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Redwood's fiscal policy fairytale

It was not traditional children's book fodder, but for Margaret Thatcher's former head of policy there was much "jousting and feasting" to be found in a discussion of 1980s fiscal policy.

That is according to a speech, written by John Redwood, the former head of the Number 10 Policy Unit, which compared Stock Exchange reform to a battle with medieval knights.

The address, which was intended to be delivered to senior policy advisers in 1984, has been revealed for the first time today.

Under the title Tilting At Castles, Mr Redwood began: "Once upon a time - or about a year ago, to be precise - there lived a noble and chivalrous group of knights in a great big castle called the Stock Exchange."

The ensuing 1,800-word yarn used the fairytale theme to explain how a change in approach by the government - or "institutional barons" - to regulating stock-broking firms could benefit the public - or "peasants".

Mr Redwood continued: "Those knights had many virtues.

"They were very honest - at least to each other - and it was truly the case they never, never lied when executing orders.

"They always worked very hard and competed with each other with high spirits.

"And of course they loved feasting and jousting and pillaging and - well, we'd better not be too explicit.

"Outside the Stock Exchange castle lived a great population of subject people and peasants.

"They were all forced to send their savings, the results of their labour, to the institutional barons.

"Now the institutional barons weren't nearly such a jolly lot as the Stock Exchange knights.

"And although they got invited to some quite good jousts and feasts, it wasn't the same thing as the feasting and jousting and pillaging that went on in the Stock Exchange."

The speech was intended to be delivered in the years pre-dating the 1986 Big Bang, which followed the decision to dismantle long-standing restrictions on trading in the Stock Exchange.

Mr Redwood explained in hindsight that the unorthodox speech was "a prophecy" of how he wanted the Policy Unit to manage an influx of entrepreneurial investors.

"Most of it was prophecy," he said.

"I was looking forward to what would happen, and my most favourable scenario was the one that happened.

"At the time, we were just beginning to see some of the older stockbroking firms selling out to institutions.

"It was still a restricted practice."

"Sir Nicholas Goodison (chairman of the Stock Exchange) came to talk to us and we agreed to give them time to sort out their own house.

"There were an awful lot of people who wanted to become players."

The story explained the process in more child-friendly terms.

Mr Redwood wrote: "Now this country had been very badly governed for many years.

"But it fell under a wise ruler.

"The wise ruler decided to send her boldest champion over to the Stock Exchange castle to sort it all out.

"Now this bold man was also very wise.

"He decided to go forth to the castle alone and parley unarmed.

"And when he arrived beneath the battlements, he spake thus: 'Excuse me, but would you mind very much just lowering your drawbridge a little so that a few other people can get into your castle and enjoy some of the feasting and jousting?'"

The former economic adviser goes on to chronicle a mythical spate of in-fighting within the "Stock Exchange castle" that resulted eventually in the lowering of the battlement's drawbridge and a rush of "barons" and "peasants".

He wrote: "And so it became apparent to all the peasants that they had indeed been wisely governed.

"By calling off the siege, by not intervening, by asking people to do what they thought best and reasonable, and by being nice to everyone, the government had wrought a great revolution.

"Some people could remember pictures of the Stock Exchange castle; some even claimed to have seen some of the last stones being carried away to make nice houses for peasants.

"But all agreed that it was much better to live in a world where the institutional barons now had to behave themselves and do what the peasants told them; and where the Stock Exchange knights no longer belonged to a special Order; no longer jousted and pillaged and went to too many feasts; but where the people could choose for themselves what to do with their wealth."

Speaking nearly 30 years after drafting the speech, Mr Redwood said: "In the end, it wasn't just many of the stockbroking firms that sold out, but most of the merchant banks sold out as well.

"Suddenly, London was transformed from a small group of relatively small partnerships which restricted their growth routes into an international centre of capital.

"In my mind all this was tied up with the development of the Docklands.

"The City wasn't just restricted in its businesses, it was restricted in property terms.

"It needed to spread out eastwards, as it did following Big Bang.

"The Stock Exchange fairytale had a happy ending."


From Belfast Telegraph