If the crunch comes ...

John Grigg

Crisis, as well as spring, is in the air. People are asking what will happen if, in spite of another pay deal with the unions, and in spite (or because) of Mr Healey's May Day optimism, the pound continues to slide—or begins to slide again after a brief recovery.

Will the old middle-way consensus survive, in however modified a form, or will it soon be replaced either by a thoroughgoing socialist siege economy or by neo-Gladstonian fiscal orthodoxy with all the disciplines and incentives of a free market ? In any case, what will be the politics of the crisis? A coalition? A general election? Or will the Government somehow manage to carry on?

Most of our politicians recoil from any over-drastic or excessively doctrinaire solution, and in that they have the cordial support of most British people. Moderation is still the order of the day. But the threat to moderation has been growing in recent years, and growing far more dangerously on the left than on the right. It is vital that the threat should now be counteracted, both for the sake of internal harmony and to restore international confidence in the pound.

Fears of a return to uncontrolled laissezfaire capitalism are unrealistic, but fears of a lurch into comprehensive and irreversible state socialism are all too solidly based. The latest policy document before Labour's national executive seems to prove the point and is itself quite enough to put sterling in jeopardy.

The world cannot be expected to understand that such a document is of no practical consequence unless and until its contents are endorsed by a two-thirds majority at Labour's annual conference. Only then would there be any obligation to include them in the next election manifesto—but why should foreigners know that ? Indeed, how many British people know it ?

If the policies of Labour's left wing were submitted to a national referendum, they would be overwhelmingly defeated. The majority against them would be much the same as that which approved British membership of the Common Market. (Who can doubt that the massive pro-Europe vote was as at least as much a vote against the left ?) But the crucial division of opinion in the country is blurred by the nature and structure of the Labour Party, and by the Labour leadership's determination in recent years to preserve the illusion of party unity at almost any cost. The left has been able to dictate policies repugnant not only to a vast majority of the general electorate, but probably also to a substantial majority of Labour voters. and has an eye to his place in the history books, he cannot allow this process to continue. He must assert the nation's will and the nation's need, if possible without splitting his party, but if necessary by engineering a split on the most favourable issue and with all the trade union support he can muster.

Coalition is certainly not the right way for him to go about it, however attractive the idea may be to a large section of public opinion and to some senior politicians who are noticeably loitering with intent. The worst thing he could do would be to drive the trade unions back into alliance with the left, so reversing their recent trend towards moderation. And nothing would be more likely to produce that effect than 'another 1931'.

The only coalition that matters to Mr Callaghan is his coalition with the trade unions, which it would be madness for him to throw away in exchange for a parliamentary coalition. Opposition parties may represent a very large number of individual voters, but they do not represent organised power.

It must be said, too, that Mr Callaghan's coalition with the trade unions is his biggest electoral asset, because however much people may resent the trade union veto (now equivalent to the House of Lords veto in pre-1911 politics), many will naturally tend to vote for a government that will not be subject to it. One may fairly suggest that Labour is now in office for that reason, and for that reason alone.

But can the Prime Minister stand up to the left and so steady the pound, without at the same time destroying his coalition with the unions ? His best chance of doing so might well be on the issue of future Labour policy, which the document prepared for the national executive has conveniently brought to a head.

Many critics and pundits, not all of them Labour's political opponents, have been arguing that only immediate and severe cuts in government expenditure will do the trick. They may be right, but it would surely be wise for Mr Callaghan first to try a less painful remedy which would have a similarly dramatic effect.

If within the next week—perhaps at the full meeting of the national executive on 12 May—he can bring himself to state unambiguously that his Government will countenance no further extensions of doctrinaire socialism until the present economic crisis is over, foreign holders of sterling will take notice. (They will certainly take notice, in the adverse sense, if he does not say it.) With any luck some trade union leaders might give him explicit backing, and in any case it is most unlikely that they would treat his remarks as a breach of contract.

But what if neither the pay deal nor the pigeonholing of socialism were to be enough to reassure our creditors? Then, indeed, public expenditure would have to be cut. But would it be for Mr Callaghan to wield the chopper ?

The answer would depend upon whether or not he could carry at least some of the big trade unions with him. Their natural reluctance to condone a reduction in the 'social wage' might be offset by the desire to keep a Labour government in office and to prevent a Conservative government making more draconian cuts (as they might believe it would, and could anyway say it would). But if Mr Callaghan were to cut public expenditure without a good measure of trade union support, he would be condemning himself to perpetual vilification, and would also be ensuring that the main body of Labour would fall under left-wing leadership.

In other words, it would be fatal to hirnself and harmful to the country if he were to cause a split in his party which was not a split in the entire Labour movement, industrial as well as political. And in the event of such a split he would need to emerge in control of a very powerful faction, with the resources to run its own candidates against left-wingers at the next general election. If he could see that this was simply nilt on, it would be better for him to resign. claiming that he was too patriotic either to act under pressure from foreign bankers or to plunge the country into an election in the midst of an economic crisis. The Queen would then have to send for Mrs Thatcher, who would form a government and bring in an emergency programme. If the minor PO; ties allowed her to implement it, he collie attack it full-bloodedly and thereafter treat it as a fait accompli. His task, whether in or out of office, is t° hold his party to a reasonably moderate course with maximum trade union suPP°11: And it may be his historic mission to dist' the left wing of his party, as Stanley Bald: win dished the right wing of his. Thong", apparently limited in outlook and devoid 01 imagination, he has some valuable ties. Unlike his immediate predecessor, De looks trustworthy. (His first broadcast as Prime Minister recalled Dixon of D°e/4 Green.) He has shrewdness and coMM°11 sense. He lacks the stigma of Oxbridge meritocracy, now a scarcely less grave tical handicap than the grouse-moor linage' His responsibility for capital gains tax gives, him a battle honour in the class war. An'ia he was the unions' friend in 1969, when Labour government was threatening to re"

form industrial relations.

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Baldwin was an undistinguished dePa

mental minister who became a rather for' midable Prime Minister. The same may turn

out to be true of Mr Callaghan. We sh soon know.