23 JULY 1977, Page 4

Political commentary

Towards the abyss

John Grigg

What one might term the choreography of Denis Healey's statement in the House of Commons last Friday was not the least intriguing aspect of it. As he spoke, the Prime Minister was immediately on his left, and next to him Shirley Williams and Anthony Wedgwood Benn sitting side by side. Beyond them were Peter Shore and Michael 'Foot. The visual message was clearly intended to be that the Cabinet was a united, even a happy, family.

The statement itself was a holding operation to win another month or two before the crisis enters a more acute phase and the next statement has to be made. The world's judgement on the Government's 'policy' was swiftly apparent from the reaction of the foreign exchange markets. Whereas until Friday the Bank of England was still selling sterling to keep the rate down, after the Chancellor's statement it became necessary to buy sterling in order to support the rate.

Of course the Government's antiinflation policy has now collapsed, and Sir Geoffrey Howe was quite right to say so. All those who believe that monetarism is not enough will realise that the proposed mix ture of monetary restraint (even if adhered to) and exhortation to the trade unions is neither just nor workable. The only ques tion is how soon it will be seen to have failed, and my own guess is that the moment of truth will come sooner rather than later. MPs who are counting on a full holiday are likely to be disappointed.

Mr Healey had an easy ride on Friday, partly because of the 'end of term' atmos phere already prevailing, and partly because he went out of his way to please the left with his bullying insolence towards the Opposition, and even towards the leading right-winger in his own party, Reg Prentice, whom he described as 'right honourable

gentleman' rather than 'right honourable friend' — a discourtesy which he would certainly not commit when referring to a leftwing advocate of civil war.

• Interviewed later, he patronisingly stressed his faith in the British people (which they have little reason to recip rocate) and argued that trade unionists had looked into the abyss two years ago and would not, therefore, now press for set tlements which would take them over the brink. But why, in that case, was it necessary to have an agreed policy of wage restraint when they were actually looking into the abyss? If the Government felt obliged to have a firm commitment from the TUC — with statutory sanctions explicitly threatened, though held in reserve — at a time when hyper-inflation was manifestly imminent, how can he pretend that fear will do the trick now that the danger is less glaringly obvious?

In 1975, when inflation was running at 25 per cent, there was indeed a general sense of alarm which, however, was not regarded as a sufficient brake upon trade union demands. Hence Stage One and Stage Two. But now the near-panic of two years ago has given way to a different mood, in which scepticism as to the value of wage restraint blends with North Sea Bubble euphoria.

The Government has done much to encourage this mood, by attributing the rise in inflation this year (from a level already far too high) to forces beyond our control, and by endless talk about the oil-rich paradise that Britain will be in the 1980s. Yet the same Government now has the effrontery to suggest that it can safely rely upon popular awareness of the hyper-inflationary peril.

The monetary controls which the Chancellor has promised to maintain — and which he has to maintain, to satisfy the IMF — can certainly be relied upon to create the maximum sense of injustice. A wages 'freefor-all' when the supply of money is arbitrarily restricted is, of course, not a freefor-all but a free-for-some. As Mr Callaghan said on Saturday at the Durham Miners' Gala, 'the lions can command in lions' share.'

But is it not the duty of a civilised, to say nothing of a socialist, government to protect the weaker animals against the lords of the jungle? Can it be right for a government to intervene only in such a way as to ensure that the predators flourish?

For it is absurd to suppose that monetarism, even in its crudest form, is noninterventionist. Money is a state monopoly, and restricting the supply of it is one most potent way in which the state can intervene in the workings of the economy. As such, it could be expected to work against inflation, but only if it were used with the backing of ruthless physical force to compel acceptance of its social consequences, and only if those consequences included unemployment on a vast scale with very little social security to mitigate its harshness.

In fact, the British state under any foreseeable government will continue to pay substantial unemployment benefit, and will shrink from using the Army or the police to enforce the full rigour of monetarist discipline.

The truism that prices and incomes policies, whether voluntary or statutory (or a bit of both, like the present Government's Stages One and Two), inevitably produce. anomalies and arouse resentment, has

blinded monetarists to the fact that their own panacea would do the same only worse and without — in British circumstances — having any chance of success. Those who are denied a fair rise, or any rise at all, or who are thrown out of work, as a result of a few strong unions' claiming the lions' share of the available cash, will not start a movement for lynching the miners etc. They will turn in fury against the Government.

And what will the Government do then? It will not throw tens of thousands of people into prison and impose a reign :If terror, with tanks and machine-guns on the streets. It will have only one recourse, and that will be a statutory policy to control prices and incomes in accordance with standards of fairness which most, if not all, will accept. Better, surely, to introduce such a policy now, instead of waiting to be driven to it by events.

It would not, of course, be an alternative to strict control of the money supply, any more than monetary control can be an alternative to prices and incomes policy. The two are complementary, and the shorter the supply of money, the greater the need for it to be distributed fairly. How that is to be achieved, with due regard to differentials, will be a matter for intense thought and discussion. But ultimately the Government has to take responsibility. It cannot stand aside and let the weak go under. Still less — if the weak refuse to accept palpable justice — can it face the implications of coercing them.

All this the Conservative Party should now be saying with devastating force and conviction. But alas, it is saying nothing of the kind, because it is inhibited by the economic theory, and historical myths which led to, and are used to justify, Edward Heath's removal as leader.

It is bad enough that the Party is not defending its own record against deliberate falsification by its opponents, but far worse that it is itself indoctrinated with a false view of what went wrong when it was last in office, and that it is failing, therefore, to proclaim the policy needed in the present emergency. Fortunately Mrs Thatcher, when pressed last year, did not absolutely exclude the statutory control of prices and incomes as an option. But she could hardly have done or said more to indicate that it is the very last option that she would seek to exercise.

Despite the almost uniformly bad press that it has had since 1974, the policy is by no means rejected, even now, by the people. According to an Opinion Research Centre poll published in The Times on 18 July, 42 per cent favour compulsory guidelines on pay, as against 58 per cent, favouring the voluntary principle. If the bogusness of 'free collective bargaining' in present conditions were brought home to those who expressed the majority opinion, it cannot be doubted that many of them would switch. But with nearly all political leaders pointing in the wrong direction, it is hardly suprising that the people are bemused.