In the City
A Thatcher boom?
Nicholas Davenport
To put it mildly, the Stock Exchange would be immensely relieved if the Labour government were swept out of office. The first thanksgiving would be over the collapse of the Companies Bill which if enacted could possibly bring dealings in domestic equity shares to a halt. This is through the clause proposing to make 'insider dealing' a criminal offence. The Tories have just lost an amendment which would have defined 'inside dealing' as 'information confidential to the company'. The Bill defines it as 'information not generally available which would be likely to affect the price of securities'. This could cause brokers to close down their research departments, which provide private and institutional clients with detailed analyses and comments on companies made after visits to the company headquarters. If the researchers are provided, as they should be, only with information which would be available to any member of the public who took the trouble to call, there is nothing 'criminal' about it — although their comment might well cause the price of the shares under review to rise or fall. What is 'criminal' would be the use of secret information about a 'take-over' bid or a company's dividend: but that is already prohibited by the rules of the Stock Exchange and the Take-Over Panel. Directors, for exaMple, are not allowed to deal in their own shares within certain dates of the announcement of profits and dividends.
What the Stock Exchange has been fearing is a department of the Board of Trade being set up to investigate allegations of 'insider trading' as loosely defined by the Bill. It would be far less efficient than the Stock Exchange Council's own investigators. The Council already deals efficiently with dozens of complaints of improper dealing. When you have an open market dealing in billions of security values, you will always run the risk of some clever rogue manipulating the market to his own advantage but, as we have seen in the last few years, the rogues will eventually be caught. We must not be too upset by the very few market manipulators who get away with it and escape justice. In the old days when I first entered the City there were many more. And Keynes once said to me: 'Without some insider dealing there would really be no Stock Exchange.'.
The relief which would be felt in Throgmorton Street over the defeat of the Labour government would not of course be confined to the small item of the Companies Bill. It would be a thanksgiving for escape from a dark and perhaps dreadful future. A Labour government has meant a borrowing government with a debt mountain growing like the butter mountains of the EEC. It has brought dearer and dearer money and the slow stifling of private enterprise. Admittedly it has brought an enormous commission business to the brokers prominent in the government bond market, where the turnover is seven times as great as the turnover in the equity markets.
And who were the people whoring after all this government money but the respectable life and pension funds who used to be the sober guardians of private enterprise? Their funds have been growing at an amazing rate — their cash flow was over a billion last year and is now exceeding £9 billion — and according to Mr Joel Barnett, Chief Secretary of the Treasury, they have been putting the bulk of their new money into government bonds. Labour members have already suggested that the government should take powers to direct the investment of their funds and although Mr Barnett has not agreed up to date there is no doubt that another Chief Secretary, Marxistindoctrinated, would enforce direction. So, if Labour was to go on ruling, the Stock Exchange could only look forward to a state-directed capital market — not the free market which had financed private enterprise in the past. The NEB would be taking over and the market in free enterprise securities would be drying up. So the prospect of the government's defeat brought a gust of buying to the Stock Exchange. Members could see the end of domination by the government; the return ' of freedom for savings to find their way into private enterprise. As Mr Harold Lever said in his remarkable speech on 1 March. 'There is enormous merit in the motivation of the private sector and in the contribution of the small firm to the economy'. There was a 20 point jump in the Fr index of industrial equity shares on Friday last and at 534 it very nearly broke through its previous high point of 535 reached in September last year. The Thatcher boom will soon out-top the Heath boom of 1972 in which the index touched 540. But she must proceed more cautiously if she wilts. Her first revolutionary move — much more significant than Mr Heath's 'quiet revolu. tion' — would be to call the trade union leaders of the coal, gas and electricity boards together with their bosses and tell them that she wishes to capitalise and unitise their industries, issue 25 per cent of the units to the workers (held in escrow for the time as I have explained until dividends have tepayed the loan) and 75 per cent W the investing public. This would make a start. on reducing the climb-up of the national debt (now about £90 billion) and its billion debt service charge. For the dividends on the coal, gas and electricitY board units —call it the Energy Trust — while substantial and likely to rise when the pos.' session of the units induces the workers to raise their productivity, will not be guaranteed or become a charge on the national debt. The units of these nationalised boards would, of course, be quoted on the Stock. Exchange and would become an active and popular market. At long last there would be a real distribution of wealth within the community. The workers would become capitalists. I bet those who are not Marxtst: indoctrinated and thick-headed Would jump at the chance. I predict that the Thatcher boom on the Stock Exchange could dwarf any boom seen before.
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