Mr Callaghan on borrowed time., A
While wishing Mr Callaghan good fortune in his premiership (as we do), it may be said without prejudice that in the context of Mr Healey's Budget proposals the prosPects are hardly propitious. By an accident of history his term at 10 Downing Street has been inaugurated with a Budget over which he had no appreciable influence—a conditional Budget, at once unprecedented and unconstitutional. If the taxation proposals are implemented, it will be by grace of the TUC, not by the will of a free !ornament responding to government policy. While the Immediate purpose may be achieved (it is not bound to !.ail), ministers have resorted to uncertain means with Implications of fundamental importance. The Chancellor's methods would in any circumstances be disturbing. They might be explicable or defensible, however, if the measures themselves were so radical in character as to argue a major change in the prospects of the economy. But that is not so. Mr Healey confessed in his speech that the public sector spending deficit—the amount by which government expenditure exceeds Exchequer income—is running at an annual rate of £10,785 million, or £2,000 million more than he predicted a year ago. Even a successful incomes policy and taxation link of the scope which he visualises can do nothing to bring the Budget towards balance; and the modicum of relief for individual citizens Which his 'prospective tax cuts would provide will do nothing to produce the kind of acceleration in production and pioductivity that might, by increasing income,
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close the gap between incomings and outgoingOrtlereiS no effective substitute for major and immediate cuts in public expenditure and the proposals in the recent White Paper, mostly trivial and all overdue, will provide no relief.
While the Chancellor has done little if anything to check the rush towards economic disaster—the relative trading position of the pound was weaker after his statement than before—he has further complicated the economic system of the country. We might well say, with Junius, that 'We are arrived at that point when new taxes either produce nothing, or defeat the old ones, and when new duties only operate as a prohibition.'
Mr Healey's policies are self-defeating: as he adds to their number and complexity he crushes incentive and opportunity alike. All the while he gains time by borrowing from abroad; and even if the assumption that the purses of our friends are bottomless were correct, his apparent conviction that their generosity is inexhaustible is certainly not.
However much the Chancellor has damaged his credit, the fund of goodwill on which the Prime Minister can draw for some time is substantial. In his first address to the nation Mr Callaghan, although he spoke in generalities, at least struck a national note. What be now needs to do, before the goodwill is dissipated, is to back his generalisations with new and radical economic measures. And if we cannot have new measures, then let us have new men.
