4 JANUARY 1992, Page 21


Not so much a budget, more a manifesto from Cold Comfort Chevening


Night falls on Chevening. Sleet blasts across the frozen landscape, rattling the windows and refrigerating the draughts. The Treasury team try to keep warm with mulled wine, their favourite tipple. This is their annual outing, a midwinter weekend marooned in the wilds of Kent, to map out the Budget.

Norman Lamont calls for order. 'Well, chaps,' he says, 'what have we got in the toy cupboard? I've come on here from Che- quers, and though, as you realise, John and I are bosom friends, he did mention the election. What can we do to cheer up the troops? I mean, look outside — it's not as though we're overheating.' The Permanent Secretary, Sir Terence Burns, clears his throat. 'Well, Chancellor, the cupboard's a bit bare. We're planning to borrow a for- tune, as it is. I suppose we could always borrow another £2 billion and give it back as a penny off income tax, but ...'

'Conservative deficits work,' suggests the Chief Secretary. The Chancellor snaps: 'David, I've told you once. Conservative tax cuts are value for money. We want cheap ones. Look at stamp duty. A holiday for the house-buyers at the expense of the stock- brokers. They have to go on paying until they can make that Taurus machine of theirs work.' Sir Terence chuckles. 'That was a safe bet, Chancellor. Let's ask Robert if he has any more.'

Robert Culpin, the Treasury's fiscal supremo, strokes his magisterial beard.

'Well, Chancellor, we quite like the idea of death. Doesn't bring in much revenue, any- way. The tax mostly gets paid on inherited houses, which have to be dumped on the market — just what you don't want now ... We could hoist up the threshold so that most people don't pay it, or even exempt the family home.' Nice one, Robert. Try it for Capital Gains Tax, too. Now, what can we do for small businesses? A VAT holi- day? A moratorium from the banks? A loan subsidy?' Three officials do sums on their fingers and drop their wine-glasses.

'Well, Chancellor,' says Mr Culpin, 'we have an attractive proposal for letting them build up tax-free reserves, and it costs out very reasonably. After all, what they need is capital.' So why can't they get it from the Business Expansion Scheme? Isn't that what it was for?"Yes, it was, Chancellor, but nowadays it's just another form of tax avoidance."Well, let's get some of it back. Now then. Share shops. My great scheme for bringing the private saver to industry's rescue. Billions for British Telecom, which must be the most over-capitalised company in the country. What's next, Francis?'

The Financial Secretary coughs. 'We've got the shops, Chancellor, but they're

rather short of stock. Unless you plan to privatise anything else this year?"Me, Francis? What makes you think I am the monopoly supplier of shares? Why can't ICI sell its shares through the shops? Or bonds, for that matter?' That would upset the pension funds, Chancellor, they'd see it as infringing their rights . . ."And you'd mind about upsetting them? Francis, for a dry you can be amazingly wet. Just pick them up by their tax privileges, and twist them. What happened to that idea of Bill Robinson's — Ex-Peps? Uniform tax treat- ment for all long-term savings schemes Peps, Tessas, BES, pensions, the lot? You save out of your taxed income, but once the money's in the scheme it's out of the tax net ... I really liked Ex-Peps. Why don't we put them in the Budget?'

Sir Terence intervenes. 'Chancellor, the Budget is usually in March, and the elec- tion must come by June, so a long and com- plicated Finance Bill would present certain problems of timing . . ."Oh, all right. Not so much a budget, more a manifesto. But we've got to have something about pen- sions, after Maxwell. They're too serious to be left to Tony Newton. Any ideas?' A junior assistant secretary takes courage and squeaks up. 'Couldn't we privatise them?' 'Privatise?"Yes, I mean, give them to the members. They'd all own their own share of the fund, and if they wanted, they could take it out and put it in a scheme of their own. Gosh, if I worked for Davy, and Trafalgar House bid for us, and our fund had a £74 million surplus, I'd have whipped my share out before that £74 million ended up in Trafalgar's balance sheet, where it is now. But . ."But how?' One clause in the Finance Bill, Chancellor. If the funds don't play ball, they lose their tax privileges. That might put the Budget back into surplus.'

All boggle. Then Alan Budd, the chief economic adviser, chips in. 'Just a word about the background, Chancellor. You remember the autumn statement we wrote, er, drafted for you?' I jolly well do — con- sumers leading the recovery, borrowing and spending more, a surge of exports — you haven't changed your mind, have you?' 'Not exactly changed, postponed. We wouldn't like to be pinned down on the tim- ing. With America still trying to get out of recession, and Germany trying to get into one, our export markets ...'

'Yes, the Americans. Wouldn't you like to be able to do what they did with their interest rates? At their lowest for a quarter of a century."Yes, Chancellor, but being in the ERM gives us the priceless advantange of a stable currency.' Does it ever occur to you, Alan, that we hitched sterling to the wrong wagon? Instead of trying to keep up to the mark, we could be keeping down with the dollar . . . Why don't we swap over? Announce it in my Budget speech? That would shake 'em.' I am afraid, Chan- cellor, that we should still be the victims of Charles Goodhart's Law.' Which says?' 'Roughly, it says that whatever peg we pick to hang our hat on, it will prove to be the wrong one."Thanks. So here we are, fid- dling around with the tax system because we're stuck with the wrong interest rate, using fiscal policy to do monetary policy's job — can't we change that?' I don't accept your premise, Chancellor, but the answer is: not before the election.'

'If you say so. Any other business? Bud- get date? I see someone has pencilled in 10 March.' The press secretary, Dick Saun- ders, jumps up. 'There'll be hell to pay!

That's the Champion Hurdle! Surely your predecessor ruled . . ."Not his predeces- sor,' says Sir Terence, 'mine. Peter Middle- ton was having his back worked over, and the physio jabbed her thumbs into his spine, and asked what was this nonsense about having the Budget in Cheltenham week, and she wouldn't let him get up till he promised to stop it.: Mr Saunders asks

for her telephone number. Mr Lamont rais- es his glass. 'I'll tell you,' he says, 'what I'm going to do in the Budget. I'll say that since the holiday from stamp duty is working so well, I proclaim a general tax holiday. No one need pay anything.'

Sir Terence blanches. 'Until when, Chan- cellor'?' Until the election.'