Let's face it, it's Chancellor Soros who counts

ANNIVERSARIES are beloved of journalists because they provide ready-made "pegs", as they are called in the trade, for articles which otherwise no one would want to read or, for that matter, to write. So it was that in May there was a profusion of pieces on Mr Tony Blair's government, a year after it was elected. Today is a better time to perform this exercise, if it has to be performed at all, because on 1 May the session still had three months to run.

Technically, it had nearly six months to go, for when the troops come back after the conferences they will engage in a few weeks' mopping-up operations. The State Opening (an historic ceremony held for the benefit of the ancient Dimbleby family) will not take place until early November. We shall then hear the Queen's Speech, only the second of Mr Blair's administration.

Some old party comrades are disillusioned. I was never illusioned in the first place, any more than in 1965 after a year of Harold Wilson. Mr Blair and Mr Gordon Brown have at least avoided a serious economic - or, rather, financial - crisis, which is more than Wilson and James Callaghan managed. It is sometimes forgotten that the Wilson government had a crisis on its hands virtually from its inception, and that before the 1966 measures there had been those of 1965.

Will we now see Gordon Brown's 1999 measures, as we did James Callaghan's in 1965-66, Roy Jenkins's in 1967-68 and Denis Healey's in 1976? Mr David ("Knife Edge") Blunkett clearly thinks we may. Mr John ("Call me Minister") Prescott is silent, on this anyway. While Mr Stephen Byers is as optimistic as an England cricketer off to Australia.

The pound has been floating since 1972, but that did not do Lord Healey much good. In the Tory financial crisis of 1992 we were forced out of the exchange rate mechanism of the European Monetary System. We have not yet re-joined, though we shall have to if we embrace the European single currency. We are unlikely to do that next year, however reluctantly or gracelessly - our traditional approach in matters European. There will be no ERM to be forced out of.

If the pound is devalued, it is what British manufacturers now say they want. What they do not seem able to understand is that Mr Brown has no power to effect this outcome in the same way as Stafford Cripps in 1949 or James Callaghan in 1967. These matters are now decided by George Soros, not Gordon Brown.

The Chancellor has lost another limb, one necessarily in more frequent use than a power to devalue: his power to fix the rate of interest. Mr Brown handed it back to the Bank of England or, rather, to the newly established monetary policy committee of the Bank. One of its members, Ms DeeAnn Julius, is a citizen of the United States. I doubt whether that country would have a British subject in the upper reaches of its own Federal Reserve Bank.

Perhaps this shows how tolerant we are in this country where some things are concerned. Under the present rules Ms Julius would almost certainly not get a job in the civil service. She is said to be the only member of the committee to incline towards a lower rate of interest. The reason is further said to be that she is the sole member with any experience of the "real" world of industry as distinct from those of academic economics or high finance.

A week last Friday evening I passed another member, Sir Alan Budd, at the Bank station. He did not recognise me, whether because he had forgotten my face or because he was walking very fast. He certainly bore a worried expression. Perhaps he was worried about missing his train. Who can tell? What we do know is that Sir Alan, Ms Julius and the rest have to direct their minds to the control of inflation and nothing else. That is what the Act setting up the committee enjoins them to do. It may be that the statute needs amending, which would take away even more power from the Chancellor.

Mr Brown's other substantial power, to raise taxes, is also circumscribed. It is limited by the promises which he and Mr. Blair made before May 1997. These were, as we know, not to raise the rates rather than the taxes themselves. Even so, Mr Brown has been constrained to raise money in ways which some would call ingenious and others underhand.

Yet Mr Brown remains the dominant figure in the Government, whose power in relation to Mr Blair was not diminished by nearly so much as the stories after the reshuffle said. What he is not is a dominant Chancellor in relation to the world or, in certain crucial respects, to his own country. More than ever are we liable to be buffeted by winds we cannot control.

I do not normally dispense financial advice in this column, taking the view that it is none of my business and that there are others better qualified to do so. But I would advise any readers within sight of cashing in any private pensions to order their companies to convert the funds from equities to fixed-interest securities. If the companies show any reluctance to follow this course, they should tell them that it is their money, not the companies'. This is what Sir Peter Tapsell did before the 1987 crash. Even with a stockbroker so rich and a politician so formidable as Sir Peter, the pensions companies still tried to be obstructive. He had to tell them firmly what to do with his money.

All governments like to pretend that they are in control of events. Mr Blair's is no exception. In reality they are not completely in control, and are becoming less so. In economics this is only partly of the Government's making. Mainly it is because electronic technology has changed international capitalism.

In constitutional affairs, by contrast, Mr Blair and his colleagues have taken a deep breath and jumped straight into a weed-infested pool where they may just keep afloat - or sink completely. Maybe they deserve credit for their courage or their foolhardiness, though the risks they are prepared to take do not apparently include those attached to a Freedom of Information Act. By any conceivable criteria a Scottish Parliament poses greater risks to the Labour Party, to the Government and to the United Kingdom.

Perhaps we should not become too attached sentimentally to the good old UK. It was always a slightly ramshackle and even a somewhat fraudulent construction. Northern Ireland was never integrated into the kingdom, nor was it ever intended that it should be. Between 1922 and the abolition of Stormont in 1972 it possessed many of the appurtenances of a fully sovereign state. Scotland had its own Calvinistic established church and its own legal system. Wales had its language but was, as it remains, more strongly tied to England administratively than were the other two Celtic nations.

The Welsh Assembly may cause more trouble than people now realise; the Scottish Parliament seems certain to. Even a parliament with Labour - but Scottish Labour - as the largest party was likely to give Mr Blair greater difficulties than he had budgeted for, in both the financial and the metaphorical sense of that word. A parliament with the SNP as the largest party will be a nightmare, for Mr Blair, at any rate. It has been a convenient Sunday to review the progress of his government not only because we look forward to the new session but also because I am now off on five weeks' holiday and shall (DV) be back for what I still think of as the Liberal Assembly but is now the Liberal Democrat Conference.