A most appropriate person
Jock Bruce-Gardyne
Mr Callaghan deserves a special accolade for the appropriateness of his selection for the chairmanship of his Committee of Inquiry into the City of London. It was appropriate at so many levels: for the purpose of the whole operation; for the Labour Party's attitude towards the management of the British economy ; and for the Prime Minister himself.
The Prime Minister has never been a squeamish politician. He displays a robust approach to the opportunities of office. The high point of his progress to No 10 Downing Street was the manipulation of the review of constituency boundaries which occurred when he was Home Secretary at the end of the 1960s. Other politicians, before and since, have regarded a tenure of office as Home Secretary as an opportunity to place upon the statute book a major piece of what they believed to be reformist legislation. Mr Callaghan preferred to mark his sojourn with a straightforward fix in the Labour Party's interests.
So it was in character that he should seize the first opportunity to reward the man whose judiciously-timed resignation shoehorned him into the premiership. Give him his due, he recognises the need to choose horses for courses. He might have rewarded his predecessor with a roving commission to drum up international credit for the pound. But while he may not have learnt much from his three years at the Treasury, even Jim Callaghan must have grasped the point that as a fund-raiser for the British economy Harold Wilson was likely to be about as persuasive as an alcoholic campaigning for the Salvation Army.
True, he might also have learned from that calamitous stint at the Treasury that Sir Harold's personal angle on the City of
London was, to put it kindly, schizophrenic (and if time had erased those memories, a cursory examination of his predecessor's resignation honours might have served as a reminder). But then he was not looking for somebody to chair a committee to shed light on the workings of the City of London as a financial institution. All he wanted was a figure to distract the attention of the left wing of his party from its vote-losing schemes for the nationalisation of private savings and the deposits of those sheiks who had not got their money out in time.
Sir Harold Wilson fits the bill admirably. From the moment, twenty years ago, when he launched a judicial inquiry into the probity of the City of London on the basis of a chance train conversation between a Conservative Central Office secretary and a minor Foreign Office worthy—an inquiry which, in the opinion of the Bank of England at the time, did serious damage to the international credit of the UK financial system— he has displayed a consistent conviction that the City was up to no good. Every time there was a run on the pound during his first administration, his civil servants had to work overtime to dissuade him from appointing a Star Chamber to arraign 'speculators' who were not located within the jurisdiction of the British courts. Thus his credentials for the satisfaction of the Left are impeccable. Yet at the same time, he can be relied upon to produce a suitably emollient verdict. After all, as we now know, some of his best friends work in the City.
There is also something peculiarly appropriate about the coincidence of Sir Harold Wilson's appointment with the arrival of the broker's men from the I MF to look over the books. It is rather like a company celebrating the nomination of a receiver by the bank which holds a prior charge on the assets with the simultaneous announcement that a management audit was to be conducted, not by McKinsey, but by the managing director's maiden aunt. Why worry ? We have it on the word of the Labour Party's newlyelected Treasurer that we are besieged by international bankers 'trying to lend us money'. Lucky us.
It would be ungrateful to cavil, but for the fact that there is, arguably, something legitimate to investigate. Naturally it has nothing to do with the terms of reference which have been given to Sir Harold Wilson and his colleagues (if he can find any). No doubt that is just as well. What needs investigation, it seems to me, is the performance, not of the City of London, but of the Bank of England. Industry has not been starved of funds by the City, as current mythology would have us believe: where do they imagine the hundreds of millions ploughed into North Sea oil have come from ? Lord Kearton and Lord Balogh ?
No, industry has been starved of funds by the Government, aided and abetted by the Bank of England. It is the politicians who have insisted on spending further and further in excess of what they have dared to raise in taxation. Yet for all of a decade the Bank of England has encouraged them in their delusion that the inflationary consequences of such profligacy can be averted with wage and price control, because the Bank has been obsessed with maintaining an 'orderly market' for marketing government debt.
Similarly, it was the politicians who decided to float the pound in the curious delusion that such was the secret of perpetual growth. Yet it took the ingenuity of the Bank of England to ensure that we continued to squander hundreds of millions of (borrowed) money to enable our creditors to sell their sterling at a price which they could not have obtained from the free flow of the market.
Furthermore, while the Bank of England was always on hand to shout the odds for incomes policy, but was mute about the consequences of deficit financing, it has not hesitated to use its influence in the City to 'persuade' the commercial credit institutions to pump money into dubious risk situations, either in order to curry favour with ministers, or to underpin London as an international financial centre, so that governments can continue to live beyond their means on externally borrowed money.
This said, these are not matters likely to respond to the treatment of an official inquiry. After all, the last inquiry into the workings of the City, the Radcliffe Committee of the late 1950s, simply served to confirm the Bank in the wisdom of its view that money and credit did not really matter in the post-Keynesian world where the finetuning of public expenditure held the secret of eternal happiness.
On balance, therefore, we should perhaps be most grateful of all to the Prime Minister for the selection of a chairman to the new inquiry whose name alone will ensure that its results are not to be taken very seriously.
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