25 JUNE 1994, Page 22


Burning, scratching, blood and bandages it's H.M. Government's stock


This is a fine time to tell us that cats suffer from sunburn. Rub a high factor sun- block on their noses and ears, so the vets now advise. Then, I suppose, bandage your hands. The markets are like that, too painful burning, angry scratching, blood and bandages, and a sense that the block ought to have gone on some time ago. Four and a half months have seen Her Majesty's Government's stock lose one-sixth of its value. This (I was saying here on 29 Jan- uary) is the proven pedigree dog which in 1993 had its year. It gave you a return of 26 per cent after allowing for inflation. Should we, I asked, learn to love it? Only if it had somehow cured itself of inflation: 'The growth of inflation came with the growth of government, always with more bills to pay and always tempted to pay them by printing more stock or more money. I will believe that inflation is dying when I see govern- ment shrinking. Until then, I shall beware of the dog.' By now it has bitten Kenneth Clarke. He can no longer borrow at a fixed rate of interest on terms which the Bank of England can recommend him to accept. For a man who has budgeted to increase the National Debt by one fifth in one fiscal year, that is something of a setback. Instead he is raising his latest £2 billion (it will keep him going for three or four weeks) at a rate which will float up and down with the price of money, like a mortgage. He came down to the City last week to tell the markets that they had got it all wrong. They promptly compounded their error, if that is what it was. Pigs, so the vets say, protect themselves against sunburn by rolling in mud. Markets, too.