What's Brown's exchange rate?

One of the less noticed aspects of the torrent of leaks pouring out of the 'Yes Minister' world of Tony Blair's government is the absence of any obvious interest on the part of the Prime Minister in the economy. You could argue that the economy is going so well (the fashionable view, about which I have reservations) that he does not need to concern himself with it.

It could also be said that Blair is happy to leave the economy in Gordon Brown's hands. Brown certainly breaks all the rules of the European Union working-time directive in the number of hours he puts in on the economy - although, if it is true that he only begins work at 6am he still has to catch up with Sir Stafford Cripps, Labour Chancellor after Hugh Dalton's 'Budget leak' resignation in 1947, who began work at 5am.

If members of this Government had to resign every time there was an embarrassing leak, there would be no Cabinet left by now. No doubt a much smaller cabinet would suit the Prime Minister well, because, as he is finding to his cost, democracy and colleagues can be tiresome when one has ambitions to break the mould of British politics. Nigel Lawson once joked that Thatcher's ideal was a Cabinet of one: herself.

Nevertheless, the delegation of almost everything concerned with the economy to the Chancellor (with occasional intervention in things like the minimum wage) is unusual: if one looks back over the past 50 years, Macmillan, Wilson, Heath, Callaghan, Thatcher and Major all took a much greater interest in the economy than Blair seems to. Perhaps there was a greater sense of crisis then. Perhaps it doesn't matter very much.

Nevertheless it is intriguing, and the Chancellor's overlordship of this area must contribute to what some insiders fear is a duumvirate that could collapse in classic Roman style.

Some people are making comparisons with the Thatcher/Lawson/Walters era. In some ways the tension between Nos 10 and 11 Downing Street is not as bad as it was then; but in others it is even worse. Unlike Brown, Lawson never took himself seriously as being prime minister material - although there was a moment, when he was being feted as the Greatest Chancellor, when others began to take him seriously.

Thatcher did not take kindly to that kind of thing. Nevertheless, she was genuinely bemused by Lawson's resentment of Walters; and, people forget, Lawson was not fired. He resigned, in considerable style, on a day when his senior officials thought they had safely packed him off to Germany.

The general view is that Blair certainly cannot afford to lose Brown from the Treasury this side of the election; Whitehall seems to be more divided on whether the Chancellor is a racing certainty to be reappointed after the election (if Labour wins) or will be put on the spot by being offered the Foreign Office.

Geoffrey Howe was happy to move to the Foreign Office after the 1983 election. Thatcher, too, thought the time had come and noted: 'It seems a kind of psychological law that Chancellors naturally incline towards the Foreign Office.' Indeed she thought it the 'next logical step'.

Number 10 has its own views on the Chancellor's psychological laws. Brown may think differently from Howe - as Chancellor he is at the centre of power and no doubt wishes to stay there until he can become prime minister. One watches all this with interest: there seemed a certain 'third way' aspect to Blair's response last week to rumours about his not wanting a full second term - indeed, I thought him somewhat Delphic. But the response was duly spun into a firmer commitment than his words seemed to warrant.

There was a time when I wondered whether Brown, too, shared Blair's lack of interest in the economy. That was when, early on, the Chancellor hived off demand management to the Bank of England. But one soon learnt that, among other things, that was to give the Chancellor more time to work on his mission to improve the supply side of the economy, and devise complex schemes to narrow, or at least block, the widening gap between rich and poor.

Last week the Chancellor told the parliamentary Treasury Committee that the economic stability he aims at is an 'essential part' of the economic convergence required by his five tests for joining the euro. But a day later the Confederation of British Industry came out with a quarterly trends survey that suggested there was still a lot of 'instability' in the manufacturing sector, caused by the high pound.

For, while people's attention has been distracted by leaked memos and fundamental spending reviews, the pound has been creeping up again. The prospects for exports have deteriorated sharply in recent months, new investment plans are weak, and the CBI fears that manufacturing could be in danger of the kind of downturn that would not be too popular with the CBI or electorate.

Nick Reilly, head of Vauxhall Motors and of the CBI's economic affairs committee, says there is a lot of evidence that more and more businesses are switching to overseas sources for supplies - hence the recent surge in imports.

Kate Barker, the CBI's chief economist, observed: 'People say industry is "adapting" as if that were not a problem.' But whereas companies may survive by downsizing their UK operations and buying and investing abroad, that is not much good for the long-term potential of the 'supply side' the Chancellor works on from 5 - sorry 6 - am.

The Bank of England's Monetary Policy Committee has made its concerns about the damaging level of the pound known, but there is little it can do given its remit. The Government seems to have no strategy other than to wait and see. While one waits and sees what happens to British industry, however, there are wonderful exchange rates available for the summer holidays.