THE ECONOMY
The soothsayers hedge their bets
JOCK BRUCE-GARDYNE
But the great man was notably un- abashed. Mother Nature, it seemed, had let him down — unseasonable droughts had played havoc with the hydro-power supplies, that sort of thing. Happily he had found an under-employed second cousin once removed to take charge of the cli- mate, and he was evidently in imminent expectation of something turning up. Hence I was not at all surprised to read his prediction for 1989. It will usher in a `wonderful future' for Rumania.
President Ceausescu it seems, is to be out on his own this New Year. Our home-grown soothsayers are notably more cautious. The National Institute's Mr Andrew Britton, for example, is prepared to stick his neck out to the extent of forecasting a current account deficit for the United Kingdom 'in the range' of £10-20 billion; inflation somewhere between four and seven per cent come the autumn; and a growth rate of one per cent going on four per cent over the year ahead.
Not since I was advised by one of our most eminent pollsters on the day Ted Heath called the February 1974 election that the outcome would be a landslide, but he was not sure which way, have I heard a more valiant attempt to cover the field.
Yet such caution is eminently under- standable. For 1988 turned out to be a wicked year for the forecasting fraternity. The Treasury came in for much ribbing from the teenaged scribblers and others for underestimating our trading overdraft by a factor of four, and predicting that the economy would be reined back to a gentle trot of its own volition. But who did any better? Last year was the one in which the world waited for the sequel to the last great crash of '29 to repeat itself, and waited happily — in vain. No wonder bets are being hedged this season.
So perhaps we'd better stick to certain- ties. And the first of these is that the two sides of the North Atlantic will celebrate the New Year with an exchange of trade hostilities between Uncle Sam and the European Community.
Fortunately the opening salvos in the beef war are more reminiscent of the `phony war' than the real thing, with both sides insisting that they are acting more in sorrow than in anger, and expressing optimism about an early return to the negotiating table. All the same, it is not a happy omen with which to start the New Year.
Our new man in Brussels, Sir Leon Brittan, told the readers of the Times that he sees his role as 'fighting protectionign, extending the free-market economic poli- cies of the Thatcher Government on a European scale, and providing a level playing field on which Europe's companies may contend for the prizes after 1992'. He will have his work cut out. A subtler politician than his sacked predecessor, Lord Cockfield, Sir Leon is unlikely to trail his coat, as Arthur Cockfield used to do, by lecturing his former colleagues round the British cabinet table about the inevita- bility of the disappearance of such essential fragments of the British constitution as the zero rate of VAT on kiddies' shoes. Yet it will be surprising if he does not find himself at the receiving end of brickbats from 10 Downing Street before he is much older.
In particular, he contrived to add the financial markets portfolio to his main responsibility for competition policy in the pre-Christmas distribution of the goodies in the stocking of the President of the Brussels Commission, M. Jacques Delors. One can quite see why he wanted it, given his Treasury background, and given also the scale of the London financial market in the Community.
But it is also not difficult to foresee that it is liable to lead him into collision with his former cabinet colleagues. For example, he inherits Mr Peter Sutherland's plans for the establishment of Community rules for monopolies and mergers. Mr Sutherland had begun to stretch the remit given to Community institutions by the Rome Trea- ty in this area remarkably — deciding, for instance, that the largest German and French car rental groups should be allowed to merge even before the French and German national competition watchdogs had had a chance to express a view.
There was an obvious rationale to Mr Sutherland's empire-building. Does not our own Lord Young regularly insist that competition nowadays is a pan-European concept? Does it not follow, then, that acquisitions and mergers should logically be vetted in Brussels? Well, not in the eyes of Lord Young's department, it doesn't. Mr Francis Maude, Lord Young's ministe- rial sidekick, has taken the lead in respond- ing to Mr Sutherland's blueprints with a bleak fin de non recevoir. Will Sir Leon, as a former Trade Secretary, prove more cautious? More conciliatory towards the susceptibilities of his former mandarins? Somehow I rather doubt it.
We may not have long to wait before we begin to find out. There is the little matter pending of the Siemens/GEC bid for Ples- sey. This may, of course, yet be blocked by our own Monopolies and Mergers Com- mission. But even if it is, it would have been quite in character for Mr Sutherland to have stepped in to overrule the MMC. And while he could have been expected, on the basis of his track record, to endorse a clearance of Lord Weinstock's ambitions by the MMC (a somewhat more probable outcome), he would assuredly have in- sisted on running his own slide rule over the intended deal first. If Sir Leon follows this line there could easily be ructions particularly if the long-standing difference of opinion between the departments of Defence and Trade about the desirability of the Greater Weinstock turns out to be unresolved.
That other larger-than-life Whitehall warrior, Lord King of British Airways, proved in the end surprisingly docile when Peter Sutherland snipped off several of the juicy European route licences he had picked up with British Caledonian. Lord Weinstock might not go so quietly if Sir Leon Brittan ordered him to sell off the Plessey defence interests which the MMC had permitted him to keep. Sir Leon acknowledges that the Prime Minister `naturally gave her views' about Lord Cockfield's designs upon our precious zero ratings. She is likely to give them in spades if he starts upsetting industrial restructur- ing on which Whitehall has set its heart. But Sir Leon knows at least that Mrs Thatcher cannot take away his knighthood — or even sack him till his term is up!
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