In the City
Nothing but the truth
Nicholas Davenport
You can deal unofficially in election majorities' on the Stock Exchange and a friend of mine bought them last week at 60 Thatchers. I would have thought this to be the top of the market but I am no pollster. The market in equity shares seems to be taking its cue from the tone of the market in majorities' and some big lines of stock have been placed in confident hands. And this applies not only to the 'blue chips' but to the smaller companies which do not excite the envy of the nationalisers. The Stock Exchange really does seem to believe in antish industry resurgent under Thatcher. For a City commentator an election camPaign is a deadening time. Like all public relations exercises an election campaign Poisons the pure wells of truth. It is an exercise in suppression, in half-truths, in false leads, particularly up the garden. I have seen on the screen fabricated flashes of the jump in prices of various things which will follow on a Tory rise in VAT without a Mention of the mass of food and other things which do not attract VAT. And who should put over this false lead but Mrs Shirley Williams who looks so honest, so mild and so depressed at not being able to tell the truth? It was almost refreshing to hear Mr Colin Redgrave of the Workers Revolutionary Party honestly saying that he Would nationalise everything without comPe, nsation and abolish the House of Lords, t,..11e Police and the army and, of course, the Koyal Family. Deadening for me too is the lachrymose election line taken by Peregrine Worsthorne and his lugubrious sympathisers who believe that the workers would not work 4ny harder even if Mrs Thatcher took off their Atlas load of income tax. I hope ?eregrine will soon recover from his liver attack which must have followed on his visit clown under' Britain may be at the bottom of the industrial league but it is not effete. Indeed, the workers are surely showing ,their native ingenuity and flair by avoid g tax as far as they can and cashing in on ,toe indulgences of the divine welfare state. am not referring to the police raid at Romsey, Hants, on the confessed swindlers Of National Health, which has had a drama tic shortening effect on the dole queues in that part of the world, for this is surely an exceptional case.) It must be obvious to every one but The Times management that the workers who spend comparatively short hours in Fleet Street and longer hours in their own private shops and sideshows are much more interested in getting large redundancy payments for themselves than in restoring a great newspaper for the nation. This suggests that there is not so much wrong with the virility and resilience of the British worker, whose first interest is always to look after himself, as with the brains of the British Establishment. What is wrong is the mismanagement of the British economy and its money by the last Tory administration as well as by Labour. What is wrong is the stupidity of all political leaders who fail to see, first, that the very dear money kills enterpreneurial activism, secondly, that the workers might well get interested in producing more wealth if they were offered a slice of the national equity. The trouble is that if the real economic truth were told in this election campaign it would be beyond the comprehension of the average voter. It is extremely difficult to understand the complexities of the finance of a country whose government is spending £81 billion more than its income and is at the same time trying to avoid monetary inflation by adhering to a 'money supply' target defined as M3 (bank deposits plus notes and coins but not building society deposits). Mr Healey claims that Mrs Thatcher is inflationary while he is not because his M3 is running within or below his target. Does he explain to an election audience that the increase in M3 equals the public sector borrowing requirement minus the net acquisition of government debt ('tap stocks') by the non-bank public plus sterling lent to the private sector and overseas minus external and foreign currency finance, minus the increase in banks non-deposit liabilities and that it is pure fluke if the result hits the target? The audience would leave the hall before he could finish his explanation. If, however, an expert from Samuel Montagu, a City bank and bullion house, happened to be in the hall he would rise to point out — I am quoting from the Samuel Montagu quarterly review — that M3 is an inappropriate monetary aggregate to control and that reliance on the 'tap' system for selling gilt-edge stocks to the non-bank public is an inadequate mechanism with which to control it, for the timing of lap' sales is at the mercy of the market. The only point which an election audience might be able to absorb is that between 1974 and 1978 under a Labour regime the national debt has virtually doubled — from £41.4 billion to £80 billion. Of this total the market holdings have risen through 'tap' issues from £27.7 billion to £57 billion and because of the extravagantly high coupon offered to secure their sales the debit service charge is up to over £8,4 billion a year. This is the cost of British socialism which has added so grievously to our taxation burden.
In my view our internal finance has been grossly mismanaged first, because it has involved dear enough money to kill business enterprise — entrepreneurial activity shrinks as the rate of interest rises — secondly, because it creates a vested interest in inflation — especially wage cost inflation — seeing that the huge debt service becomes more expensive in real terms if the rate of inflation falls. Try to explain that to your election audience.
As for external finance we have the breathing space of a surplus on the balance of payments through the exploitation of North Sea oil which has been due entirely to private enterprise (BP is entrepreneurial although 51 per cent state-owned). Without oil we should be running a massive deficit on the balance of payments, for whenever the rise in wage earnings exceeds the rise in prices, as it does today, the imports of foreign manufacturers fill the shops to meet the consumers' extra pocket money. With an alienated work force, disinterested in increasing output, which has sunk to 0.6 per cent per person over 1973-77, we ought to be thinking of putting this miraculous surplus on the balance of payments to a special account against rainy days instead of promising the ignorant electorate more goodies in the election campaign. But who wants to listen to boring economics and finance? Who wants to discuss' with the voters whether the pound sterling is too expensive at over $2 and whether for the benefit of our hard-pressed exporters it should be brought down below $2 by allowing sterling to finance international trade? But I must stop being serious. The election is imminent.
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