15 NOVEMBER 1997, Page 28


The Chancellor with a song in his heart and a hole in his pocket


The new Labour Chancellor took up his work with, as he told us, a song in his heart. He would transform the economy, get investment going to where it was needed, put the public finances in order and knock the Bank of England into shape. His party had been swept to power with an unstop- pable majority and no one could gainsay him. Fifty years ago he was bundled out of office. Hugh Dalton's fate should be a warning to chancellors who know it all or think they do. His final error was to leak his budget to a lobby correspondent. Selec- tive leaking and planting, as I have been saying, is always a temptation to a chancel- lor. His memorial is the government stock issue that was nicknamed after him Treasury 21/2 per cent, or Daltons. Those who bought it when he sold it and held it through the years of inflation that followed have seen it lose all but a trace of its value. Anxious to get his new issue away, the Chancellor called in favours from his City friends. The Treasury issued the stock with one hand and bought it back with another, covertly using public funds to prop the price up. Meanwhile Dalton pretended that his stock was in short supply: 'Already we are almost home and I shall not keep the tap open much longer.' It is dangerous for chancellors and their advisers to play such games with price-sensitive information. As they are finding again, these are games they tend to lose. My sainted precursor, Nicholas Davenport, tells the story of what followed in his Memoirs of a City Radical: `When he lost office he came to see me and said: "I wish, Nicholas, that you would look after my money. I haven't got much." He sent his portfolio and to my dismay and admiration he had put it all into Daltons! I said to him: "A painful operation is neces- sary. An impacted wisdom tooth has to be pulled out. I am going to sell all your Dal- tons." He seemed shocked, but I got him out at over £75 [today's price is £37] and reinvested the money in well-chosen equity shares, eventually trebling the value of his original portfolio.' May all chancellors be so fortunate in their advisers.