7 NOVEMBER 1958, Page 3


AFURTHER rise in the gold and dollar reserves in October brought them to the highest figure recorded for the last seven years; and as Mr. Wilson and other Opposition speakers discovered during the economic debate, this niakes an un- satisfactory background for an attack on the Government. The truth is that the policies,adopted by the Government since the 'autumn of 1957, especially the use of Bank rate, have succeeded remarkably. From near-catastrophe our economic position has been transformed to one of strength., The is held in such' high regard that fdreigners are daily expecting news of some further move towards convertibility; at home, the dire prophe- cies of recession and slump have proved 'false. There has been a pause in the gradual expansion Of the economy, and that is all.

Even so, there are clearly a number of points On which the Government remains vulnerable, and' on which, one would have thought, the Labour Party might have attacked. The future both of our export trade and of the level of prices is uncertain, and the Chancellor wisely made no rash promises about either. Yet within the last six months the Government has done a great deal to encourage the public to spend more. Banks have been awakened from their deep sleep lasting some twenty years, and are at last competing with each other to lend money again. There are now no restrictions on the hire-purchase industry, which is going all out to get more business. But it should be emphasised that these changes have been pushed through before prices have been stabilised, let alone held steady for any length of time. Price stability has been promised; but its achievement is far from certain.

Again, these various stimulants to consumption, which' may prove to be extremely powerful, must make some difference to the attractiveness of the home market compared with the export trade. Exports are not doing well at the moment, as they are earning us about 6 per cent. less than this time last year. In part this reflects the generally slacker conditions in international trade. Still, there is room for some misgivings here, and one might have expected the Opposition to exploit them. It is even more curious that so little atten- tion seems to have been paid to the extraordinary failure of the Paymaster-General. Mr. Maudling has taken the best part of two years to leave us in precisely the position in the European Free Trade Area negotiations which it was clear at the outset we must at all costs avoid. Conservative com- placency and British exporters will receive a bad shock if the tariff barriers go up against us in Etirope next year.. All this would have made good material for the Opposition's case, but most of it went for little. Mr. Wilson touched on it lightly, but scored his only effective debating point when he pointed to the contradiction between the Gov- ernment's eagerness to encourage people to buy and its anxiety about further increases. in wpges. This seems to bean issue on which the' Govern- ment should make up its mind.

Instead of vigorously drawing attention to this and other inconsistencies, the Opposition chose to ride its three favourite hobby-horses, all of which are non-starters, if only from old' age and exhaustion. The successes since the autumn of 1957, it argues, are due to the fall in commodity prices, and not to government policies: all that these policies have done is to lead to stagnation and unemployment. Mr. Heathcoat Amory dis- posed of the charge of stagnation without diffi- culty. It is absurd, he said, to talk of stagnation when investment,. spending and savings are all running at record levels. So it is, but the Chancel- lor would have done well to emphasise the trend of investment. The Government's critics, aided by one 'or two Amateur inquiries into the future course of capital investment, have managed to present a picture of declining investment. In fact, Capital investment in the second quarter of this year was not only higher than a year earlier bt:t also showed a greater increase than had been recorded in the same period of 1957. The present rate is, as the Chancellor observed, not unsatis- factory; though, at the same time, he is wisely taking the precaution of encouraging the national- ised industries to bring forward some of their modernisation and re-equipment schemes. The Labour Party's position on this is paradoxical. It is apparently anxious for companies to add fresh factory space to what they already have while at the same time resenting any measures to give the public the extra money to buy the goods which would be produced.

. Mr. Macleod, by comparison, made heavy going of the issue of unemployment. A surfeit of statistics which must have confused the House was notable only because it omitted the one figure which mattered. The figure of 500,000 unem- ployed includes a very large number of men and women who are changing from one job to another. This is particularly true of the industries con- nected with defence, and of the cotton industry. It is inevitable that fewer people should be em- ployed in these fields, but it takes some time for them to find fresh work. Real unemployment in the sense of people out of work for more than two months, continues to be remarkably small -- still well under 1 per cent. of the civilian labt■tIr force.. Nor is there much that the Opposition , do with the jibe about the 'luck' the Governn' has enjoyed because of the fall in comet - ' prices. Commodity prices began to fall more th.:a six months before the crisis of 1957, and not, as seems to be suggested, after that crisis developed. Moreover, what matters here, for the strength of the gold reserves, is the progress of the whole sterling area, taken together. The remarkable thing is that in spite of lower commodity prices, which have made a number of sterling countries poorer, we have still recovered so well. Mr. Heath- coat Amory gently reminded the Opposition of the old saying that one of the qualities of a good general was to have good luck, and that it was amazing how we had nothing but bad luck from 1946 to 1951.

So, for the moment, the Government is on top of the economic problem. Its policy of gradual easement is likely to be continued throughout the winter, The real test will come with the Budget, which already seems to offer the opportunity for drastic reforms of taxes. It is to be hoped that by then the Labour Party will be able to make some sort of a challenge in the House. Unfortunately the Left has at the moment nothing to say. In economic affairs its thinking seems to be suffering from—shall we say?—stagnation.