THE ECONOMY
Mr Lawson and the one-edged dagger
JOCK BRUCE-GARDYNE
hen Nigel Lawson and I wrote a study of decision-making in Whitehall (The Power Game, Macmillan, 1976) (it hap- pens to be his only book to date — but watch this space — which is no doubt why those genial publishers Macmillan have let it go out of print) we quoted with approval Ian Gilmour's warning that Ministerial resignation is a one-edged weapon, with the sharp edge pointing to the resigner. Is his own to be one of those exceptions which go to prove the rule?
The general judgment seems to be that nothing in his ministerial career became him like the leaving of it. That is as it may be. The more interesting question this week is whether it will be but a few short weeks before even She is saying 'come back Nigel, all is forgiven.' Somehow I rather doubt it.
Certainly the Treasury will be a duller place under John Major, and us scribblers will long bewail the removal of a marvel- lous source of copy. That is all very sad. But what is the lasting effect of these stirring events going to be upon our nation- al progress — or the lack of it? Is there a silver lining (no, that won't do) — let's say a silver hand-rail to sustain us as we tip into the hard landing which seems now to be almost universally predicted?
A month ago in these columns I rather rashly suggested that following the last hike in interest rates, and the devaluation of the pound which coincided with it, Nigel Lawson might in reality have got us pre- cisely where he wanted us to be, with monetary policy at long last tight enough to choke our appalling appetite for borrowed money, and an exchange rate which was calculated to impress the foreign punters as one that had more downside than upside potential. Furthermore, that he had cont- rived to make the switch without encourag- ing the CBI and other foolish virgins to think that he would henceforth bale them out of irresponsible cost increases by clip- ping the currency. It was a classic Lawson gambit, and it constitutes, I suggest, his essential legacy to John Major.
Since then the pound has slipped another five per cent or so. A proportion, at least, of this slippage must be clawed back just as soon as possible, or it will feed through into the inflation rate. Admittedly it would be unfortunate if that required another notch to interest rates to achieve.
But if it be true that the pound is objective- ly on the low side, and that does seem to be the consensus view (OK, consensus views are more likely to be wrong than right, but here goes!), then Mr Major could find himself in the less familiar predicament of having to stick his finger in the dyke against an inward flow of funds. In that case he would have a rather wider choice of options than those that are available when the funds are running out. He could, for example, instruct the Bank of England to rebuild its somewhat depleted reserves at a profit. He could watch the pound appreciate. The one thing he could not do would be to lower interest rates. That move must yet be many months away. But happily, Mr Major, in his performances to date in his new job — and they have been distinctly impressive — has shown no sign of an urge to indulge in any such tempta- tion.
All this may be the purest wishful thinking, swiftly disposed of by another set of horror trade figures. But on the other hand John Major could turn out to have Lady Luck in the saddle with him (Nigel Lawson had many glittering gifts from birth, but I'm not sure that luck was obviously highest amongst them).
Consider for a moment the implications
of this possibility. No one doubts that the new Chancellor will have some sober landscapes to unveil in his Autumn State- ment this coming week. 1990 is clearly not going to be another year when Britain Beats the Rest. But then perhaps Mr Sobersides Major is a more suitable pilot for a slough of despond than Kingfisher Lawson.
Me, I worry just a little bit — on a purely personal note — about my old friend and fellow-author's long-term reputation. It seems to me conceivable that he may have chucked in his hand at the very moment when his wretched 'blip' has at last re- sponded to his treatment: that from now on the misery (and inevitably there is going to be quite a bit of that) will be laid at Nigel Lawson's door; while the credit for the turn-around to recovery in time for Mrs T's positively last rendezvous with the voters will accrue to his successor. That would, for Nigel Lawson's many friends, he sad. But he cannot say he wasn't warned. Perhaps he should have re-read our passage about the dubious pleasures of resigning before he went to see the Lady.
Finally, before we say a fond farewell to him, I can't resist a footnote about his parting wheeze of the independent Bank of England. I had a forebear, a hundred years ago, who offered his services to the local Liberal Party to carry their standard in a forthcoming general election. It seems that his elder brother, and indeed the whole family, were notoriously Tories of the deepest dye. The local newspaper laughed my forebear's pretensions to scorn. Who- ever heard, it asked, of a Liberal from that pedigree? Mr Leigh Pemberton and his merry men must have been sorely tempted to put a similar question. For no Chancel- lor in modern times has treated the Bank with less deference than Nigel Lawson.
So it was a beautifully characteristic parting shot. But if you read the small print it didn't really amount to very much. Certainly those who yearn for a Central Bank which could tell the Chancellor that it would not cut interest rates and throw the printing presses at the economy to enable him to win the next election would have found little joy in it. But I suppose the Bank of England plc. of Mr Lawson's dreams might be able to tell the next Chancellor who rubbished it for dropping a Johnson Matthey to get lost.
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