But in his annual Mansion House speech to the City, delivered this year at Guildhall, the Chancellor appeared to rule out a dash for growth by allowing rates to drop sharply. 'If slashing interest rates were all that was required to generate growth, there would not be a single poor country left in the world.'
None the less, in drawing a sombre picture of British and world economic prospects, he seemed to confirm the Treasury's known plan to announce a rate cut after the Autumn Statement on 12 November, provided markets expressed confidence in its public spending plans.
Acknowledging the unprecedented criticism of government economic policy in recent weeks, Mr Lamont spelt out the Treasury's plans to open up economic policy proposals. This would include a new role for the Bank of England as public critic of government anti-inflation achievements, which the Bank could exploit as a first step towards independence. The Bank has been invited to publish quarterly assessments of government progress in curbing inflation, starting next month.
Mr Lamont will also establish a consultative panel of outside economic forecasters. Between six and 12 economists from academia, think tanks and the City will be invited regularly to publish their economic forecasts. The Chancellor will also publish a monthly assessment of monetary conditions.
In a speech usually devoted to monetary policy, Mr Lamont attempted to shore up flagging confidence in the Government by providing a glimpse of the Autumn Statement. Public spending on infrastructure would, where possible, be maintained and the way to private-sector participation in public works opened by scrapping rules blocking big construction firms from taking part.
But, in a potentially remarkable policy change for Britain, the Chancellor said from December 1993 the new Budget unifying taxation and the Autumn Statement spending plans would include separate totals for current and capital spending, something that should underpin the Government's commitment to infrastructure. Mr Lamont backed this up by appearing to abandon the policy goal of balancing the budget when the economy recovered, promising only to maintain a 'tight' fiscal position.
It is understood the Treasury is debating whether to adopt Germany's so-called golden fiscal rule, which would give it the economically respectable excuse of borrowing more to spend on capital projects as long as spending on current items such as wages and benefits was controlled.
At the banquet, Robin Leigh- Pemberton, the Bank's Governor, seemed to exploit its new role when warning against cutting rates too far and too fast. Although recent cuts were justified, 'at this juncture it is imperative the authorities are not perceived as taking their eye off their counter-inflationary duty,' he said.
Gordon Brown, the shadow Chancellor, said Mr Lamont announced no new measures to reverse the recession, the basis of his new economic policy being nothing more than 'that exposed as fundamentally unreliable . . . Norman Lamont's judgement'. He added that a national recovery programme was needed.
Leading article, page 18
Lamont's speech, page 22
Hamish McRae, page 23
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