Last week’s public borrowing and tax-receipt figures, headlined ‘Chancellor hails biggest monthly surplus in seven years’, received considerably less attention than the employment and wage-growth numbers a week earlier, underlining my belief that voters care a lot less (or indeed not at all) about the intangible ‘fiscal deficit’ and its implications than they do about their own prospects and spending power. And rightly so. Failure to shrink the deficit at the rate he first promised is nevertheless the one major issue on which George Osborne is seriously open to criticism as Chancellor. But what matters in political terms at this stage is that borrowing this year is 7.5 per cent down on last year and can be described as ‘on track’ — while tax revenues are up by 3.1 per cent after a long run of near-zero growth.
Within the tax figures, corporate payments for January were up a billion on the same month last year, a useful answer to the accusation (even if it’s largely true) that HMRC is slack in pursuit of tax-minimising multinationals. Stamp duty receipts were down 11.4 per cent — a welcome indication of a cooling property market. Best of all, income tax receipts were boosted by payments on high earners’ bonuses and partnership profits deferred from 2012-13 to 2013-14 in order to take advantage of the top-rate cut from 50p to 45p. Since the 50p rate — which came into effect just six weeks before the 2010 election — was designed by Darling and Brown as a cynical political trap for the Tories, rather than a responsible fiscal measure, there is both justice and cunning in the way Osborne has used its reversal to conjure a bumper monthly surplus just ten weeks before the next election.
Lesson of Leeson
‘Win some, lose some’ was our headline for March 4 1995, under a Castro illustration of Chinese merchants smiling inscrutably at the FT headline ‘Barings lose all in Far East’. My contribution to The Spectator’s first attempt to ‘navigate Barings’ straits’, as the strapline put it, was an essay about my own experience of dangerous Asian markets, concluding ‘It is a region of powerful spirits, and Barings sadly failed to propitiate them.’ Coverage elsewhere focused on class: here was the most aristocratic of City firms brought down by Nick Leeson, a former clerk from a council estate in Watford.
This ‘rogue trader’ in faraway Singapore — who resorted to fraud after his positions had gone haywire because of the market impact of the Kobe earthquake on Tokyo share prices and the related derivative contracts in which he was dealing — had brought down a dynastic banking house admired the world over. And because his losses had not yet been closed out, Barings’ City peer group could not mount a rescue, though the big cheeses of British banking spent a weekend closeted at the Bank of England trying to concoct one. The City was ‘A Club No More’ (the title of the last volume of David Kynaston’s history) and — we all concluded — its proud but undercapitalised merchant banks could not survive in a globalised securities arena. Stephen Fay in The Collapse of Barings (1997) had a memorable vignette of Warburgs’ chairman, Sir David Scholey, leaving the Bank of England that Sunday night with ‘a sense of foreboding’ — as well he might have done, for his own bank, a beacon of the post-war City, would be sold to a Swiss buyer at a knockdown price two months later.
Yet in the perspective of 20 years, Barings’ demise looks very much like the beginning of a new era rather than the closing of an old one. This was the first of many cases of banks permitting traders to deal on a vast scale in derivative instruments of which the risks were not properly understood; of senior managers deluded into folly by their own bonus prospects; and of regulators with their eye off the ball. Under the heading of ‘Where are they now?’ let us pause to remember Christopher Thompson, the Bank of England official who gave an ‘informal concession’ that allowed Barings to remit more than its entire capital to Singapore for Leeson to gamble. And because we know how rarely lessons pass from one generation to the next — to quote Fay again — ‘it’s a pity that the nod and wink Thompson gave Barings could not have been captured on video and preserved in the Bank of England Museum’.
A wily bird
I know I should write more about the living and less about the dead — but the dead so often have the best stories. This week I salute Sir Robert Wade-Gery, a former Whitehall mandarin and high commissioner to India who has died aged 85. He became a colleague of mine at BZW (predecessor of Barclays Capital) after retiring from public service. We travelled together with the objective of opening up high-level business relationships in China and Taiwan, and I learned a lot from observing his modus operandi, which combined worldly determination with an All Souls intellect and the courtliness of a bygone Foreign Office era.
In Beijing for the 1989 Asian Develop-ment Bank meeting — on the very day the students first marched into Tiananmen Square, as it happened — we sought a meeting with the Taiwanese finance minister, Mrs Shirley Kuo, who was keeping a low profile on what was then very hostile territory for her unrecognised island state. Unable to make official contact, Sir Robert decided it was simplest to hammer on her hotel bedroom door — which she opened on its chain, with a look of terror, to receive through the narrow gap his proffered card and elaborate compliments. Undeterred, on we went to the most exclusive party of the whole jamboree, in a closed pavilion of the Forbidden City, hosted by the globetrotting uber-banker Michael von Clemm of Merrill Lynch.
‘But I haven’t got an invitation,’ I said, trotting behind him. ‘Never mind, mine says “Sir Robert and Lady”, you’ll just have to come as my wife.’ He was a wily bird, and surprisingly good fun.
Budget Briefing 2015
On the day of the Budget announcement (18 March), join The Spectator’s Andrew Neil, Fraser Nelson and James Forsyth for a discussion on George Osborne’s last Budget before the general election. This event has been organised by The Spectator in association with Aberdeen Asset Management. For tickets and further information click here.