21 OCTOBER 1972, Page 29

Skinflint's City Diary

If the Bank runs out of Money it may issue as much Money of its own as it may need by merely writing on any ordinary paper.

From the Rules of the Game of Monopoly, Messrs John Waddington and Sons.

The Chequers talks on inflation, with the CBI putting forward proposals for voluntary controls backed by a monitoring body and with the TUC still maintaining that some form of statutory control is essential, are of no more use than putting a toe in the bath tap to stop the bath overflowing.

Money supply through taxation is the remedy. In addition to raising revenue, taxation has two further functions today: the controlling of demand, and the redistribution of wealth. The culprits that escapes all three functions are the tax-free insurance company, charity or pension fund. These institutions, like the mediaeval church, build monuments of inveStment to their own glory, priming the pump of inflation outside Treasury controls through the remorseless arithmetic of compound interest.

Tax pension funds

An American advertisement once showed a one cent postage stamp with a caption "This cent invested at the birth of Christ at five per cent compounded semiannually would today be worth $1,000,000,000,000,000, more than 'all the money in the world." The pension funds and insurance companies have only lived in the happy land of compound interest, forbidden the money lender, for fifty or so Years so far.

Symptoms and diseases get mixed. The reverse yield gap (the difference between gilt and equity yields) must be closed so that organic risk-taking investments pay better than lending at fixed interest to the state. The Prime Minister and the Chancellor have the answer, not the CBI or the TUC. So have I. Here it is.

The answer

Since the purpose of taxation is to raise revenue, control demand and redistribute income all institutions should pay corporate tax. They would be contributing to revenue, .and thus lessening the burden on the individual (and his wage-claims), helping in the socially justified redistribution of wealth, and be under tax restraint SO as to suit the needs of the economy. The cuckoo-land of compound interest would no longer be for them. If, for some electoral reason, this is claimed to be impossible, institutions and Charitable funds enjoying a tax-free existence should, be compelled to carry, say, 30 per cent of their portfolio in government stock. This would temporarily mangle the stock market as they liquidated shares but would quickly lift gilt-edged prices as they switched, making money cheaper, equity yields more generous and thus real investment in industry more attractive.

It would also satisfactorily correct the property market as they sold property to meet their gilt edged commitments.

Better both together now and quickly.

Nigel Broackes

It is a pity Michael Heseltine, Minister for Aerospace, who is also responsible for the Department of Trade and Industry's research departments, has appointed his friend and rich neighbour Nigel Broackes, Chairman of the Trafalgar House Investments, conglomerate owners of Cunard, to head the Ship and Marine Technology Requirements Board. Heseltine discounts the possibility of conflict of interests by appointing industrialists to head Requirements Boards in fields where their own companies are involved, saying that the advantages outweigh the possible hazards. The truth is the opposite. The advantages do not outweigh the possible hazards. Particularly for Trafalgar House share-holders who are likely to miss out, through the rectitude of a chairman like Nigel Broackes (a reluctant modesty does not conceal his pride in this appointment) naturally holding back later over some profitable company activity on the grounds that he obtained privileged information during the period he was performing this modest but satisfying role in the public eye.

New Telegraph Editor

Rumours in Fleet Street that Maurice Green will be stepping down from the Editorship of the Daily Telegraph are gathering pace. The good Colin Welch, the Deputy Editor, is tipped for the reversion, though at one time Kenneth Fleet, the Business Editor was thought likely to be Lord Hartwell's choice to the dismay of some.

Whoever is chosen, I hope it is not the author of the wrong-headed second leader on Monday, October 16 tastefully entitled: 'Free Trade in Immigrants.'

This nasty piece, redolent of Enoch Powell, suggests that Ugandan Asians should be left to their own devices, the natural consequence of which, the author argues, is that they should be allowed to drift to the Midlands and North where there are other Asians and jobs, saying they will be " . . . living close to each other, even when this involves a degree of overcrowding which violates accepted British standards."

Such concentration means the takeover of towns by Asians delaying indefinitely their absorption into British society. The answer to the question, always left unsaid in polite company is eugenic — the thinner the spread the quicker the mix puts it bluntly. If they stay in these ghettoes and prosper they will encounter the same jealous antagonism they thought they had left in Uganda. If they meet economic difficulty the blame will be laid at their feet, with violence becoming one day inevitable. The Daily Telegraph's writer's "they are more likely to be happy living close to each other even if this involves a degree of overcrowding" is reminiscent of the old Morning Post's "Rich man in his Castle—Poor man at the Gate" concept of society.

Tuesday's Telegraph as I expected, printed no protesting correspondence. This reprehensible leader attempted to destroy with a few words the patient work of the Resettlement Board over many months.


London Weekend Television have decided for some mysterious reason to declare a 20 per cent dividend, even though the ordinary shareholders have been told no more than that the company is now making a profit.

London Weekend have £2,447,280 uncalled Loan Stock which was due for payment, if called by December 23. They are now suggesting extending the call date by three years, but reducing the call to El million, since they do not want the money in the short term as their present cash flow projections are good they say, and in line with the industry. They certainly must be if this recent dividend announcement is justified for a company that has very heavy re-location costs ahead on its forthcoming move to its lavish headquarters on the South Bank. Previous losses that eroded the original capital have presumably been made up in addition to the dividend. The accounts will show the state of affairs though unaudited interim figures should have been supplied.

Sir Hugh Greene is calling for a fourth television channel for the IBA and not surprisingly suggesting that the BBC Charter should be extended beyond 1974, and the Television Act from 1976 to 1981. He says he sees no need, at the present time, for a Government inquiry into the future of broadcasting for technical reasons. He is wrong — there should be no extension to the Charter or to the Television Act which is in need of a cold hard look, particularly at the attempts of groups like Trident to enlarge by persuading Lord Aylestone to let them have Anglia or London Weekend as a third prong to fork in the profits.