Political Commentary
Sterling: End or the beg ining
Hugh Macpherson
A couple of weeks ago I commented on the fact that the class of 1970 — the bright young entrants to Westminster — had come of age. This was amply confirmed on Monday of this week when the only money market open was in New York. One bright Tory accosted me in the Lobby and asked with a smile: "Tell me what you think would happen if, when the pound settles down, it does so at 2.70? I'll tell you. Tony Barber will start to make Healey's speech, and Healey will start to make Barber's."
No one at Westminster was in any doubt that the floating of the pound was the supreme example of the Government's making a virtue out of necessity. Indeed pro-Marketeers were almost feeling cheerful, although with the kind of guilt that mourners feel at merry Celtic funerals, since financial crises must at all costs be taken seriously. By flOating the pound, without consulting anyone in the EEC, they believed that Britain was demonstrating the same indifference to the rules of the Market they hoped to join as France and Germany have already shown. This they believe is an excellent thing, and in the short term they are no doubt right.
What is clear is that the Common Market countries did not expect Britain to float without consultations — for as early as Thursday, June 15, the French said Belgian central banks intervened, to support the pound to keep its value within the monetary accord agreed last December, which only allows a fluctuation of 21 per cent on either side of the central rates. The EEC lobby are happy that this blow has been struck at the working of the common agricultural policy, which would become an administrative nightmare if currencies in the Community were not tied to each other.
Anti-Marketeers were, for once, in at least part agreement with their opponents in welcoming the floating of the pound but were also muttering warnings that this was the beginning of the end of the Sterling Area. Anyone imagining that they are being unnecessarily gloomy need only apply to the French Embassy for a translation of the interview which M. Pompidou gave on French television just a year ago, after his long session with Mr Heath. The French President said in that broadcast that he put four questions to Mr Heath "in the clearest possible way," and on the answer to the third, dealing with the monetary question, the President had this to say: Sterling has at present a special status, known as that of a reserve currency. It would be too complicated to explain here, but it means that it has privileges. Obviously, in a community, each member must be on an equal footing, and, therefore, the British currency must be like the others. I obtained from the British Prime Minister an undertaking that this was indeed his concept of things and that, gradually — for there is no question of creating a monetary crisis in the Sterling Area — the Pound would become a currency like the others and would therefore participate in what we are trying to achieve: the creation of a European monetary union.
This thought hardly produced peals of uncontrollable laughter when put to City men on the Government benches early this week. They, like all the rest of us, have been brought up to believe in the value of our " invisibles," and since many have an odd copper or two at stake perhaps they are due a modicum of sympathy. The one common denominator among the confused reactions — for it must be borne in mind that many MPs do not understand what it is all about — is the changed attitude to Mr Heath.
There is a turning point in the fortunes of any PM, a moment when his supporters first acknowledge that he does not quite combine the wisdom of Solomon, the drive of Napoleon and the political skill of Disraeli. Quite suddenly this has happened to Mr Heath. In a way his party has always expected less of him than his more charismatic predecessors. They expect above all else efficiency — action not words — and so far they have had just that and his stock has been very high indeed. But it is an acceptance based on success for there is little else for the PM to fall back on. Now the latest monetary crisis, added to the previous reversals of policy, have finally convinced backbenchers of his fallibility. Things, of course, have not plummeted to the depths prophesied by one backbencher who claimed he would be reviled like Neville Chamberlain because he has no human qualities (like a love of dogs) to soften the blow when the nation loses faith.
It is much more subtle than that. The fact is that, probably through no fault of his own, he has broken the cardinal rule of politics and neglected his power base among the new intake of businessorientated MPs. They found common ground with the right wing who were already in the House in welcoming a departure from governmental interventionist policies. Over the last few weeks the disquiet over the reversal of these policies has grown.
The feeling is best illustrated by the experience of one backbencher who is in the building industry. By the early 'sixties his firm was building about a hundred houses annually at a cost of around £12,000 each. When the squeeze came under the last government in 1968 the company found itself with fifty unfinished houses on their hands valued at around £500,000 and the bank almost squeezed them out of existence. From that time they worked well under capacity but felt cheerful enough when Mr Heath, and in particular Mr Barber, made all the right noises about continued expansion with no threat of a credit squeeze. The advent of Mr Chataway with all the old interventionist policies under new names (what will the new Prices and Incomes Board be called?) destroyed any confidence they had gained.
Confirmation of this experience can be found in the number of business bankruptcies which rose from 4,547 in 1960 to 8,844 in 1970. During the same period the number of new businesses formed dropped from 34,620 to 30,603. Above all else the new intake, and many other government supporters, looked to the PM to provide long-term confidence but this has simply not been forthcoming.
Until now nobody has been able to question the PM. He is not naturally inclined to listen to criticism and when he has met the backbenchers over dinner, in quite small groups, any tentative question about government policy was countered by a swift resume of the situation, the bald restatement of the action taken (" we decided that this should be done ") and that formidable glare which makes strong men cry and women flee in terror.
This week the backbenchers are more ready to question decisions than at any time before. Some were recalling that the person who really fought against the detested Industries Bill in Cabinet was Mrs Margaret Thatcher, with little support elsewhere. Others believed that Sir Harry Legge-Bourke as Chairman of the 1922 Committee should become less concerned with the party's celebrated loyalty and more with conveying the almost united opposition to recent economic measures.
There is .growing dislike of the activities of Lord Rothschild and thinkers in his tank. (The Central Capability Unit is believed to have provided a strong influence on the final decision to float the pound.) In this, backbenchers have allies in the Treasury, some of whose mandarins have kicked strongly against the way in which the think-tank bypassed their institution.
Sourness has suddenly crept in towards colleagues such as Mr Heseltine, Mr Boardman and Mr Emery because of their enthusiasm for the socialist embrace of civil servants who still love the shades of Wedgwood Benn. A week is indeed a long time in politics, and the class of 1970, which so recently came of age, is in a mood to talk back. That could be the most significant effect of the monetary crisis on domestic politics.
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