SKINFLINT'S CITY DIARY

Political and journalistic commentary cony cerning the hive-off of the peripheral and viable activities of the nationalised industries has overlooked an important part of the strategy which was outlined in a letter to the Times in January 1969. The correspondent argued that a National Statement of Intent should be set before us by a strong PM and should include:

1) High Bank rate has failed to regulate the economy and is the largest single cause of inflation. A long-term prime internal inter- est rate for growth, say 31- per cent, not neces- sarily in one step, should be set down before us. The Chancellor or the Prime Minister would merely state that this 31 per cent inter- est rate was a long-term objective for the economy. This would result, so it is argued, in a boost for government securities and the money supply would be reduced in the short term which, if the present experience is any- thing to go by, would be all to the good. However the statement would argue that in the long-term demand would rise, and that in time cheaper money would mean easier money.

2) A Statement of Intent would include a proposal to start to repay the National Debt, even in small part. Before 1939 the Govern- ment was usually a net repayer of National Debt except in time of war. This should mean that gilt-edged and the pound would be strengthened as a small part was paid off each year.

3) Institutions, pension funds, anyone with preferential tax treatment would be required to carry a larger proportion of their port- folio in gilt-edged. This would support gilt- edged and reduce the level of share prices, correcting the reverse yield gap, which con- tributes to inflation as well as being obviously enough due to inflation.

4) The government debt to the private sector must be reduced. This would be (as it now seems to be if Sir John Eden and other members of the administration's proposals are anything to go by) by the sale over a long period of all public sector assets to private interests which may be • or might properly be sold. These would include de- nationalisation and hiving-off of parts of the nationalised industries and utilities, sale of government-sector assets including council houses and so on.

The 'payment for all these assets would help -reduce money supply and in a small way, it was stated, year by year reduce the National Debt. The Times contributor, writ- ing in early 1969, went on to argue that the Bank rate is the key to our problems and that it is vital that this declaration of intent was made without delay as a forerunner for plans for real government and town hall economies. Whether wittingly or not, it seems that the present Government may be following this strategy and that outlined by Mr Nicholas Davenport of the SPECTATOR and Professor John Vaizey rather than that of the. Economist and Treasury mandarins who suggest that ever-increasing interest rates are the orfly way to curb inflation.

Father of the turf

Anyone who follows this column will know that it is the bard and unyielding enemy of collectivism. However, the area of betting and gambling screams not for control but state operation.

It is assumed that Lord Porchester will as time goes by take over from the Duke of Norfolk as the father of the turf which presumably means continued life for the bookmaker and prolongation of the day when a National Totalisator produces subsidies for racing and reduces cor- ruption.

_ Casino

Nothing in betting approaches the socially destructive consequences of gambling in some of our trendier casinos where losses of £20,000 a night go unremarked. If you know of any young man who is lucky enough to have a fortune you may care to warn him of a vicious trick which is regularly employed on the impressionable young, overseas visitors and nouveau riche in one club, known to almost everyone in London.

House-players

Our Nice Young Man will sooner or later find himself in one of these casinos in at- tractive mixed company. He will lose a little, win a little, and after a few visits feel at home with old friends. Inevitably he will arrive there late one night, the better for hav- ing celebrated somewhere else, to be greeted with shrieks of welcoming flattery and an in- vitation to join the chemin de fer table. He will not notice the doors have closed behind him or that a card has been hung on the han- dle outside saying 'Private Party'. The room will fill with young friends of the manage- ment and he will not realise until he has been `taken' that he has been playing both against the bank and 'house-players' on his own side of the table who have been encouraging him to ever greater risk. Though a financial puritan about gambling, I will wager that Sir Stanley Raymond and the Gambling Board know of whom I am talking—I hope the club is put out of business when they have enough evidence.

Dear Skinflint

Skinflint is either slapdash or out of date on charitable Trusts if my information is -cor- rect. Although charitable trusts do not pay corporation tax the business does, and to be making distributable profits of £100,000 it would have to be earning—say----£180,000 before tax.

The vendor (who has presumably built up or inherited the business at a low value) would be liable to nearly £300,000 of capital gains tax on the £1 million sale value. Also, if It is sold on deferred payments, the interest factor must be taken into account, and would presumably make the vendor liable to additional income tax and surtax or cause the consideration to be grossed up for capital gains tax.

Yours sincerely, Douglas Collins The Royal Seed Establishment, Reading. Berks To which I reply:' The Royal Seed Establishment does not con- ceal from me that Mr Douglas Collins's arm has not lost its skill since he built up his Goya enterprise. The whole subject is, of course most technical, but I hope he will allow me to take refuge behind the saying that in order to demonstrate a principle it is necessary to exaggerate much and omit much.

Sorry, Jim

In this feature on 28 November 1970 I expressed the view that Slater Walker would treat some part of the £10.2 million received from Gallahers for the sale of Dollond and Aitchison Group as income rather than as capital.

I now understand that this amount will be dealt with in the Group Accounts of Slater, Walker Securities for _the year to 31 December 1970 by crediting approximately £3.7 million against the book value of tang- ible assets sold and by crediting the remain- ing £6.5 million to capital reserve. No part of the £10.2 million will be directly or indirectly credited to profit and loss account. The substantial credit to capital reserve arises from the fact that the goodwill of the com- panies in the Dollond and Aitchison Group was immediately written off in the Slater Walker Group Accounts at the time of their purchase in accordance with the normal conservative Slater Walker practice of elim- inating goodwill from their balance sheet.

My apologies to Slater Walker, who tell me that my suggestion as to the probable treatment of the proceeds of the sale of D & A was wrong, and that at no time in the past has the Slater Walker Group adopted the basis of accounting suggested, neither does it intend to do so in the future,