Commentary: Lamont's dangerous game of waiting

The CBI's quarterly trends survey confirms the business community's recent gloom. More people think output is still likely to fall over the next few months than think it will rise. The characterisation of the economy as bumping along the bottom increasingly sounds like a euphemism: most businesses are still sliding bumpily down the stairs. There are no abysses or cliff faces. But there is also no sign of an upturn.

Indeed, there are two indications of renewed gloom a little farther out. Companies are reporting a higher level of stocks relative to expected demand than in the last quarterly survey. If they choose to reduce those stock levels once again, output will be cut back as the demand for products is met from the storeroom. Secondly, export orders are weakening.

Something needs to change. The best solution to the problem would be a unilateral revaluation of the German mark, cutting German import prices and inflation and hence allowing lower German interest rates. So long as any change was clearly seen as a once-off response to the unique economic shock of German reunification, this should allow all the countries whose currencies are linked to the mark within the exchange rate mechanism to lower their interest rates as well.

The snag is that this policy option is not within the Chancellor's gift: the French remain resolute in wanting to maintain the current parity of the franc against the mark, for fear that anything else will imperil the chances of monetary union. The Chancellor is also right to rule out any unilateral British devaluation within or outside the ERM, which would only serve to raise interest rates. That leaves the Chancellor with fiscal policy, which is also constrained by the burgeoning deficit.

But the biggest obstacle is the Government's long-standing antipathy to packages for this or that, briefly suppressed under pre-election duress in the case of December's mortgage rescue package. Patience is a virtue, but to do nothing would be a mistake. If the Chancellor wants to head off a more radical change of policy, he should come up with all the ideas he can for stimulating the economy this autumn.