20 AUGUST 1988, Page 22


News from a time-slip: we must have done something right


Iwas submitting myself to the soothing influence of the Bank of England's atmos- phere and prose style when I suddenly experienced a time-slip. Back I slithered a dozen years. Harold (now Lord) Wilson had just resigned, James (now Lord) Cal- laghan had just taken over, the pound and the economy were in every sort of trouble, and the drive was on to find a scapegoat in the City. Britain's greatest need was said to be investment, and the City was charged with failing the nation, by denying industry the finance it needed. It should (said its pursuers) have its investments and its lending directed. The guileful new Prime Minister deflected the pressure by conven- ing a full dress inquiry into the financial system and putting his predecessor in charge. The Wilson Committee's findings fill a dozen green-backed volumes, but its central theme, as its chairman said, and the first question that he asked, was: Has the City let industry down? It found its answer in a dismal series of figures, which showed the real return (that is, allowing for infla- tion) on investment in British industry. Down and down it had gone, down it was still going, from a double-figure rate of return in the early 1960s to six per cent, four per cent . . . By the end of the decade it was under two per cent. The committee, looking at the development of the North Sea, found that difficult and novel and costly ideas could draw all the money they needed, if they looked like paying off. The central theme, the central trouble proved to be that investment in Britain did not pay and would not return until it did pay. A pity, really, I thought — and then emerged from my time slip to find my nose in the unsensational pages of the Bank's Quarter- ly Bulletin. British industrial and commer- cial companies, said the Bank's econom- ists, last year showed the best return on the capital for a quarter of a century, a real rate of 111/2 per cent. Gosh! We must have done something, some central thing, right.