine-tool industry, the aircraft industry. are all in a mess and that the rationalisation of any one of them cannot be carried through with- out government support and finance. Why, then, take alarm at the IRC being set up with a fund of £150 million? The only parties who might be upset are the merchant banks, but they are in- capable of tackling the rationalisation of whole industries.

Alas, it is too much to expect that the elec- tion will lead to any better understanding of the Government's intention; in regard to the private sector of the economy. however honourable and svmpathelic they may he. Eriehtening speeches will be made. thre::ts w ill he hurled about. bad Will will be engendered. 1 his is democracy: this is the very. mived economy.