In rejecting any form of import substitution or control, the Government has left itself with only the floating or, perhaps better expressed, sinking pound — which it deliberately fails to support as the country's last economic rampart. Plainly this risky strategy is behind the rejection of the plea from Brussels for a movement towards monetary union by the 1980s. There is also the more shameful motive of devaluing petro-dollar and other debts not guaranteed or linked to an outside unit of value. The economy is at a most perilous point, with the rate of inflation making it increasingly difficult to decide if hyperinflation or the more likely money panic (with a rush from goods at any price into cash) will be the scenario, accompanying widespread unemployment, unused capacity and bankruptcy.
The pound is being allowed to fall to help exports and, it is hoped, to price out some finished goods the demand for which was covertly dampened by the rise in VAT in the Budget. Our rate of inflation is now running at the highest level in Europe at 25 per cent on a six months' reckoning. The authorities, and no one else, are to blame. They have encouraged wage settlements to move 8 to 9 per cent ahead of prices at a time when they have well known that commodities are falling and world trade moving into recession. Nevertheless, they have acquiesced in prodigal wage and pension claims on self-fulfilling inflationary grounds of pressure from their own Budget. For the private individual the choice is between guarding against hyperinflation, through assuming long-term debt and exchanging cash for some acceptable real value, or in deciding that cash, with all its faults, is the best hedge when the money panic starts. For the Government there is no such choice. There is only a sensible retreat into a period of austerity, with the plain purpose of reducing living standards, balancing Budgets and building a firm base from which a controlled expansion may proceed. The enemies of these measures will call them autarkic and contrary to the letter and spirit of the EEC. They probably are, and for no better reason, though many abound, a firm decision for an independent Britain must be taken in the June referendum, concomitant with the immediate domestic measures that are now so overdue.