When the Iron Lady Ruled Britain (20 page)

The
Gatecrasher
had a photo feature on ‘Le Snog!!' and a popular paper reported that the privileged teenagers enjoyed uninhibited sex beneath the dining-table cloths as the evening wore on. But Mr Taylor said that Aids was cramping the young people's style – ‘they worry about it a lot.' ‘Did they see themselves in the tradition of past eras of excess,' I asked, ‘like those written about by Evelyn Waugh?' He looked rather blank. ‘I don't do much reading, unfortunately.' Mr Davenport had to leave, and there was a brief hunt for the car phone. A few minutes later a young woman with ‘
CHANEL
' written across her T-shirt came in: ‘
Harpers and Queen
are on the phone for Eddie. Shall I give them the car phone number?' The
Daily Mirror
had contrasted the money spent by the ball-goers with the pittance paid to people on the dole. ‘Did that worry Mr Taylor?' It was, he said, ‘hard to think of that sort of thing' when you were surrounded by people in jobs. The ball-goers had lived ‘quite secluded lives in private schools and their parents' nice homes in the country.' Everything was good, and they were going to turn out rich like their parents. It was hard to avoid
Gatecrasher
's essential snobbery – one of their dances was called ‘The Slough Comprehensive End of Term Ball'. Comprehensive school pupils – or, put another way, ninety-four per cent of secondary schoolchildren – were, I was told by one ball-goer, known as ‘Kevins and Sharons'. Where, I asked Mr Taylor, would most of his revellers eventually earn their living if it came to that? In the City, Mr Taylor supposed. Were they spoiled, like the children of the American rich are increasingly being spoiled? Not usually, said Mr Taylor, though ‘the nouveau crowd, who had just struck it rich, might give their son a Porsche for his eighteenth birthday.'

It appeared that it was no longer considered either desirable or prudent for the rich not to flaunt their wealth. Messrs Taylor and Davenport were falling in with the prevailing mores. In the months before ‘Big Bang' some dealers in their twenties had their salaries more than trebled between lunch and pink-champagne time, from £30,000 perhaps to £100,000. Seventy-three people at the ‘lower end of the employee scale' at one City jobbing firm were paid between £35,000 and £120,000. The firm was reported to believe ‘it right and necessary to ensure that remuneration is fully competitive in the new environment.' Glossy magazines like
Harpers & Queen
and
Tatler
revelled in the wealth and consumption of people about whom they wrote. The Earl of Lichfield edited
Courvoisier's Book of the Best
, which told us that the ‘complete house' should have two swimming pools, jacuzzis in each bathroom, a helicopter pad, a gymnasium, and a ‘perfect couple' of servants. The book's recommended champagne, Roederer Cristal, sold at £37.75 a bottle, and the best claret was said to be Château Petrus, a Pomerol costing £280 a bottle. Shrewd public relations operators began to exploit the desire of the new rich to be accepted on the unashamedly opulent London social scene by organizing parties for their clients at which no one could be quite sure who had paid to meet whom. In 1919 a confidential government document, drawn up to assess the possibility of revolution in Britain, listed ‘foolish and dangerous ostentation of the rich' as a prime cause of unrest. Presumably by 1987, despite three million unemployed, no such danger was feared by Mrs Thatcher's government.

‘Big Bang' – the wiping away on 27 October 1986 of restrictive practices and demarcations on the Stock Exchange – caught the public attention and the headlines, but the process of ‘liberalizing' the City had begun more than a quarter of a century earlier when exchange controls were relaxed, stimulating foreign-currency dealing. Parallel markets – in Eurodollars, for example – developed, creating a faster moving financial milieu than in the traditional centres like the Stock Exchange and Lloyd's. One banker said: ‘Gilt and equity traders stayed on the floor, scarcely recognizing that the telephone had been invented.' The old institutions became anachronisms, stately galleons, their decks lined with beribboned admirals, while the water around them churned in the wakes of fast-moving frigates. The ‘barrow boy' dealers – kids with minds like pocket calculators, but otherwise scarcely touched by education – had been around for years already making big money in the newer markets. A senior banker said: ‘There began to appear a new class of trader/dealer/broker, who came from a fundamentally different background, and had an uninhibited approach to business opportunities. They were orientated towards income and excited by trading, and not clouded by much thought and analysis. They were quick-reacting and sensitive to clients' needs, and, by definition, had to come from a different educational and social background.' At first in the traditional areas they were under-recognized and underpaid, but, by their skills, kept the old-style City gentlemen in the manner to which such gentlemen had always been accustomed. But, as in all culture clashes, the new inevitably overwhelmed the old. The last bastion of the old snobberies was Lloyd's, where, ironically, many of the worst City scandals of recent years have broken. The frauds were few, but the consequences devastatingly large – one bunch siphoned off thirty-nine million pounds, and cost their clients £235 million in losses. A few ‘nasties' – as my banker friend put it – ‘manipulated their positions of power.'

