2 JANUARY 1993, Page 20


At the Treasury's mid-winter beano, the toast is: Absent friends


here is some mulled wine left over from the Christmas party, and the Treasury, mindful of the public purse, has sent it down to Chevening and warmed it up. Nor- man Lamont raises his glass for a toast: `Absent friends!'

Sir Terence Burns, the Permanent Secre- tary, coughs. `Chancellor, do you have any- one in mind, particularly? I noticed at your party there were empty saddles in the old corral."That', snaps the Chancellor, 'is not what I meant. How did it get in the papers, anyway? No, I meant all the Treasury min- isters who were with me last year — John Maples, Francis Maude, David Mellor . . . How sad that they couldn't be here to see the fruits of their labours.' Sir Terence coughs again.

This midwinter weekend in the wastes of Kent is the Treasury's annual outing. At Chevening, the ministers and mandarins let their hair as far down as it will go. Some- times there are charades, and Mr Lamont may be persuaded to sing in his bath or imi- tate an owl. Amid this jollity they put their heads together and rough out the Budget.

'Well, chaps,' says the Chancellor, calling for order, 'our theme this year is a Budget for growth. This is a British Budget for British interests, all part of the new strategy I thought of. The Prime Minister — you know how close we are — he was saying the other day that we should do something for industry. Boosts for confidence, incentives for investment, special measures for small business, we all know the form. Conserva- tive tax-breaks work. So what have we got in the kitty?'

`Strictly speaking, Chancellor,' says Andrew Turnbull, in charge of public finance, 'we have the square root of minus £44 billion. We have, you may remember, forecast a record-breaking deficit for this year and a larger one for next year. Some of us would like to see money in the kitty before it goes out again.'

`Rubbish', the Chancellor tells him. 'You sound like that ass John Smith. Fancy say- ing that taxes would have to go up! Who'd vote for that? Besides, everyone knows I'm committed to balancing the Budget over — what did I call it last time?' The extended medium-term cycle,' says Sir Terence. `Thank you, Terry — sounds like a circus act, doesn't it?' The Permanent Secretary's cough still troubles him.

`Chancellor,' Mr Turnbull persists, `I don't know how long your cycle is but before it comes round we'll have doubled the national debt. In fact, on our present projections that will take us three years. Think of the poor chap at the Bank who has to raise the money. Every Monday morning Ian Plenderleith must wake up and wonder: how am I going to borrow another billion, this week?' Put it on Access,' says a voice from the back. Mr Lamont glares round, but sees straight faces.

`It's a matter of marketing,' says Anthony Nelson, the keen new Economic Secretary. 'We learned that at Rothschilds. You can't just expect people to go on buying plain- vanilla stock in industrial quantities. You need stockholders' perks, like at Eurotun- nel — return tickets for two on the Jubilee line, when it opens . 'Nick Monck, who looks after public spending, mutters, `If it opens.'

Alan Budd, the chief economic adviser, gives a nervous pat to his beard. `I think we may have to accept,' he says, `that borrow- ing money as if there was no tomorrow is a high-risk strategy. We risk inflation, one of these days. We risk cornering the market for savings, crowding the private sector out and aborting recovery. We risk a crisis of credit, which is what their Tower-of-Pisa fiscal policy got the Italians. Last time we borrowed like this, the IMF had to come and sort us out.'

The Chancellor cannot believe his ears. 'What's the matter with you, Alan?' he yelps. `Have you been talking to the Seven Dwarves? You sound like that awful wet- blanket Congdon. We only put him in the Seven to shut him up.' Fat chance,' says the voice.

Michael Portillo, Chief Secretary and minister for saving candle-ends, weighs in. `I'm afraid, Norman,' he says, `that my pre- decessor let public spending run out of con- trol."I won't hear a word against poor David."Well, surely it wasn't his predeces- sor. Or the one before that.' There is a col- lective intake of the Treasury's breath, for the luckless Mr Mellor followed John Major and Norman Lamont.

thought we agreed,' says the Chancel- lor sternly, 'to hold down public pay, but not to cut capital spending — vital for industry, vital for our infrastructure . 'Like the right wing of the Eurofighter?' 'Well, high-tech, then, the leading edge. Anyway, public spending is a matter for next autumn, when we have our new-style budget. What we're talking about now is taxes. Have we any painless ideas for rais- ing revenue?'

Robert Culpin, the fiscal wizard, pro- nounces. 'We normally recommend Nation- al Insurance contributions, Chancellor — they're our own-label income tax, nobody will spot it. We could play around with VAT, make people exempt, they'll be pleased, until they find out how much bet- ter off they were with zero rating. Full- whack increases on drink and tobacco. `A budget for Threshers,' the voice sug- gests, but the Chancellor ignores it.

`The trouble is,' Mr Turnbull explains, `that even putting up income tax wouldn't get us far. We reckon that a penny on the Standard rate brings in another £2 billion. So to cover a deficit of £44 billion, we might have to double the standard rate.' Mr Lamont thinks of his budget for growth, and tears his hair.

'Well, Chancellor,' Mr Culpin rumbles, 'we could always find you some short-term incentives which needn't cost much, if they're too complicated to use. And if you must have tax cuts, try the taxes which don't yield anything anyway, like inheritance duties or capital gains tax.' All the same,' says Mr Portillo, 'we shall have to cut spending. I mean cut it.' Mr Lamont is still shocked. 'What,' he cries, 'am I to tell the Prime Minister?'

Sir Terence comes to his rescue. Like a good mandarin, he has learned to hold his fire in committee and wait for the battle- winning broadside. Now he says: 'Chancel- lor, since you're planning to move Budget day to the autumn, why bother to have one now? We're agreed that there's not much you could do. Cancel the Budget, pass that off as a reform, let everybody go to the Cheltenham races instead.'

`But in the autumn, Terry,' asks Mr Lam- ont, 'won't it all come back to haunt me?' `By the autumn, Chancellor,' says Sir Ter- ence, very gently, 'you may be an absent friend.'