The economy
Lobbyists' victory
Jock Bruce-Gardyne
Ask what the boys in the backroom will have, and tell them I'm having the same.' So sang Marlene Dietrich: and so, on the whole, sang Nigel Lawson. Gone was the daring radical we loved to hate, and in his place a sober, solemn, bank- managerly character emerged. Arthur Scargill took the blame for this transforma- tion (music to his ears it must have been).
but perhaps the true responsibility rested nearer home — on the Government's back benches. Having scared them rigid with his talk of VAT on books and tax on golden handshakes ('anomalous but much loved' as he called them wistfully on Tuesday), he had his colleagues pleading on their knees for a nice, quiet life. so that is what he gave them. I trust they are duly thankful.
On the whole. Those of us who had predicted that, whatever else he was, Nigel Lawson could not be dull, had begun to tear up our betting slips as he headed into the home straight. And then it came: a thumping switch in employers' stamps from the low-paid to the high-paid. On the face of it a pretty smart move. Cheaper lobs at the bottom end of the market, to draw them in off the dole-queues, paid for by much dearer jobs among the fat cats: as nice a piece of larceny of Opposition clothing as you could wish for. One just hopes that the Chancellor had worked out where the pips will squeak. British Oxygen should be able to cope with an extra £75,000 a year to maintain
Mr Giordano in his lifestyle without too
much heaving. For City stockbrokers and accountants the bills will be a good deal more awkward, and some of those shotgun marriages are going to look even more expensive for the bridegrooms than they did before. But where the pips will really squeak is down in Fleet Street. Fleet Street Was just about braced for VAT on adver- tisements, which it duly got, and all set to Crow at the success of its campaign against VAT on the cover price. But with scores of Guardians of the Mysteries of compositing down in the print-shops at £20,000-plus a head, the open-ended increase in the em- Ployers' stamp is far, far worse. The good news for the Treasury in all this is that, souls of priority and honour though they may be, bankers, stockbrokers and accountants are not universally loved; while Fleet Street is universally deplored. The bad news is that Fleet Street, like the banks, has ways of getting even. If in future the newspapers were to deny the former city editor the benefit of any doubts this would, it need hardly be said, but underline the robust independence of the British journalist. That it would also go down agreeably with their proprietors as they try to balance their books would be just an added bonus. But at least the former city editor is better qualified than any of his predecessors to judge the fire- power of such potential saboteurs. It's worth dwelling on what is, after all, the small change of the Budget since the grand strategy is so much at the mercy of the winds and tides. If it could be read in isolation, small print and all, I believe the Chancellor's menu is more heavily tilted in favour of the jobs and against the prices than he has been given credit — or blame — for. The combination of a £7 billion target deficit and a whopping £2 billion extra in his kitty-bag (the contingency reserve), coupled with stern words about the Government's 'commitment. . to bring down inflation' regardless of what that means for short-term interest rates has sufficed to convince most people in the City and beyond that they really mean it.
I wonder. Two months ago all the talk was of really starchy monetary tailoring, with expectations of a pledge to aim at the middle of the target range. Instead of which we get the (unannounced) enthrone- ment of a brand new indicator, known in the trade as 'money GDP'. Now 'money GDP' is very fashionable in certain quar- ters, but hitherto the line in Whitehall has been that as an indicator of financial conditions it is about as much use as trying to read your speed from a signpost. But, it seems, no longer.
Then there was that interesting passage about the exchange rate. 'There are those who argue that if we stick to sound internal policies, the exchange rate can be left to look after itself.' Indeed there are — and one N. Lawson was of their number not so long ago. But now 'benign neglect is not an option', since 'significant movements.. . can have a short-term impact on the general price level and on inflationary expectations'. Indeed they can. So does that mean that we are keen to see a dearer pound to help us with inflation expections? That is not so clear. The actual inflation expectations are notably less optimistic — gone is all the talk of 'zero inflation'. And the exchange rate is assumed to stay nice and soft. Once the initial gloss has had time to wear off, all this might seem to be telling the markets that the Chancellor is more interested in 'competitiveness' than in stable prices nowadays. But isolation is the last condition that the Budget judgment can be read in. Tues- day's rip-roaring performance by sterling had a good deal more to do, one feels, with what was happening in Ohio than what was happening down at Westminster. For years Paul Volcker has been trying to drum into the White House that vast deficit financing will end in tears. If those tears are now beginning and the dollar is at long last falling out of bed then we shall be heading for a dearer pound, lowered inflation expectations and interest rates (and low- ered revenues from oil as well) regardless of the Budget strategy.
Would that mean that our radical re- forming Chancellor would re-emerge in time for 1986? It might, although by then the next election will be casting shadows. This was actually the last ideal year for radicalism, and it was not to be (though why on earth he felt it necessary to shut the trap on VAT extensions for the lifetime of this Parliament I simply do not under- stand). Those lobbyists have much to answer for!
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