The new traders had nothing but contempt for the old boy net and the fuddy-duddy ways of their seniors. They revelled in the perils and excitements of unsecured markets. If there was to be capitalism for the people – created on the back of giveaway privatization – these were the men and women for the new world. Big Bang signalled the beginning of the end for the solid, snobbish, traditional stockbroker classes, with their relaxed commuting habits and self-protective paternalism. To compete with the new dealers, the old gang found they had to leave their Hampshire homes at 5.30 a.m., and not return till 10.00 p.m. As the banker said, their way of life was ‘no longer sustainable.'

As the walls tumbled down and the old guard retreated, the City increasingly became like a bright light to moths for young people who wanted, above all else, to make money. While I was meeting people in the City, the Civil Service Commission reported that it was losing ‘golden graduates', including those with ‘exceptional skills', to the City – in 1986 a record number of such graduates, fifteen, had eventually turned the Civil Service down. A man in the Bank of England told me that in the City a bright graduate might be offered a £10,000 joining present, £20,000 a year and a car, while the Civil Service was still concerned whether a recruit ate peas from his knife. Other crucial skilled people – accountants, scientists and surveyors – were being drained away from public service by Big Bang. The report concluded: ‘Analysis shows that salary is one of the reasons for withdrawal given by half of all respondents in the specialist areas.' In simple English, the Civil Service no longer paid enough, and old-fashioned rewards, like the satisfaction derived from duty, failed to compensate as they once had for comparative poverty. But, as in any gold rush, alongside the admirable entrants, Big Bang drew in those whose avarice outstripped their judgement and morality. Oddly, perhaps, it was an upmarket ‘bookmaker' who first blew the whistle from inside the Square Mile of the City of London.

Christopher Hales, who – after a brief period as a professional golfer – had started in the City as a stock jobber and had been a commodity broker, ran an outfit called City Index, which offered odds on, among other things, the movement of the Financial Times and Wall Street indices. His business allowed brokers and others who spent their working days ‘speculating' with company money to back their hunches with their own: it was attractive because winnings were tax-free. His clients on occasions ran up seven-figure debts, but, until Big Bang, although gaming debts are unenforceable at law, he had always been confident they would settle. Most of his ‘sporting gentlemen' were brought up in the tradition that you paid the bookmaker before the milkman because betting losses were ‘debts of honour'. But the new young men, said Mr Hales, suffered from intellectual arrogance. They were sure they would be right, and, if they were wrong, you were only a bookmaker and they didn't have to pay you. They were ‘spoiled' with money, but didn't know how to take their knocks – they weren't prepared to part with the Porsche or take out an extra mortgage to settle their debts.

When he discovered that a number of defaulters worked for Merrill Lynch, he called the firm, and four employees were disciplined. One of them, Justin Tate, was already well known in the Hooray Henry world as a former president of the Oxford University dining club, the Assassins, where he had been dubbed ‘The Baron'. While he was president in 1982, the Assassins caused six hundred pounds' worth of damage to a restaurant in Thame, near Oxford. Mr Tate owed Mr Hales £57,053. Over a lunch in one of those subterranean wine bars with sawdust on the floor, which are so beloved by pin-striped City types, Mr Hales gave me a talk about City probity that would have done credit to a Department of Trade and Industry inspector. There were not enough good-quality yuppies to go round, he said, so young people were given more responsibility than they could handle. Their ‘monstrous' salaries were paid because the out-of-touch City headmen ‘didn't have the faintest idea what these young people were doing,' a suspicion I had cherished since first writing about Big Bang.

