THE CHANCELLOR AT BRIGHTON
SO much responsibility rests these days on the Chancellor of the Exchequer that it is always a little frightening to read Mr. Thorneycroft's speeches. But he did very well talking to the bankers and merchants of the City of London at the Mansion House dinner on Tuesday. Having quite Properly pointed to the immediate success of his recent measures in restoring sterling to parity with the dollar and other currencies, he went out of his way to emphasise that this was not the end but the beginning of our recovery. It is to be hoped thathe will continue to speak in the same tone. it will be unfortunate, and probably fruitless, if he tries to divert his audiences' attention with gossip about the Euro- pean Common Market, or about what is still left of the Anglo-Canadian free trade area. All that is interesting, but for another occasion. What delegates in Brighton are grimly anxious to know is why we are in a mess again, and what we are going to do to get out of it and keep out of it. The main question is still what are the aims and objectives of policy, after these emergency measures have fulfilled their immediate Purpose? And, ironical as it may seem, the most reliable answer would he for the Government to decide to adopt for the first time since it took office, six years ago, its own economic policy. Such a policy—if it is to be a Conservative policy—need have only three main points : no inflation, more saving, and less Government spending. It starts, therefore, with the advantages of being simple to understand and to explain. • • * • Inflation must be not only halted but reversed, so that in finure, if the country earns a better standard of living, it will enjoy it through lower prices, rather than through higher *ages for only some workers. The appalling truth is that, in spite of. their•many protestations about inflation, the Con- servatives have taken little action to try to stop it. Is it generally realised that not a single Conservative Chancellor has come to the despatch box and proposed to the House a Budget which aimed at an over-all surplus? (The Budget of 1956.is a negligible exception.) No wonder that the Governor of the Bank of England, when he replied to the Chancellor, stressed the need for an over-all Budget surplus. It is to be hoped that those officials at the Treasury who have flirted With inflation as a deliberate policy have been shocked into more sense by the.present crisis. Within the last two months. however, a few American economists, who had private and • informal talks inside Whitehall while on visits here, returned' home with the clear impression that the officials they spoke to did not believe that inflation either could or should .be: - Stopped. The damage that is done by this sort of silly beha- viour is inCalculable. But at least*Minisiers have now begun to talk as though inflation were their responsibility, so we may be spared further tedious exhortations, which the Ameri- cans now describe as 'jawbone controls.' It is 'sound money' or surrender for the Tories.
The second part of Tory economic policy must be to give savings quite exceptionally privileged treatment. The more we save the less we have to cut investment programmes. But what has gone on in this field since the end of the war must count as one of the worst deficiencies of policy. For example, but for the Treasury's reluctance to lose about £20 million of revenue. we could have made the Post Office Savings Bank an attractive investment, offering a rate of interest of 5 per cent. free of tax. This might have brought in, at a guess, an extra £50 million of savings, thus helping the inflationary balance. Instead the Treasury fights for years against any concessions, keeps the rate of interest at 2.1 per cent.—rather lower, that is, than the annual rise in prices-and then finds itself paying an extra £100 million to service the National Debt—some of it to overseas countries—after a 7 per cent. Bank rate has been imposed because of a shortage of savings. It is not much to ask of a Conservative Chancellor that he should make it easier for people to save if they want to. Sir John Braithwaite gave him one suggestion on Tuesday night—to 'put right' the 2 per cent. transfer stamp duty, a 'vindictive tax' on invest- ment.
Cutting Government spending has always been the contro- versial topic since the end of the war. But it is a4so the test of the Government's 'determination' .to carry out the policy of 'honest pounds' which Mr. Thorneycroft described. The quantity of money, about which we are hearing a great deal at present, has been inflated time and time again by govern- ment borrowing from the, banking system. And the diovern- ment has been borrowing simply because it has not had enough money to finance its activities out of current revenue. If it is to borrow less, it will have to spend less, however unpopular the implications may be. In fact, each year brings its crop of examples of Government extravagance, and there is still about £300 million of taxes going to subsidise food, farming and housing, which could be pruned back sharply. As the Governor pointed out, there is little sense in cutting investment if the result is simply to let consumption go ahead.
-* These, then, should be the main headings for the Chancel- lor's speeches if he is to reassure delegates and the country about future policy. An equally important task awaits the Chancellor when he settles down again, for the winter in Great George.Street. This is quietly to undertake the overhaul of the planning Machinery of his department, which has once again failed, as it did so disastrously in 1955. How else can one explain that the GOVerninent seems to have been taken by surprise by developments, some of which have been obvious for nearly a year?
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