Budgeting for Deflation ?
The most important point in the Commons debate on the -.Budget proposals came right at the end, in the Chancellor's reply, and, as a most regrettable consequence, was never properly discussed. It was his statement that his official advisers had told him that there was a considerable danger of deflation, and that he had consequently deliberately limited the surplus to £500 million so as to avoid pushing this deflationary tendency too far. In other words, it is the Chancellor's con- sidered judgement that the days of too much money chasing too few goods may end this year, and that there is some danger that they may be followed by a period of not enough money chasing too many goods. He considered it his duty to anticipate this danger, and he therefore refrained from taking too much money away from potential consumers. He gave tax reliefs when many people had steeled themselves to bear new tax burdens. Was he right to do this ? That was the one point that was never responsibly discussed in the Commons. Mr. Jay and Mr. Dalton talked a great deal of nonsense; Labour spokesmen as a body never made up their minds whether the Budget was inflationary or deflationary; Mr. Lyttelton con- tented himself with puncturing some of the more foolish and misleading statements of Mr. Jay; Mr. Gaitskell only realised when it was too late in which direction the Chancellor was running, and so Mr. Butler has not yet defended in detail a Budget which was intended to be anti-deflationary in its effect. But he must now defend it. Even in a situation of potential deflation there is no escaping the fact that the pro- portion of real national production going to exports and rearmament must be increased. And that inevitably means at this time that the proportion going to civil consumption must be decreased. It is still a real weakness in the Chancellor's argument that he deliberately proVided for real consumption on the same level as last year. It may come to that, if frustrated exports are turned on to the home market and if consumers have enough money to buy them. But to run down stocks and to starve the capital goods industries in such circum- stances seems to be wrong anyway.
