There is no easy path to savings, Mr Redwood

"Kenneth Clarke certainly isn't willing to cut whole areas of spending out of the public remit. Neither is Mr Redwood on the basis of what he has told us so far. Both are offering false prospectuses"

One of Mrs Thatcher's most striking characteristics - one she shared with Ronald Reagan - was a capacity to behave as if she was not part of the government over which she presided. Judging by his "manifesto", John Redwood shares this ability - as no doubt he should since he is at such pains to cast himself as her ideological successor.

Mr Redwood's pledge of pounds 5bn of across the board savings in public spending through an attack on waste is somehow reminiscent of the early years of Mrs Thatcher's term of office and the days of the Rayner efficiency unit. Mr Redwood is, ofcourse, playing the same record. As a former head of the No 10 policy unit he should be as aware as anyone that even Mrs Thatcher was to find that there was no easy path to public savings; eventually she gave up the struggle to cut spending in real terms. Mr Redwood was still part of Mrs T's think tank when the original commitment to cut public spending in real terms was junked for one to reduce it as a percentage of GDP.

This was also the goal reiterated by Kenneth Clarke as he did his best to cut Mr Redwood to size while nominally presenting the Treasury's Summer Economic Forecast yesterday. The key objective was for public spending not to exceed 40 per cent of GDP, said the Chancellor. Forget "wish lists" and "vague assertions that deliver nothing", said Mr Clarke: look at the record of a Chancellor who has achieved "the tightest control of public spending in modern times".

It all depends what you mean by public spending, however. Yes, in nominal terms, the record on controlling expenditure has apparently improved. But in real terms - and the Chancellor was adamant in presenting himself as someone who lived in the real world - public spending has gone up. In 1994/5, general government expenditure, excluding privatisation receipts, rose by 2 per cent in real terms. Yet in November 1993, when Mr Clarke presented his budget for that financial year, that measure of public spending was supposed to fall slightly.

Or take the control total, which excludes cyclical spending like social security payments. In November 1993, this was going to fall by 1.25 per cent in 1994/5. In practice it rose by 1.25 per cent.

Public spending defied its most doughty adversary, Mrs Thatcher. It defied her because, pragmatic politician that she was, she was unwilling to axe functions. Mr Clarke certainly isn't willing to cut whole areas of spending out of the public remit either. Neither is Mr Redwood on the basis of what he has told us so far. Both are offering false prospectuses on the outlook for the public finances.

Waiting for the regulator

Trafalgar House is almost certain to renew its bid for Northern Electric as soon as Professor Stephen Littlechild, the electricity regulator, has said what he plans to do with charges. The price is clearly dependent on what the regulator does but assuming he is as tough as everyone supposes, it seems equally certain that Trafalgar will bid at less than the pounds 9.50 a share it said it was prepared to pay a couple of months back. This is going to put the Northern board in a highly embarrassing position, to put it at its kindest. It will be recalled that the Northern board refused to allow the pounds 9.50 bid to be put, despite the protestations of many of its shareholders. With the shares languishing at just 774p, it is now quite possible that the company could be taken over for a lot less.

Even more extraordinary, however, is that Trafalgar is in any kind of fit state to bid at all. Jardine Matheson has struggled valiantly to salvage this beached wreck of a company but all efforts have so far failed. The Keswicks and their fan club have spent a small fortune trying. Northern is in a sense the last throw of the dice, a way of providing Trafalgar with the cash flow and impetus necessary to refloat.

Without Hong Kong Land and Swiss Bank Corporation, which miraculously seems to be able to conjure up takers for Trafalgar's unwanted paper among its international client list, Trafalgar would not be able to mount this bid. Small wonder, then, that Northern has been fighting a determined battle with City regulators to have Swiss Bank banished from the scene. There was more than just principle involved in this one. Success would have wounded, possibly mortally, the Trafalgar bid.

On the face of it, Northern is on firm ground. Swiss Bank is in the process of taking over SG Warburg, until yesterday Northern's merchant bank adviser. That clearly makes Swiss Bank's position in continuing to advice Trafalgar untenable.

The Takeover Panel appears to agree, but only up to a point. The messy compromise settled upon is that Swiss Bank should stand down as adviser but should be free to act as a lead underwriter in any forthcoming bid. Ridiculous though this fudge might seem, it is nonetheless something that should work to the advantage of Northern shareholders. Finally they should get what their board has done its utmost to prevent, a chance to consider whatever it is Trafalgar has to offer.

The market is not yet convinced

Lord Young may have finally secured his long-anticipated link with the German utility giant Veba, but the deal won't convince everyone that the telecoms "federation" that is Cable & Wireless really makes any kind of sense. Don't expect the market's wariness, which translates into awarding C&W more or less the same capitalisation as its 57.5 per cent stake in Hongkong Telecom, to recede anytime soon.

Buying 45 per cent of Veba's telecoms subsidiary Vebacom, even at the higher than expected cost of pounds 825m, plainly makes commercial sense. What it does is to give the British company a window on the continental European cellular market, through Vebacom's 28 per cent interest in E-plus, a leading cellular operator.

Another important benefit of the deal is that it lays the groundwork for a Europe-wide personal communications network, which will take in C&W's previously announced link with Bouygues in France, together with plans to apply for licences in Spain and Italy, and Mercury's One-2-One cellular network in Britain.

Furthermore, by cementing the Vebacom deal, C&W will now be able to sell its stake in a rival German cellular player that is backing a competing network, D2. That disposal might yield as much as pounds 200m, lowering the net cost of the Vebacom buy.

The problem is that though most analysts seem to agree with the strategy behind the deal, their agreement doesn't necessarily extend to the valuation. Most of the bits and pieces being built up by C&W are potentially highly profitable, in a market still in its infancy.

The start up costs may be huge, as the Mercury experience with One-2- One has so painfully shown. But down the road, these assets can probably be sold at handsome prices. Even so, it is looking increasingly likely that Lord Young will have to find some more powerful and immediate way of delivering value to shareholders, or someone, one day will do it for him.