Next April

By NICHOLAS DAVENPORT

IT is suggested by some faint- hearts that Mr. Maudling has already tabled his Budget and will have nothing more to do in April. This is absurd. What he has done is merely to give first aid to certain casualties in the economy. What he has got to do in April is to intro- duce an economic plan which will (a) enable British indus- try to improve its ground-plan (hence its com- .petitiveness) and (b) allow the national economy to expand even if our entry into the Common . Market is delayed. That the ground-plan is all Wrong n6 is made painfully obvious by the in- ..creasing unemployment in the north and the increasing over-population and industrial con- gestion in the south. Scotland now has an unem- . ployment ratio of 4 per cent., the north-east coast <24 4.7 per cent., and Ulster of 7 per cent. This Is. an old problem—the north grew up with a disproportionate share of coal, steel and heavy engineering--but it is getting worse, not better. And it has become a dangerous social evil when a large part of the school-leavers up north have to stand idle in the streets. The Distribution of Industry Act (which requires employers to ob- lam an Industrial Development Certificate before building a new factory) and the Local Develop- _

ment Act have undoubtedly helped—were not the motor companies induced to carry their ex- pansion into Merseyside and the Clyde?—but they do not provide the Government with the machinery to deal with such a frightful problem, as, for example, the dependence of nearly 40

per cent. of the Scottish labour force on heavy engineering. Next April Mr, Maudlin must pre-

pare the way for a radical solution of our in- dustrial imbalance. It was an obvious 'first-aid' to reduce the purchase tax on motor-cars im-

mediately from 45 per cent. to 25 per cent.—

otherwise the new motor plants on the Clyde and Merseyside might have to close--but some-

thing much more fundamental will have to be done. I suggest that in his Budget Mr. Maudling must unfold a comprehensive public investment plan designed to assist the rationalisation of our industrial 'infra-structure.'

First, the increase in public investment for 1963-64 must be much larger than the recent White Paper (Cmnd. 1849) foreshadows. In the

current year an increase of around 71 per cent. at current prices--about £140 million—is ex- pected and next year the increase is estimated at 9 per cent. or £200 million, making a total of £2,130 million. A £21 million decline in coal, railway and atomic energy investment is much more than offset by increases in roads, elec- tricity, post office, housing, schools and hospitals.

But if we are to begin to improve the ground- plan of British industry much more will have to be spent than an extra £200 million. The regional authorities—The Scottish (Development

and Industry) Council and the North-East De- velopment Council--will have to submit far-

reaching plans to the central Government which will involve more roads, more slum clearance, new housing, new offices and public services, together with new towns and their linked in- dustrial estates to cater for the new lighter in- dustries. Further, the south could concede to the north much more administrative work, such as that of the insurance offices. To carry into effect the dispersal of administrative work it would, of course, be necessary to extend the Industrial Development Certificate to office blocks, which is a necessary part of the building control I have been urging Mr. Maud- ling to adopt. Without this building control an extension of the public investment programme up to, say, an extra £500 million a year could lead to an inflationary rise in building wages.

Next, this increase in public and local authority spending requires an end to the stupid system

which denied local councils access to the Public

Works Loan Board. Being driven to the mort- gage market (largely financed by 'hot' money

from abroad) the councils have borrowed ex-

pensively and have piled up a short-term debt exceeding £1,200 million. This must now be

funded with Treasury help. In future the rate of interest for social investment must be kept low, and, if necessary, insulated from the market rate. Excessively dear money, inflating the cost of housing and all social investment, has been one of the inflationary madnesses of the Treasury,

where the oulmoded theory of the 'equilibrium' rate of interest is still apparently taught. I beg Mr. Maudling to look carefully into the plan for a 'two-tier' system of interest rates. But he should not wait until April before lowering Bank rate to 4 per cent. and releasing the remaining £75 million of 'special deposits' to the joint stock banks. We cannot embark on an extended public investment programme with a long-term rate of interest still as high as 51 per cent. • Finally. next April Mr. Maudling will be anxious to safeguard the re-expansion of the British economy, which he has started, in spite of external factors which may . be making for sonic recession, such as, for example, the end- ing of the European boom and perhaps stagna- tion in America. He must therefore be con- sidering what further release of purchasing power he might allow. So far he has released £42 million to post-war creditors (who are much more likely to save it than to spend it) and he is increasing public investment gradually by £200 million. But this 'may not do More than offset the decline in private investment which his pre- decessor brought about. He has taken about £55 million off purchase tax on motor-cars and has allowed larger investment allowances and speedier write-offs for new investment which will cost the Exchequer up to £50 million next year. This is not much compared with the forced savings which have been exacted through Budget surpluses 'above the line' of over i£400 million a year in each of the past we years. He should, therefore, be prepared to put an end to such huge deflationary exactions. He Shbuld reduce purchase tax on other consumer durable goods (especially household goods and radio. and tele- vision equipment); he should also, remove, in preparation for the Common Market;.the stupid fuel oil tax which puts up industriat costs and worsens our industrial competitiveness- abroad.

Of course, if we fail to get into the Common Market or if our entry is postponed for another year, 'preparation' on Mr. Mandling's part implies such a decisive release of 'Money from the Treasury—for private spending as Well as for public investrnent--as will restore our industrial morale and end the nervous depression which Mr. Lloyd induced and Mr. Heath's prolonged negotiations worsen.