The yuppies, he said, ‘haven't got the breeding for the City, to put it quite bluntly. “My word is my bond” has been replaced by “Dog eats dog.” With the stakes getting bigger, they forget the ground rules and get carried away by greed. There are not many people who are capable of being moral when they start talking in millions. Big
Bang has changed the profile of the City.' He mourned the passing of the ‘straightforward, old-fashioned, doddering public schoolboy. He may have had a lot of drawbacks, but he had an honest simplicity. He might not make you a fortune, but he wouldn't lose you one either.' There would, however, soon be a shake-out of the young tyros, he forecast with satisfaction, bringing with it ‘a weak market in second-hand Porsches.'

Six months after Big Bang, most people in and around the City agreed that the boom would be followed by at least a mini-bust. Anyone can make money during a Bull market, several people said, but when it turns to a Bear there'll be blood on the pavement. ‘The yuppies are starting at the top,' said the international funds manager of the subsidiary of a smallish American bank, ‘and there's only one way for them to go.' And he drew a large downwards arrow on the pad in front of him. He, unlike some, was not rejoicing in the fall that might lie ahead for the unlucky. He regretted that there was no longer time or inclination for paternalism, and that dealers joined banks to make a killing rather than a career. Exceptionally, he took young dealers in his own firm to lunch to advise them to be prudent with their money while the good times lasted. Highly salaried young people in most firms had no such avuncular counselling. ‘It is inevitable there will be some pretty disgraceful conduct. The most incredible salaries are paid to the young and inexperienced. The yuppies are immature, and many come from backgrounds which lack a gentlemanly tradition. They were brought up in a void, live in a void and work in a void,' he said, blaming the poor parenting of the sixties for the lack of moral standards. His young dealers came from a wide range of backgrounds – the father of one was on the Ford production line; one was black; one was a graduate, who had started his career as a journalist and seen the error of his ways; a fourth had the classic ‘barrow boy' background. He disliked, he said, the barrow boy cliché, but he had to recognize its validity. ‘Yeah, I'm a posh barrow boy, in't I?' he said mockingly. Men of his generation had evolved as the City money markets had evolved. When he started, a foreign exchange dealer earned only a few pounds a week more than a bank clerk. Then, far from there being ‘golden handshakes', which these days lure dealers from firm to firm, this man had had to resign one job before seeking another, such was the etiquette against ‘poaching'.

He was sympathetic to people who were poorly paid in other parts of the economy, having himself three members of his immediate family who did responsible but under-rewarded jobs – a hospital radiographer, an engineer and a police constable. His 31-year-old daughter, the radiographer, was in charge of a body-scan machine, and was paid £12,000 a year. When she had recently wanted to improve her skills in order to cope with a new scanner, she had had to take time off without pay to visit another hospital where one was in use. However, he argued that there were two justifications for the present inflated City rewards. One was simple economics. Good people had been in short supply at a time of high demand. The other was that they lived a crazily hyperactive life, yelling down phones all day. If you put the average doctor in a dealing room, he said, he would not understand how the dealers survived one day. In his own bank four dealers with three assistants settled two hundred transactions a day, worth five hundred million dollars. ‘You get paid for living the life that has that sort of pressure on you. Information technology increases the volatility of the markets. You live with continuous nervous pressure. We are throwing young kids into battle each day,' he said. However, six months after Big Bang I found fewer people prepared to defend telephone number salaries than I had six months earlier. Then the only senior note of caution had been struck by Sir Timothy Bevan, chairman of Barclays, who warned that the City ‘was subject to a lot of political and social opprobrium for paying what is perceived generally as too much.'

The argument for the new freebooters, put forcibly by a leading head-hunter, is that Britain's economic activity had been in the hands of unadventurous and easy-going gentlemen for too long. ‘It is extremely desirable that business is controlled by people who are restless and greedy. Since business in international terms is somewhat akin to war, it is best to have people who imitate the action of the tiger controlling companies, rather than the lamblike people who have been at the helm for many years past.' He pointed to Britain's 1987 growth rate, and argued that it was propelled by ‘the optimism, the aggression, the competitiveness' of the new tycoons. ‘All of these are functions of a new cultural mood, and they go hand in hand with the success we are starting to see.'