THE ECONOMY
The rabbits in the box at No. 11
JOCK BRUCE-GARDYNE Apart from that, Mrs Lincoln, did You enjoy the play?' Arriving back in Fleet Street ten days ago after three weeks' absence out beyond the Andes that old wisecrack from the 1960s was the greeting I received from more than one of my old friends on a certain national daily news- paper. But if the Big Bang has reached the newspaper industry a little early in my absence, expectations of the Former Fleet Street Person in 11 Downing Street, are by now so modest that it is tempting to speculate that this weekend's Sundays will overlook the ritual pre-Budget photocall Which portrays the most unlikely Chancel- lors in bucolic mood.
Clever old Nigel! Say what you like of ,bint, he knows how to set a stage. Judging Dy the trailers we might as well stay away on Tuesday altogether. An extra 10p on fags and booze and petrol, and an extra two or three per cent on tax thresholds, and that'll be just about it. The Institute of birectors and Professor Patrick Minford May rail at loss of nerve and direction. But with oil prices all over the shop and sterling vulnerable to jitters, a thoroughly boring tudget is the best that we can hope for. So the commentators have done Mr Lawson proud. For as I have argued in the tun-up to his previous offerings, it is just not in his nature to produce a completely boring package. Even when, as last year, allhis more radical options had been Closed by preventive lobbying, he still ePne up with elegant surprises like the dramatic shift in employers' insurance con- tributions. He'll have some rabbits in his box on Tuesday. And now that our ex- pectations have been thoroughly put to Sleep, they'll look all the more exotic.
the first for that purple prose they call tne 'Budget judgment'. He might start — although I fear he won't — with an 11,„nnecustomed toast to the much maligned hank of England. The manner in which the hank contrived in January to ease the Clutch on sterling as the oil price collapsed Without having it ripped from its grasp by a market rush, or having to spend a fortune buying pounds abroad, or being forced to nequiesce in dearer credit at home, showed that the Old Lady's hand has not yet lost its e unning. As a result the Chancellor has a f Tuesday of action with monetary policy on !uesday that he did not look like having Just two months ago. tiow will he use it? The new phase of seat-of-pants navigation initiated last sum- mer has now worked out too indifferently in practice. At any rate the Prime Minister was right to point out that had we signed on with the Euro currency club last autumn our exporters would not now be frolicking on a deutschemark rate of 3.25 to the pound, or anything like it. Maybe we had been led to understand that keeping up the pound against the deutschemark was going to place a curb on the embarrassing gener- osity of cash-rich members of the CBI towards the workers. But you can't have everything.
So until he proves me wrong on Tuesday I am inclined to discount the talk of a great come-back for that fickle jade, sterling M3. I'd lay odds on continuance of 'pragmatic monetarism': what the Treasury likes to call, in terminology borrowed from the labour ward, 'bearing down' on inflation. But not too hard.
If so, Mr Lawson's scope for playing sugar daddy is bound to be restricted. He might get away with borrowing £81/2 billion, or even a bit more, instead of the L71/2 billion he has written in his scorecard, by fluffing it out with mildly optimistic talk about what might happen to oil prices and our national output. More than that, or too much sleight-of-hand with asset sales, wage bills of the state, or the cost of servicing the national debt, and sterling might turn bilious again.
That doesn't mean, though, that he will be obliged to play around with farthings.
One popular suggestion has been that he will enlarge his play-pen by clawing back the cheaper cost of oil and its derivatives in extra tax. Only so far there has been no cheaper cost to us motorists at all. A special levy, then, on the profits from retailing of the oil companies, to teach them manners? I wouldn't put it past him.
The City of London remains a much more likely target, though. Christopher Fildes reminded us last week that the property surtax of 1973 signalled that that boom was about to turn to slump. He should know by now that governments always fight the war that's over. If anything should convince us that Chancellor Lawson will have something horrid in his box for the City's millionaire salariat, it is last week's news of redundancies at Wedd Durlacher.
Selecting a precisely appropriate rod in pickle is not so easy. Taking the lid off national insurance contributions from em- ployees and the self-employed would steal a plan new-hatched by Mr Hattersley — rather a temptation, in fact. But it would catch a huge hoard of potential Tory voters far beyond the City, and would outrage the back benches. No, I'd lay a saver on a specially-tailored tax to clip some bullion from the golden 'handcuffs' and 'hallos' and suchlike. As Christopher Fildes re- marked, a futile gesture maybe. But politi- cally sweet for all that.
Still, that does not bring home the bacon for redistribution. So a nasty thought occurs. The clearing banks have, with their traditional unerring sense of timing, just reminded us that the so-called 'windfall' element in their profits which arises when interest rates comfortably exceed the cost of servicing current accounts has surfaced once again. They are gluttons for punish- ment. Sir Geoffrey Howe's promise of non-repetition following the outcry over the surcharge on bank profits in 1981 expired, after all, with the last election.
Even if he resists that temptation, it would be surprising if the Chancellor does not dig out something like that old rejected favourite, a VAT-by-any-other-name upon financial services. Admittedly it could hit the pockets of the City's customers rather than its practitioners. But if it were ex- tended to include the building societies — as, in all equity, it would need to do — it would be a major money-spinner, and compensate for the one concession that looks well nigh inevitable in the City's favour, the ending of stamp duty on share transactions, many times over.
As to beneficiaries, the argument still rages between the protagonists of a cut in the standard rate of income tax, those who want to concentrate on raising the starting- point for tax, and those who think we should spend it all on drains or home improvements. But here again, I'd be inclined to back our Chancellor to do the unexpected. So what about the reintroduc- tion of the lower starting-band of tax scrapped by Chancellor Howe (and Finan- cial Secretary Lawson, for that matter) in 1979? Only at 20 per cent instead of 25? the Inland Revenue would groan. But it might make good politics.
A slogan? Why not 'the People's Budget'? That should appeal to the Chan- cellor's well-developed sense of history, and irony.
Previous page
