Relax. You are under no obligation to read the small print. There is a clause in Europe’s constitution about bringing our economic policies — money and tax — into line with our neighbours’, but it must have got past the Prime Minister, because he has flown to Rome and signed us up for it. In any case, we shall be able to vote on it. In eighteen months or so from now, if he is still with us, he will stage his promised referendum. One other promise of this kind remains outstanding. Before the pound can be submerged in Europe’s single currency, we shall have to vote in favour — but he has never called this referendum, because he has never yet felt confident of winning it. He must be tempted, at least, to take the two of them together, arguing that logic links them, and believing that if he can win one, he can win both. He could then claim to have left his mark on history and retire to Bayswater-les-deux-Eglises. This would indeed be a moment of economic decision — for many of us, one of no more than five in our lifetimes. Looking back, we can rate the first four: two clear wins, one great leap backward and one road not taken. All four of them will have lessons to teach us as we approach the next moment of truth.
Passing the parcel
The loser is easily spotted. This was the attempt to solve our problems — most of all, inflation — by handing them over to our neighbours. Signing ourselves up for Europe’s exchange rate mechanism, we expected the Germans to act for us. I said at the time that they would act for themselves, and they did. We were soon bundled out, ignominiously and expensively, and our affairs at once took a turn for the better. Joining had been a tired choice, made by a tired government, against the Prime Minister’s better judgment. She herself was out within a month. The winners were bold choices, made by fresh governments: well thought out, well planned, well-kept secrets. Geoffrey Howe has admitted that the scrapping of exchange controls — this year marks its silver jubilee — gave him his only sleepless night. How Gordon Brown slept after making the Bank of England independent (on his own terms, of course) is not recorded. Both of these decisions amounted to the discarding of crutches. Both came as shocks at the time. Both are now taken for granted, which in its way is a tribute to them.
The road not taken was a guilty secret when I first came to the City. The Treasury and the Bank of England, committed in public to defending the pound at all costs, had once proposed to turn it loose and let it fend for itself. This was Operation Robot: sold to ‘Rab’ Butler, the Chancellor, favoured by Churchill, opposed by his cronies and stymied by Eden, who said it would upset his friends in Europe. (The Foreign Office’s song never changes.) No-one can say now where Robot would have taken us. Alec Cairncross, who studied it, thought that we had a lucky escape. Butler disagreed: ‘In the long run, I believe that the decision not to free the pound was a fundamental mistake.’ It would, he thought, have spared his successors the uncertainties and indignities of stop-go economics. Harold Wilson’s first government dug in behind the exchange rate for three years of trench warfare — ‘Hard pounding’, he said, quoting Wellington, ‘let us see who will pound longest’ — and lost. In the end, Anthony Barber floated the pound (or let it sink) but the apparatus of crutches persisted. It took a more confident Chancellor to do away with them.
One line of form unites all four of these critical choices. We did well when we were confident in our ability to manage our own affairs and stand on our own feet. We did less well when we funked it or ducked our responsibilities round to others. Before we vote to bring our policies into line with our neighbours and merge our currency with theirs, we need to study the form-book. Even Robot, the most obscure of these portents, may now find a new application. When we were joining the ERM, the Germans were staging a currency union all of their own. Then, to join Europe’s new single currency, Germany gave up the mark and saw its revered central bank cut down to size. The terms of this deal now look penal for Germany — its struggling economy is doomed, so the IMF says, to five more lean years — but they do not provide for an exit. Surely, though, someone in the Ministry of Finance or the Bundesbank is working on a German Robot: vorsprung durch technik, of course.
Mills and boons
Almost to the end (which came this week) Lord Hanson was in combative form, writing stiff letters to The Spectator, but his biggest fight of all never quite happened. This was his projected bid for Imperial Chemical Industries, for so many years the right marker of British business. The mere threat provoked ICI to split itself in two. In his Yorkshire days, the young James Hanson used to go round the West Riding looking at mills. If they had Rolls Royces outside them, he would bid for the mill, fire the directors, sell the Rollers, cash in and move on. The technique served him well when he turned to bigger targets.
Dear Sid, tell Claire
Oh, look, there’s a cheque in this letter. I knew Sid was right. He told me to buy shares in British Gas, and then it decided that Centrica was a prettier name, and then for some reason it bought the AA and then sold it again, so now it’s changing its share structure and has got cash to distribute, and... How much? 23p? I think I’ll tell Sid. Centrica is sending out 600,000 of these cheques, none of them for more than £2.10, which would scarcely cover the cost of accounting for them on a tax return. Luckily, the unstoppable Viscountess has a better idea. This is Claire, Lady Mackintosh, whose charity, ShareGift, lives by putting odds and ends like these to good use. Just endorse the cheques, she says, and send them back, and Centrica and ShareGift will see that the money goes to a wide range of suitable charities. Better still, donations like these are eligible for GiftAid, so that the biggest contributor will be the Exchequer. Tell Gordon.