Favourites' chances in the Threadneedle as the City's great race opens up
CHRISTOPHER FILDES
Ashake-up in the betting for the City's classic event, the Threadneedle Street Stakes. The early favourite has dropped out and, with Sir Edward George a non-runner this time, the race is opening up. Appointed Governor of the Bank of England in 1998 for a second five-year term, he has always made clear that he would not take another, and I can imagine that his house in Cornwall is calling to him. When the race was run last, he got into a bumping and boring match with Gordon Brown, and after one exchange spoke of resigning. The new Chancellor's groupies were delighted. Now they could bring in a Governor who was on message, and who could be more perfectly tuned in than Gavyn Davies — City economist, New Labour archetype, close to the Chancellor and married to Sue Nye, his political secretary? Stamina finally saw Sir Edward through, and his rival has found his reward elsewhere, as the British Broadcasting Corporation's new chairman. The market now has two joint favourites — Sir Howard Davies, chairman of the Financial Services Authority, and Mervyn King, the Bank's Deputy Governor in charge of monetary policy — but I would not mind taking a longer price about Sir Brian Williamson, chairman of Liffe, the financial futures exchange now surrounded by suitors on all sides. The race must be run by 30 June, 2003, but I hear from the stable that it might start earlier. If the government planned a campaign to take us into the euro, Sir Edward might think it right to stand aside and let a new Governor cope. He is carefully neutral in public, but I never thought that he planned to end his career as the European Central Bank's branch manager in London.
Nolan rules
FOR the first time. the Threadneedle will be run under Nolan rules. In the name of clean and open racing, these provide that public appointments must be publicly advertised and open to all comers. Already, suitable candidates for the Bank's Court of Directors have their attention drawn to the Situations Vacant column. When Gavyn Davies filled in the right form for the BBC job, Tessa Jowell, as the Cultural Secretary, praised the process for its independence: 'The old way, with politicians making decisions in secret, have gone for good.' They got their man in, all the same. Never mind the rules, watch the results.
Spend to defend
WE now spend less on defence than at any time since the Wars of the Roses. I have taken this statistic from Professor Niall Ferguson, and one day I must ask him how he works it out. (In a civil war, do you count what is spent on both sides?) It is easier to show that less and less of our total output of goods and services has been finding its way to defence, and that the proportion has halved in little more than a decade. We have been paying ourselves what is called the peace dividend, and now we may have to get back to earning it. If this prospect disturbs Gordon Brown, he is shielding us from his anxieties. To his party, in conference this week, he presented himself as a Chancellor determined to stick to his plans and to spend ever-increasing amounts of public money on almost everything except the defence of the realm. No doubt from now on it will need to be defended in new ways against menaces of new kinds, but that will not make it cheaper. It never does. All the same, chancellors and governments sometimes have to grit their teeth and find the money. Even if Richard III had made far-reaching plans for higher expenditure on health and education, they would not have been much good to him at Bosworth Field.
Told you so
TADASHI NAKAMAE, who prescribes drastic treatment (on page 46) for Japan's economy, could claim to have diagnosed its weaknesses when everybody else thought it was invincible. He appears in City Cinderella, Peter Stormonth Darling's account of the life and times of Mercury Asset Management: 'A brilliant perceptive economist who has foreseen, with unflinching accuracy, the Japanese recession and stock market collapse of the 1990s.' At the top of the market
he warned that the Nikkei Dow index in Tokyo would come back to match the Dow Jones index in New York. At the time they were upwards of 35,000 points apart. This week there was a thousand points between them. If the two indices cross, or — better, of course — if Japan takes the treatment, the long fall may end.
So much waste paper
AT last, a use for the euro. It will encourage us to tidy out the sock drawers and cardboard boxes where we keep our foreign currency. All those francs and escudos and drachmae which managed to hitch their way home with us in our trouser pockets and have been taking up space ever since — it is goodbye to the illusion that we shall one day take them back with us and exchange them for something worth having, such as a kir or an ouzo. At the end of this year they will all go out of circulation, and we shall have a few weeks to exchange them for the inelegant new notes of Europe's single currency. Your bank will, if you ask it, take your notes from you and give the proceeds to a charity, but I suspect that most of them will stay in drawers and boxes until they finally become waste paper. No one can tell how much value will be wasted with them.
So many promises
PAT on cue, enter Viscountess Mackintosh of Halifax, the pioneer of ShareGift. As a City fund manager, she saw how easy it was for odd-lot investments — a few shares in this or that company — to accumulate in drawers and boxes, not worth keeping, not worth selling. They were well worth giving, though, if you gave them to ShareGift, a charity which could sell them in bulk for other charities' benefit. That idea was a winner, and is, and now she hopes to repeat it with EuroGift. We should be encouraged to walk into any bank in the country, empty our pockets of marks or pesetas, and know that their value would be passed on to a broad range of charities. Getting the bankers together will take some persuasion and some head-banging, but she is working on them. Hang on for EuroGift, and note the moral, which is that a banknote is only somebody's promise to pay. That will be equally true of the euro.
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