The Rt. Hon. Sir John Major KG CH

Prime Minister of Great Britain and Northern Ireland 1990-1997

1989Chancellor (1989-1990)

Mr Major’s Speech to the Stock Exchange Christmas Lunch – 20 December 1989

The text of Mr Major’s speech to the Stock Exchange’s Christmas Lunch on 20th December 1989.


I’m pleased to have been invited to join you for two reasons. First, because it is an agreeable occasion in itself, and second, because it has been a pretty boring year to far, and coming to the Stock Exchange Christmas Lunch will give me something to remember it by.

This is the third successive years I will have both begun and ended in the treasury. In saying this, I am of course assuming that I will end the year in the Treasury – you may regard this as rash, since there are, after all, eleven days to go yet! Nonetheless, I will take the risk.

The Treasury has lost none of its subtle ways in my absence. Treasury officials really are in a class of their own. And to prove it – they have a language of their own.

For example, the Delphic phrase, “We are still crawling over these numbers”, really means “this thing is riddled with mistakes”.

“There is one slight wrinkle” translates as “the whole idea is fundamentally flawed”.

“I think the point you made may well be right, Chancellor” translates as “it’s absolute rubbish, but in this daft world anything can happen”.

And heaven help you if you are told some question is “essentially a matter for your political judgement”, that means “you got yourself into this mess – now get yourself out of it”.

But jargon is not just the preserve of civil servants. The City has its own jargon too. It starts with the radio in the morning, and the compelling news of how the American long bond has fared in Far East trading. And it continues all day. The pound does not go up or down’ nothing so mundane, it is “firm” or “soggy”. Trading is “choppy” or “directionless” – and I’m not sure which is worse. And huge fluctuations are put down to a mysterious phenomenon described as a “nervous European afternoon”.

And how about the following, which I find published at the foot of one eminent city firm’s circular:

“This material is for your private information and we are not soliciting any action based upon it. Opinions expressed are our present opinions only. The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such”.

This really means:

“For heaven’s sake, take no action on the basis of this circular. We don’t want to be sued. In any event, we may change our mind by this afternoon. Our conclusions are based on ropey information, and you would be loopy to take any notice of it”.

I am not being critical. I know how they feel. I just wonder if I could have that long caveat stamped on Treasury forecasts before I presented them to Parliament! Fortunately, I don’t need to – they are the best forecasts in the business, by and large!

And these forecasts are clear for next year. They leave me in no doubt about the priorities for economic policy either. I have made no secret of my determination to get inflation down, and keep it down. For inflation, if it were allowed to take hold again, would be intensely damaging. It is not just that it undermines business planning and investment, and provokes industrial strife – though that in itself is damaging enough. It is that inflation is socially divisive on a grand scale. It favours the debtor at the expense of the saver, and the strong at the expense of the weak. It is quite simply unacceptable.

So inflation has to be squeezed out using all the practical methods to hand. Which means monetary conditions have to be adequately tight. Of course there are always those who fear that the cure will be worse than the disease. But no one should underestimate the underlying strength of the real economy today, which is far healthier, more resilient, and more independent than the condition in which is entered the ‘80s. In the long term, the economy will be stronger, not weaker, for the action we have taken now. So to the doubters I say simple this: the soft option is not an option. And I believe that message is now well understood, and I see no need to labour it on this festive occasion.

And I am also confident that I shall not need to borrow the technique one South American President, who has recently stated that he will go into exile if the 1990 inflation rate exceeds his target. He made the same promise last year if he missed his 1989 target of 80%. In the 12 months to November the rate was 77.9%. So far so good: we will watch events with interest.

Another matter I have been watching with interest and which I should mention while I am at the Stock Exchange is the progress your exchange is making in preparing for the future. I was very glad to learn that a design for TAURUS is now ready to go out to consultation. With 1992 approaching fast, it is clearly of the greatest importance that we have an effective and modern system, and I hope that all concerned can now move quickly to achieve that.

TAURUS is, of course, not only the name of your settlement system. To far more people it is a sign of the Zodiac. I am not myself a great believer in horoscopes, although I have made clear that we take a wide range of indicators into account when deciding whether monetary conditions are right. In this respect, there is one particular indicator whose status I have decided merits upgrading. Many people present may not realise the close relationship that existed for so long between the sterling dollar exchange rate and the performance of the English cricket team. Regrettably, this has broken down somewhat over recent years, but I believe it may still be useful, and so officials have been examining this matter carefully, to see what lessons we may usefully draw.

There are clearly still a few wrinkles in the system. For example, I gather that on the basis of the Test team’s dismal performance over the past few years, the pound should now be worth less than 40 cents. There are a number of possible explanations for this:

(i) It could be that there has been a chance in exchange rate policy, towards maintaining a firm pound, and that this has been spectacularly successful
(ii) Or it could be that there has been a change in policy by England’s cricket selectors, which has been spectacularly unsuccessful
(iii) It could mean that the pound is about to plummet
(iv) Or it could simply be that you can prove anything with statistics

I leave you to judge which of these is most likely. The conclusion I prefer to draw is that England are about to beat the West Indies 5-0, and win all their future matches for the next few years as well. And on that agreeable note, I wish you all a very Merry Christmas, and a Good New Year.