One thing was clear. Mr Clarke wanted to sound tough. This was a Chancellor who was no more for turning than Margaret Thatcher, he declared. The lower range inflation target of 1-2.5 per cent for the end of the present parliament was reasserted in ringing terms. And it was extended beyond spring 1997 as a target of 2.5 per cent or less.
But then Mr Clarke, a political Houdini to his fingertips, added a crucial escape clause. Monetary policy, he said, can never be precise enough to hit a specific number for inflation at all times. A wider range of 1-4 per cent - the initial range set by Mr Lamont two and a half years ago - was acceptable as the outer limits of a policy aimed at 2.5 per cent or less.
So now we know. Mr Clarke can legitimately disagree with Eddie George about what interest rate policy is needed to get inflation down to 2.5 per cent or less two years in the future. As he pointed out in the speech, his controversial decision in May was a finely balanced one. The Bank, after all, has erred on the side of pessimism in its inflation forecasting so far. If, however, inflation does come in above the 2.5 per cent target, the Government now has a let-out clause.
You could say this is only sensible. Inflation does vary over the cycle. It wasn't a smart move for the Government to commit itself to so tight a target for a stage in the business cycle that was as likely to be the high point for inflation as the low point.
On the other hand, Britain has long experience of pre-electioneering economic stunts. Given the political depths the Conservatives are now plumbing, it is almost inconceivable that Mr Clarke will not do the same - while all the time averring his commitment to stability.
Not that any of this will come as a great shock to the markets. For one thing, the Chancellor has already softened them up by saying that inflation of 3 per cent would be a triumph compared with past experience. For another, their disbelief of the inflation targets is manifest in the returns demanded in the gilt-edged market. The credibility of the counter-inflation regime has taken a knock - but it was one that was predictable.
A vicious circle of their own making
There is nothing like a spectacular financial crash such as Barings to wrench the spotlight of concern back on to City bonuses. The renewed vigour with which the Bank for International Settlements returned to this matter in its just-published annual report was no doubt in part prompted by the Barings shock. The BIS worries about the incentives to excessive risk taking when salaries are too closely linked, for example, to the profitability of derivatives.
Such worries are, of course, far from new. The reputation of the City as one of the world's most flamboyant casinos does not date from yesterday. It is just over a century since the first Baring crisis.
But there is little doubt that as the competition in investment banking has become relentlessly more cut-throat and global, firms have been drawn into taking ever greater risks with their capital to make sufficient profits, and to resort to ever more fantastic ruses to encourage staff productivity. Although the full story behind Barings' demise has yet to come out, there are good grounds for believing that the apparent profitability of Nick Leeson, the Singapore trader, and the prospect of big earnings for himself, his immediate bosses, and indeed the entire bank, encouraged the oversights that allowed the ruinous speculation to occur.
Investment banks have become locked into a vicious circle of their own making. Senior managers rationalise pay strategy by saying a large bonus element allows them to cut employment costs quickly in bad years. But it does not actually work like that. In the words of a leading City banker, staff expect huge bonuses in good years, and to be paid well in dreadful ones.
The effervescent row on executive pay, largely confined to big industry, and especially the privatised utilities, has skated round the telephone number rewards and bonuses that are common on City dealing floors. But, as Salomon, the American investment bank, has recently discovered, trying to pull the emergency cord on this onward and upwards system of pay and reward is difficult. Haemorrhaging key staff, it was forced to renounce most of its innovative pay scheme, which tried to link rewards more closely to performance.
If anyone is going to get this problem and the risks associated with it under control it can only be the practitioners themselves. The BIS, and along with it the Bank of England, can raise concerns, and point out the dangers, as they do regularly.
Whether anybody listens is another matter. That, as Eddie George, the Governor, would have to concede, is for the market to decide.
Labour picks up Heseltine's baton
Tony Blair was yesterday charming a business audience in London with promises of consultation like you have never seen before. The late John Smith's prawn cocktail circuit of the City before the last election is beginning to look a pale shadow of the campaign Labour is now planning to get itself closer to finance and industry.
There is no substitute for finding out how things work before tinkering with them. The test of Labour's policy will be the extent to which the feedback from business, banks and from experts such as the utility regulators changes the detail of tax, industry, competition and regulation policies as they evolve.
There are some promising signs. Labour's plans for small business, for example, have moved to the point at which they recognisably overlap with those already being promoted at the Department of Trade and Industry by Michael Heseltine.
In comes something remarkably like Mr Heseltine's favourite project, Business Links, the network of organisations around the country that brings together services to help industry and commerce. Tacked on to these new agencies will probably be a facility to guarantee equity investments by venture capitalists, which may or may not work. But at the DTI, is possible to envisage a Labour government taking up Mr Heseltine's baton and running with it.
Later this year, says Mr Blair, Labour's team will be talking to managers, investors and workers throughout Britain in what he described as "the biggest consultation exercise ever undertaken by a political party". Immodest, perhaps, but Mr Blair has been successfully practising national consultation on his own party stalwarts in the campaign over Clause IV, so we should take this exercise seriously and applaud it. Industry certainly is, judging by the way Labour spokesmen are now besieged for meetings.