Watch Brown's corset come out of the closet for a nation on the never-never

GORDON Brown needs a corset, and if he looks in the Downing Street wardrobe, he should find one. It was hung there by Sir Geoffrey Howe, who mistakenly thought he had no need for it, but it was worn with great effect by his predecessors as chancellor, Denis Healey and Tony Barber.

The corset was the strangely-termed mechanism for controlling credit: when things were getting out of control, the Treasury pulled the strings and the corset tightened, causing banks to reverse their advances.

Brown needs to tighten credit now, but he finds that the traditional kit for doing so is out of fashion. When past governments wanted to stop us spending tomorrow’s money on today’s luxuries, they could force finance companies to make us pay up to 40% of the price in cash and repay the rest over no more than two years. That stopped people buying cars.

They told credit card companies to increase our minimum monthly payments. They instructed hire-purchase companies to make the never-never more finite. Chancellors could order the clearing banks to make special deposits at the Bank of England, thus giving them less to lend to the public.

Howe scrapped all that, leaving interest rates as the only control on credit. As credit-card rates show, that is not always an effective tool - but Brown has handed even that sanction to the bank, and while the independent bank is also worried about our borrowing, it can’t afford to damage the rest of the economy by raising rates.

Whether we call it a corset, a girdle or stays, Brown needs something to restrain Britain’s bulging boom in credit. Equity-withdrawal on mortgages is running at 40bn a year, financing 6% of all consumer spending; the average person has 1,400 of credit card debt.

Britain’s consumer-led boom has been financed from tomorrow’s earnings and, as Mr Prudence knows, that cannot go on for ever. But if consumers even stop increasing their debt, it will depress growth; if they start repaying it we could head for recession; and if they don’t repay, the banks are in trouble.

He has already left it too late to act, but compared with his current straitjacket, a corset seems preferable. Brown needs us to stop borrowing so that he can start borrowing. The time for him to show us this garment will be the pre-budget report expected this month. He can have it remodelled to suit today’s fashion, but Brown has to make us tighten our belts.

It’s payback time

I DON’T know what is the longest sell-by date on Northern Foods’ dairy products, but I’ll bet that it is not as long as the pay-by date on its dividend. The food group last week declared its profits for the half-year to September and announced that it will pay its 3.25p-a-share dividend - next March 28.

That is 136 days between telling shareholders (the owners of the business) what the company owes them and actually paying it. Northern is not the slowest payer of the companies declaring dividends: Scottish & Southern is paying its interim next March - 137 days late. This is even slower than the 126 days it took the power company to pay its final dividend.

Slowest of the current crop, however, is Viridian, the Ulster electricity company: its payment will reach shareholders on March 31, 139 days after last week’s announcement. In the past year, the only FTSE 100 company with a worse record was BG (British Gas) at 141 days, and it means that Viridian will, on the last day of March 2003, be paying out profits it earned a year earlier on April 1, 2002.

Some companies pay up within a month, but the cost of delay can be more than lost interest. This month both pubs groups SFI and contractors Amey have, between declaring their dividends and posting the cheques, had second thoughts and cancelled their payment altogether.

A fishy business

JUST like New York, the City of London is looking for someone to run its markets. At a salary of 67,000 to 80,000, the Director of Markets being sought by the Corporation of London may be paid less than Harvey Pitt’s successor at the Securities & Exchange Commission, but the job is just as important.

The City wants someone who can spot a bad apple, smell stinking fish or recognise a pig in a poke. The director will be looking after Billingsgate, Smithfield and Spitalfields, the City’s fish, meat and fruit-and-veg markets.

This is not necessarily bad experience for a financial watchdog: Rudolph Giuliani, the former New York mayor tipped as the next SEC chairman, cut his teeth as attorney-general cleaning up the city’s notoriously-corrupt Fulton fish market. I see no reason for not including the London Stock Exchange, Liffe, the metals and other exchanges within the remit of the Square Mile’s director.

The absurd way

WELCOME to capitalism, Labour-style. Somewhere between nationalisation and privatisation, the famous Third Way has now been discovered. The public will receive shares in state organisations but will not be allowed to sell them.

Alan Milburn, the health secretary, last week launched the "foundation hospital" which will be owned by potential customers who apply to be members. But not only can we not sell our shares, there are no dividends - not even perks such as queue-jumping or private rooms. The only reward is that we can manage the hospital, saving Milburn the trouble.

Allan Leighton, meanwhile, Royal Mail’s chairman, plans to award shares to post workers that may pay a dividend if the group ever makes a profit, but which confer no ownership rights and are thus equally unsaleable. Still, at least these New Labour shares don’t fall in value.