Political Commentary

How much, how soon ?

John Grigg The other day I was asking an eminent man, much concerned with economic policy, if the TUC would accept an adequate revision of the Price Code and whatever .might be needed in the way of public expenditure cuts. His reply was swift and emphatic. 'The TUC will accept anything.'

That such a remark could be made at all was a tribute to the Government's success in maintaining its vital coalition with the unions through what already has been a revolution in policy. More specifically, it was a tribute to Mr Callaghan, because it is doubtful if any other Labour leader could have achieved what he has achieved in recent weeks.

But will the TUC and those it represents 'accept anything'? Above all, will enough be accepted in time ? It is excruciatingly difficult and dangerous to do a U-turn at high speed. Yet that is precisely what the Government and its trade union allies are now having to do.

The hardest test of all relates to the cutting of public expenditure. High and ever higher public spending, rather than Aneurin Bevan's 'language of priorities', has hitherto been 'the religion of socialism'. But now the language of priorities is being spoken with a vengeance, and the top priorities are beating inflation and saving the pound.

In the vote of censure debate on 9 June the Prime Minister said that there was 'no need for panic cuts in public expenditure'. The operative word was 'panic'. It must already have been clear to him that cuts would have to be made in the next financial year, and since then he and Mr Healey have been preparing the ground for such cuts. But at the same time they have been holding out against demands for cuts in the present financial year.

At the longest-ever meeting of the Labour Party-TUC liaison committee on 21 June (which lasted from 10.30 a.m. until nearly 2 p.m.) a new social contract was agreed, in which a key item was recognition that there would be little scope for increasing public expenditure over the next three years. And Mr Callaghan firmly refused at the meeting to give any guarantee that there would be no expenditure cuts in 1977-8.

Two days later the revised social contract was accepted by the TUC general council— unhappily, but by a majority of twenty votes to three. But even while the trade union leaders were reaching their affirmative decision, the national executive committee of the Labour Party was voting by eleven votes to eight for wrecking amendments to the contract. One of these expressly repudiated the clause that there would be little scope for more public spending over the next three years.

This vote did not help the pound, but if foreigners (poor things) had known a bit more about our institutions, they would have realised that it demonstrated not the power, but the impotence, of the NEC. The TUC general council and the NEC were able to meet simultaneously for the significant reason that the top trade unionists who sit on the general council do not consider it worth their while to sit on the NEC.

The NEC voted as it did only because some of the leading politicians who belong to it were absent on duty connected with the French President's state visit, and because the left-wing politicians on it were thus able to seize an opportunity to embarrass the Government. But the vote that mattered was the vote of the TUC general council.

Meanwhile candid remarks had been made at the OECD meeting in Paris, on 22 June. The US Secretary of the Treasury stated that lending nations would 'become increasingly reluctant to finance expanding current account deficits' unless borrowing nations made 'fundamental changes in their domestic economic policies'. And the Assistant Secretary went further, deprecating suggestions that sterling was undervalued— thus in some degree exposing the international bankers' ramp which temporarily rescued sterling after Whitsun.

The Government obviously hoped to be able to avoid explicit spending cuts until after the TUC and Labour Party conferences. (It is necessary to say 'explicit', because rigid adherence to the cash limits system must, in view of the recent depreciation of sterling, involve some enforced, if unadvertised, reduction in spending during 1976-7.) But only an explicit announcement of cuts will have the psychological effect needed to restore confidence in the pound, and one is bound to ask if even Mr Callaghan can get away with such an announcement in the near future. The row over the child benefit scheme was bad enough, though that was a matter on which Government and TUC were more or less in cahoots. But spending cuts that will mean a substantial increase in unemployment, as well as damage to social programmes, are far more menacing to Labour solidarity.

Some official advisers believethat the inevitable announcement should be made sooner rather than later. So does Brian Walden, a Labour MP noted for his courage and independence, who on 1 June wrote in the Daily Express that £2 billion would have to be cut, and that the longer the evil

hour was deferred the nastier it would be.

Mr Walden tells me that he has seldom received so many letters in response to any speech or article of his, and that a great many have come from Labour supporters, among whom the ratio commending his view is about twenty to one. Granted that Labour supporters who read the Express may not be quite so representative as, say, Labour readers of the Mirror, this is still, surely, rather encouraging evidence.

Doubtless Mr Callaghan is well aware of this rank-and-file opinion, and it may have encouraged him to move further towards announcing cuts for next year, when he answered questions in the House of Commons on Tuesday after his return from Puerto Rico. But when Mrs Thatcher called on him to make a statemen,t in July, before Parliament rose, he would not commit himself.

'If we can complete discussions by the end of July that would be helpful and the House would be informed. I would want to discuss these matters with my party as well, with the House, and with everyone concerned. . . . I have a feeling that the public expenditure survey paper comes out later. If it . . . can be done, I would not rule out doing it in July. But I would not want to rush it out at the end of July so that people would feel tricked by it, and I would want to make sure there is proper and adequate discussion.'

Translated out of politicians' English this means that he will not make an announcement until he has, at least, squared the TUC, which is tactfully covered by the words 'everyone concerned'. (If he were to act literally on those words he would have to consult the whole population.) We can take it that there will be intense negotiation with the TUC about both the total figure to be cut and the detailed incidence.

When Eric Heifer quoted a newspaper report that the total would be £1,000 million, Mr Callaghan dodged the question by pretending to misunderstand it. In fact, £1,000 million is unlikely to be enough.

Just as Mr Healey has a financial credit to draw on from abroad, so Mr Callaghan has a moral credit with the unions, deriving from his relatively underprivileged background, his freedom from the stigma of an elitist education, and above all his service to the unions in 1969, when he helped them to sabotage In Place of Strife.

This moral credit has been drawn on very heavily since he became Prime Minister, and it is not inexhaustible. But there is a good chance that it will prove more durable than Mr Healey's stand-by credit.

So long as it lasts, Mr Callaghan has little to fear from either the Opposition or the Tribune group. Most Tribunites are anyway unwilling to bring a Labour government down. The true hard-liners of the Left, in Parliament, are only about a dozen strong, and it is not easy to imagine an issue on which they, the Opposition and most of the small-party members would vote together, to defeat the Government.