Prudence and the Pill
PRUDENT Passage is a City byway in the hinterland beyond Cheapside. It is also, now, the danger signal in a Lawson speech. When he gets to the passage on prudence — take no risks with inflation, maintain a prudent stewardship, adhere to our strategy, and all that — gilt-edged stocks tremble. His triumphant speech to his Party conference was full of prudent pas- sages. 'A fine speech', said Sir Peter Tapsell afterwards. 'How sensible not to say anything about the economy, or the currency.' Sir Peter, the inveterate foe of monetarism by numbers, has argued for some time that the best way to cheer up the financial markets would be for the Govern- ment to improve its chances of getting re-elected, even if (especially, he says, if) it means spending more money. Sterling and gilt-edged, given this treatment, looked more dazed than pleased, but they have had to take a lot of prudence. First they met the Governor of the Bank of England, returning from Loughborough (the new Delhi) with word that sterling M3, the preferred and principal monetary indicator all these years, was meaningless and should be dropped — something he would men- tion to the Chancellor when they next had to talk about it. A Mutt and Jeff act — or Batman and Robin? Then the Autumn Statement, to say that everything was on course, or that higher spending was `demand-led' by local authorities and social security claimants. (I wouldn't mind lead- ing the demand for money myself.) The Chancellor's touchstone of prudence is that public spending, as a proportion of the total output of goods and services is still falling. Note that the privatisation sales, budgeted to bring in £5,000 million a year for three years, are not, as is often said, counted as revenue. They are 'negative public expenditure'. It all looks like a straightforward bet that, in the fifth year since the economy turned upwards, the revenue will be buoyant enough — VAT on the retail boom, income tax on the wages the Chancellor complains of, and corporation tax too — will pay for all and leave room for the tax cuts. Prudence was never the same girl after she discovered the Pill.
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