Melt the butter in a small saucepan and add the flour, stirring with a wire whisk. When blended, add the milk, stirring vigorously with the whisk.
Add the cream, nutmeg, cayenne, salt, and pepper. If the sauce seems too thick, add a little more milk or cream. Bring to the boil and remove from the heat. Immediately add the cheese, stirring until it melts. Reheat but do not boil.