Skinflint 's City Diary

If any company's books were produced on the same principles as Britain's official statistics, the auditors would anathematise it with qualifications, the Stock Exchange would excommunicate it, and the Whitehall devils would drag it off to hell.

It is not just that a fourth sort of lie has been added (it used to belies, damn lies, and statistics' — but now we also have 'seasonally adjusted figures'); it goes wider than that. Take for example the statistics just published about our official reserves. They were up, and presumably we should feel relieved and cheerful that Britain is such a sound country and can back its currency with large amounts of foreign capital. But just what do these figures mean?

Well, one can only guess of course, because even officialdom does not know all the answers and is not saying anyway, but I doubt if the figures rose because the country suddenly became prosper ous despite all indications to the contrary. One source of the increased reserves is almost certainly Arab money being placed in London to earn munificent rates of interest. The Bank of England in its latest quarterly bulletin estimated that perhaps an eighth of the $25,000 million of oil revenues, say $3,000 million may have/to come to Britain for investment.

This would be fine if the cash were committed to being here for any serious length of time, because it could then be used to bolster cash-hungry industry in its day of liquidity squeeze. But it is hot money, and we have seen ample demonstration recently of what happens to people who borrow short and lend long (other than being bailed out by the Bank of England, that is). The only people who seem able to get away with it are the building societies, but more of them some other time.

Another source of the large increase in foreign currency reserves is the extensive borrowing overseas by industry, and recently more importantly, by• the nationalised corporations. So our reserves are higher because we borrow overseas at high rates of interest.

To the untutored ear something • begins to sound somewhat strange. Be honest now, you thought reserves were assets. Well not in this type of accounting they are not — they are liabilities and would be called that on any company books. It is money Britain owes the rest of ,the world which has come here because of the competitively high rate of interest in this country.

In September for instance, when reserves rose by $328 million, the public sector borrowed $309 million (about £132 million) on the Eurocurrency market, bringing that sector's borrowings in the past eighteen months to $4,700 million. And now the National Water Council is preparing to take aboard the first tranche of $400 million from the $1,200 million loin Iran has agreed to make to the UK. After that is exhausted there is still the untouched $2,500 Eurodollar loan arranged by the Government.

All this is part of the government plan to stuff borrowed cash into the yawning gap of the current year's payments deficit — and that is estimated to be £4,300 million. Which is understandable considering that the alternative may be agonising deflation, producing millions of unemployed, just at a time when unemployment is already expected to rise next year. But consider the price.

All the boons of the North Sea oil are mortgaged as far ahead as anyone can see so the much vaunted boost to Britain from that sourc'e can almost be said already to have been and gone. And if we go on at this rate the Arabs will be able to give away the oil free and live off the interest from the cash they lent out. And ironically, if they do lower the price of oil, it will totally destroy the economics on which the North Sea oil depends.

Undeterred

Though not much of a crossword puzzler myself, the very proximity of The Spectator's puzzles to my own notes obliges an interest in the things and I am constantly amazed by the numbers of people who actually complete the fiendishly knotty Jac puzzle. I learn from our crossword editor that these enthusiasts are not even deterred by what would seem vital accidental omissions — as happened two weeks ago when two horizontial bars mysteriously disappeared from the cross

word grid during the printing process. The regular entrants took it in their stride, disdaining even to write letters of complaint about the error.

Let us hope, nevertheless, that we never get into the sort of situation that afflicted an American local newspaper called the St Petersburg Times last year. To the delight of the New Yorker (which quoted it) they were obliged to print the following:

"Here's what happened to the

first edition crossword Monday, we ran next Saturday's (Oct. 20) puzzle and the Friday (Oct. 19) answer by mistake ... Tuesday, we ran Tuesday's puzzle, the answer to the Monday puzzle that wasn't In the paper and the answer to Saturday's (Oct. 13) puzzle which should have been in on Monday ... first edition readers didn't — and won't — get the puzzle that should have run Monday ... Saturday we will repeat the Oct2Opuzzle and Oct. 19 answer which ran Monday. , then we'll be bask on schedule.”

Musso's idea

Heath was being particularly pertinent when he spoke in Glasgow last Tuesday saying: "By crushing industry between high taxation and a rigid price code, they [WedgeSenn and Co] would force firms to come to the government for money and then use that money to gain control over those firms. There is no use in pretending — it is happening today." In 1933 Mussolini set up the Istituto Ricostruzione Industriale at a period of depression somewhat similar to the British situation now: lack orf liquidity and appalling loss .01 confidence coupled with social unrest and looming dnemploYment. The idea was that the shares in the companies taken over would be sold back to the private sector when conditions improved. In the event very little that had once been bought returned to private hands. On the contrary, the government bought more and more into shares, until now 35 per cent of all Italian industry is controlled by the state through their vehicle, the IRI. Who doubts that however well intentioned a National Enterprise Board (and it is modelled directly on the IRI) might be they would be unable to sell much back to the public however much they might like the idea.