POLITICS
The triumph of Mr Lawson and the Abnormals
FtRDINAND MOUNT
In those entertaining conversations with celebrities, conducted in the better class of newspaper by Mr John Mortimer or Mr Terry Coleman, there is often a bit which I particularly enjoy. It comes towards the end, after the Celebrity (usually a he, women seem to be less evasive on this point) has gone on at some length about `what the Christian tradition means to me' or 'the spiritual values I relate to'. At the moment of truth, the interviewer sticks in the question: 'Do you believe in God?' And the Celebrity splutters: `Well, in the actual sense you put the question, in terms of a personal God up there, I would have to say, on the whole, not exactly, but there is a very real Christian sense in which . . . etc, etc.' I seem to remember Mr Tony Benn being delightfully skewered thus.
The aficionados have been waiting to hear Mr Nigel Lawson flounder in the same way when asked 'And do you still believe in monetarism?' At the Mansion House banquet, they thought they had got him. Since M3 had been the prime measure of how much money was sloshing around, did not the Chancellor's relegation of M3 to the second tier of indicators mean that the Government had effectively aban- doned monetary control? Mr Lawson claimed that the Treasury, even back in the days when he was Financial Secretary, had always said that monetary policy would be based on a whole range of indicators. But it was a lame claim, since we all knew that M3 had been the cornerstone of the Medium-Term Financial Strategy.
What he should have said — and didn't quite say — at the Mansion House was: `Yes, we were wrong to place so much emphasis on M3, for a single indicator is always liable to give a false reading under the pressure of time and human ingenuity. But if you think we are abandoning sound money, just watch what we do to short- term interest rates. Just because we played the game rather crudely in the first half, that does not mean we shall not play harder and with greater subtlety in the second half. Like Keynes and every sensi- ble man since, I believe that money mat- ters. And my faith grows stronger with the passing years.'
But there, it is not for us to write the Chancellor's speeches for him. We ought, however, to note the yearning — some- times conscious, sometimes not — among Tories no less than among their opponents to detect backsliding and to be the first to spot Mrs Thatcher retreating from 'mone- tarism'. Several Conservative MPs like to fancy that it has all happened already and to talk of 'the Thatcher era' in the past tense. But where is the evidence?
Well, it is pointed out, for example, that the Treasury has finally given up stating a pay norm for public servants. Now the argument about this has been grinding on for years. The 'Normals' argued that by announcing a declining figure every au- tumn (five per cent one year, four per cent the next, and so on), pay settlements in the public sector could be nudged lower, and this good example would in turn influence the private sector. Not so, according to the 'Abnormals' — who always included Mr Lawson — it merely made the Government look silly to go on setting 31/2 per cent norms when in practice civil servants, firemen and the rest were getting pay rises of up around 7 per cent. Norms do not help. The way to stand firm against exces- sive pay demands is simply to stand firm. What has happened now, as far as I can see, is simply that the Abnormals have won, largely because Mr Lawson has now been at the Treasury long enough to start getting his way on most things. But I don't see much sign of public employers going soft on pay. Look at Sir Keith Joseph and the teachers, or Mr Ian MacGregor and the miners, even the Nottinghamshire ones.
Then we are invited to take the agonies of 'Star Chamber' as evidence that mone- tarism is in trouble. Look at the appalling struggle to reconcile the politically moti- vated demands of spending ministers with Mr Lawson's aim to hold public expendi- ture steady in real terms over the next couple of years. Poor Lord Whitelaw, how one's heart bleeds for him, how his heart bleeds for himself. Poor Mr John MacGre- gor, the new Chief Secretary to the Treas- ury. How will they manage to meet the target in time? Will Mr Heseltine resign? Will Mr Kenneth Baker appeal to Prince Charles to get his money for the inner cities? Will Sir Geoffrey Howe appeal to Mr Bob Geldof to get his overseas aid budget through?
There is, I am afraid, a lot of silent- movie melodrama about all this. The real- ity is that these exercises are not nearly as agonising as they used to be. Five or six years ago, the autumnal argument would typically be about £5 billion-worth of spending, with only £1 billion or so put by in the reserve for contingencies. Now the figure are, very roughly, reversed. The expenditure items in dispute add up to only £1 billion or so, and there is a contingency reserve of over £5 billion. Public expendi- ture may be too high, but its growth is more or less under control as it has not been since Good King Roy's golden days when one year the Government was actual- ly in the black.
What has made life easier for the Treas- ury is that the fruits of the grim industrial struggles have begun to show up in the figures. British Steel expects to make a profit this year. The National Coal Board expects to do the same this year or next. British Rail's losses are being reined in. Most of British Shipbuilders is being sold off, and so on. There are patches of fudge in all these calculations, but they still represent a different world from the early Thatcher days when the Treasury used airily to forecast improvements in the finances of the nationalised industries of up to £3-£4 billion without much idea how they were to be attained.
Among the melancholic school, the rumour that the Government is about to backtrack on its plan to abolish the State Earnings-Related Pension Scheme is greeted with especial Eeyorish relish: 'There, I told you so, they have Given Up.' It would be a pity if Mr Fowler does backtrack (the Prime Minister may yet prevent him). I still do not see what business it is of the State's to preserve income differences in retirement. But so far as controlling the costs of the scheme goes, Mr Fowler can quite easily stop Serps from ballooning out of control by worsen- ing its terms for the beneficiaries. This seems to me more ratlike than doing away with the whole scheme, but even this much was not on the agenda two years ago.
All this is regarded in the trade as dry stuff, not at all 'sexy', to use one of my six least favourite epithets. I wonder about that. Several times in the past week or so, I have seen my fellow analysts ruminate on the modest improvement in the Conserva- tives' standing in the polls; 'mystifying' Is the word often used; the Bernie Grant factor has been invoked, by this column among others. But I would not underesti- mate the impact of sustained control of public expenditure; indirectly felt no doubt, and not without its downside (our old friend Savage Kutz), but not without its effect on the confidence of a public stretch- ing far beyond 'the awful young men' who write brokers' circulars. Since we in the trade live off thrills and spills, we are apt to underrate the lure of dulness.
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