CITY AND SUBURBAN

Recovery, warm beer, trouble brewing — Gus, you pulling my leg? Yes, Prime Minister are

CHRI STOPHER FIL DES

C Fififty years from now Britain will still be the country of long shadows on county grounds, warm beer, dog lovers, invincible green shoots, the National Debt, trade gaps, sterling crises . . . ' Gus, is that last bit right?

Yes, Prime Minister.

I mean, is it supposed to be in my speech? I like the rest of it. Sounds like a Hovis com- mercial. Who wrote it? You?

The draft came from a young chap at Central Office called Dominic Morris - Dominic who?

— but I thought that as your press secretary I should add a note of realism.

Come on, Gus, you know better than that. Besides, this is a great moment. The reces- sion is over. That's official. It's not just Norman. The Central Statistical Office says so. Happy days are here again — I hope you're writing all this down?

Oh, yes, Prime Minister. It's all going into your next speech but one, after your address of welcome to Jacques Attali. All positive, upbeat stuff The fastest growth rate in Europe. Of course, that's not saying much for Europe, but never mind. If we can keep this up until the end of next year, the British econ- omy will get back to the size it was when you and I were at the Treasury.

Gus, I know you trained as an economist, but I sometimes think you miss out on the political dimension. We wanted a recovery. We promised a recovery. Now we've got a recovery. So we can take the credit, not for- getting my faithful colleague next door what's that noise?

Singing in the bath, Prime Minister. La Vie En Vert.

The last Chancellor with a song in his heart was Hugh Dalton. He had a lot of stock to sell, too. Tried to persuade the market that there was a shortage. If you'd bought those Daltons you'd have lost 70 per cent of your money, not allowing for inflation.

We must hope that Lamonts will perform bet- ter, Prime Minister.

Oh, really, Gus, it's all a matter of confi- dence, isn't it?

Just so, and . . .

And what?

Well, Prime Minister, there are people around — mavericks, malcontents, monetarists, peo- ple like that — who say that if we got the recession so badly wrong, why should we be expected to get the recovery right?

Gus, how can you say such things? Have you been out to lunch in Lombard Street? Only the Reform Club. The cold table.

Well, then . .

Hypothetically, Prime Minister, it might be argued that we never knew what we had let ourselves in for. After all, our old department was slow to see recession coming, and slow to take it seriously, and quick to forecast that it would go away, and . . .

It was a worldwide problem. We said so at the time. Or are you telling me that our recession was different from other people's?

No, it was quite like the Americans'. Both economies had gone on a credit binge and were suffering from hangovers. Only the treat- ment was different. They cosseted theirs with cheaper money. We went in for cold baths, and got pneumonia.

Rubbish, we did all the right things. Classic counter-cyclical policy — Carry on spend- ing.

Yes, Prime Minister, but if your immediate problem is that you are deep in debt, and the interest is mounting up faster than you can run after it, you don't want an environmental enhancement at the end of the decade, you want cheaper money now, and if you don't get it you go bust. Then your suppliers and your creditors start to go bust. It's cumulative. You know very well that we couldn't cut interest rates just because we wanted to. We were committed to the ERM — the centre of our policy, as Norman and I kept explaining. Not a scintilla of doubt, he said. Good for recovery, he said. Interest rates would go up if we left, he said. Offered the prize of zero inflation, I said. Those were jolly exciting times, at the heart of Europe, as its cutting edge. Remember when I fore- cast that sterling could take over as the anchor currency? Who wrote that one?

I don't remember, Prime Minister. Maybe Sarah. Anyhow, we were out within weeks. That was because of the fault lines. And the speculators. And the Germans. They really were most inconsiderate. Downright selfish. I suppose they would say that they never asked us to hitch our wagon to their star. We just told them. We said it was an external dis- cipline and just what we needed. A sort of monetary Miss Whiplash.

Anyhow, we came unhitched. So the pound went down and now it's going up again and interest rates have been slashed, which is what you say was essential - Well, Prime Minister, we do seem to have a recovery.

So what are you complaining about?

I hate to seem picky, Prime Minister, and I suppose that any recovery is better than none, but when the Chancellor popped out on his doorstep and said that higher sales in the shops were good news for the shops' suppli- ers, I couldn't help thinking that they would be celebrating in Taiwan. I mean, even before we spiked the trade figures - Crafty, that, wasn't it? And all in a good European cause.

— we were running a billion-a-month trade gap.

You do look on the glum side, Gus, you and your import-led recovery. Why shouldn't it be export-led?

It could be, but for that we'd need a real shift of resources towards export markets. That means a competitive exchange rate, and it means hard tack at home. No boom in the shops, and not so much spending and bor- rowing by the Government, which doesn't export anything.

Oh, but it does, Gus. Norman's planning to sell British Government stock all round the world. With £50 billion to raise this year, he'll need to.

Exactly, Prime Minister. We've put off the day when we have to tackle this deficit, we've given ourselves one more year on the never- never, I can't help feeling we'd have done bet- ter to face facts. If were unlucky, we shall hit the next crisis some time next year — July is the usual time — a sterling crisis, a balance of payments crisis, a crisis in funding the Government's debt, or all three. If Norman Lamont is really unlucky, he'll still be Chan- cellor.

Oh, nonsense, you make us sound just like the Italians.

The Italians had the same problem. Now I see they've asked the Governor of their cen- tral bank to be Prime Minister and form a government.

Well?

Well I thought it might suggest a suitable retirement job for Robin Leigh-Pemberton. Gus? Gus, tell me you're pulling my leg. Yes, Prime Minister.