CITY AND SUBURBAN
A new pink wrapping for the trendy version of how we lost the peace
CHRISTOPHER FILDES
The Germans, I used to be told, had an unfair advantage. We had bombed all their factories flat, so they got the chance to build new ones. We, though, were stuck with our elderly plant, which had worn itself out in the war. Even at the time (a long time ago) I thought there must be something wrong with this argument. Now that Japan has briefly become the world's biggest economy, we are left to reflect that, whoever won the war, there can be no doubt who lost the peace. How did we let that happen? The trendy view (out again this week in a pink wrapping from New Labour) blames short sight and lack of investment and leadership. I would say that we have had plenty of investment, much of it led and much of it bad. It was fatal in the 1950s to invest in that least productive of resources, housing — a mistake we repeat- ed in the 1980s. It was foolish to transfuse money into failing industries — railways, steel, shipbuilding, British Leyland, Canary Wharf — so as to keep them going a little longer in their old form. The idea that public sector investment ought to earn its keep was a penny that was slow to drop, if it ever has. Nuclear power and Concorde were two of the worst bets of the half-century, made worse by the conceited notion that if no one else in the world does things our way, we must be right. (Topical example: Lloyd's of London.) At the end of the 1970s, after two decades of government direction and con- trol, the real return on our investment capi- tal had disappeared. Investors cannot be expected to see further than the next U-turn of policy. The cure for short sight is financial Stability -- sound money, even and we haven't had much of that since the war, now, have we? Looking back on his career in the Treasury, Sir Peter Middleton drew the moral: 'Even if you have a badly functioning economy — as in many ways we still do — it is always possible to make it worse by gov- ernment initiatives.'
Surviving the doctor
ADAM SMITH backed people to survive governments, and I take heart from him. Man's urge to better his lot, said the sage, could withstand both the extravagance of governments and the greatest errors of administration: 'Like the unknown princi- ple of animal life, it frequently restores health and vigour to the constitution, in spite; not only of the disease, but of the absurd prescriptions of the doctor.'
Scholey takes the hint
THE GENIAL Sir David Scholey is a man who can take a hint and make it his own. When he was recalled to command at S.G. Warburg I urged him to sell his trouble- some subsidiary, collect a billion pounds or so, and buy something he wanted. The sub- sidiary I had in mind was Mercury Asset Management, whose directors (the formidable Carol Galley among them) effectively blocked Warburg's plans to sell out to Morgan Stanley. The one Sir David has in mind is the merchant bank that Sieg- mund Warburg founded. The Swiss Bank has made him an offer, and if it goes through, he will spread the proceeds and the stake in MAM around his shareholders. After the Morgan Stanley affair, Warburg's days of independence were numbered. Merchant bankers have reason to know that once the 'For sale' sign goes up on a business, it never comes down again. So our biggest merchant bank looks set to follow our oldest, into new hands. A bad year for the City, if Barings goes to the Dutch, War- burg's goes- to the Swiss, and all that remains is for Lloyd's to go west.
Stepping on the gasmen
RICHARD GIORDANO, who is paid £471,000 a year to spend three quarters of his time being non-executive chairman of British Gas, has heard from his masters, or some of them. Yeoman Investment Trust tells him that it will vote its shares against the re-election of four British Gas directors who, it says, are paid too much. Mr Gior- dano does not come up for election this year, but his chief executive, Cedric Brown, the golden gasman (on £492,602) does. So do Howard Dalton (£302,965) and Norman Blacker (£247,150) and Roy Gardner (£138,999 last year, including a joining pay- ment of £100,000, with another one paid last month). 'Excessive remuneration of direc- tors,' says Yeoman, 'signals to the owners of the company that their interest will not always be the first priority of the directors. This anti-owner policy may be reflected in other ways in the business generally.' Mr Giordano blames bad presentation (© Con- servative Central Office). Yeoman blames the old trade union tactic of comparability, which still survives on remuneration commit- tees. Mr Giordano chairs British Gas's. They are no substitute for active ownership.
Moving into goal
HOWARD DAVIES presents the Bank of England with a poser. Whatever can be found for him to do? The ambitious new Deputy Governor will surely not be content to serve as Eddie George's chief operating officer, minding the shop, ordering the port and replacing the carpet when it gets worn out. My mouse under the Court Room table thinks that he will be encouraged to take an interest in banking supervision. Barings and the Bank of Cocaine and Colombia, though agreed (says my mouse) to be nobody's fault, were embarrassments, and it would not do to have another gial bulging at the back of the supervisors' net —still less if it were an own- goal. Mr Davies, who ran the Audit Commis- sion, would be just the chap to keep an eye on shaky figures and on the accounts they produce. If this keeps him busy he will have less time to think and talk about a single European currency, which would be an added advantage, at least to the Governor, my mouse says.
Paper money
MY PLANS for securing lottery funds for this column now take the form of the sale of my archive. It has been accumulating on my desk for years, and I always knew that it would come in handy, some day. I hope that there will be no fuss about my title to it, or about paying money to me. After all, if the National Heritage Fund chose to buy Churchill's birthplace, Blenheim Palace, would it jib at enriching Lord Blandford's trustees? Never mind who gave Blenheim to the Churchills.
Previous page
