What's in the Bag?
By NICHOLAS DAVENPORT ONE hears that Mr. lain Macleod told his Tory back- benchers that the Prime Minister had 'something in the bag' which would help am no political correspon- dent, but as the 'something' them to win the election. I
Allitil. is supposed to be economic ''&477011,°x rather than political I have been busy conjuring up every kind of miraculous panacea. I have noticed that ministerial speeches lately have been giving the Impression that an economic miracle is round the corner. Mr. Lloyd has more than once told Us to expect the miracle of an export boom. Last month he was even saying that 'there is a good chance that the cost of living will be stable over the next six to nine months.' As this pro- nouncement came after the cost-of-living index had risen 6.6 per cent. in the last seventeen months it certainly suggested some divine inter- vention. But Mr. Macleod is not the Chancellor and is probably as sceptical of Mr. Lloyd's eco- nomic 'miracles' as 1 am. If he has anything in the bag it must be something more realistic and probable than these Lloydian prophecies. I can only think of three practicable economic changes Which could help the Government in its election campaign. First, a retreat from its wages Policy; second, a switch from restrictionism to expansionism; third, a postponement of the entry into the Common Market.
As regard the first, the objection to the wages Policy as conceived by Mr. Lloyd was that it was unworkable and inflicted grave injustices on Public servants. How unworkable has been brought home in an important article in the latest bulletin of the Oxford Institute of Statistics. A Painstaking analysis by Mr. K. G. Knowles and Mr. D. Robinson proves that it is really im- possible to do what the Government claims— that is, to preserve the machinery of free nego- tiation and impartial arbitration and at the same time ensure that the results do not run counter to the national interest. The authors show clearly that the methods and aims of the existing Machinery for determining wages are not de- signed to accommodate the national interest. Their analysis also demolishes two popular `hews: first, that wage rounds are usually led by nationalised industries; second, that the wage !Mind is an annual event. In fact, the nationalised Industries come out badly as 'leaders of money bunchings' and the wage rounds turn out to have 11 very unstable timing and membership. The authors' contention is that any national wages Policy, if it is to be more than an emergency %easure, must apply to all earnings, including Piece-work earnings, and not merely to the nego- tiated wage rates of particular industries, how- ever critical those industries may be for the hanonal problem of a wage-cost inflation. They eonclude that it is impossible to have such a Policy unless many of the wage-fixing institutions and Procedures are drastically altered. As the Government obviously will not wish to break up Its new planning body (NEDC) at the start of its deliberations by raising an unseemly row over arbitration procedures, it is more than likely that it will quietly drop its wages attack and let the public know that a more sensible incomes policy will be worked out after the election. An electoral victory could conceivably give the Government some authority to modify the existing wage-fixing machinery and proceed to what Mr. Maudling in effect advocated in his speech to a party rally in Lincolnshire last May —`a general determination by the Government of the levels of pay and prices.'
As regards the second directive—the switch from restrictionism to expansionism—this policy is almost under way and only needs a push and a public pronouncement. The start of it was the relaxation last month of the hire-purchase con- trols--the cut from a 20 per cent. to a 10 per cent. deposit on all consumer durable goods ex- cept motor-cars—and the release of 1 per cent. of the banks' special deposits. A further release of the remaining 2 per cent. is expected hourly. Moreover, official connivance in the present sharp rise in the gilt-edged market suggests that at long last the Treasury has stopped shilly- shallying about the rate of interest and is agree- able to a little cheaper money. This Rill give some encouragement to the business world in planning its future capital spending. It might even start a stocking-up movement which would put an end to the present stagnation in our economy. The final step towards expansion will be taken when Mr. Lloyd removes his 10 per cent. surcharge. As regards the third directive—the postpone- ment of our entry into the Common Market— this cannot happen until the final settlement of the negotiations over agricultural products and a statement is made by the Governments of Australia and New Zealand that the terms are unacceptable to their countries. (I except Canada because there is no real difficulty over the ex- port of her raw materials and hard wheat.) If the Prime Minister then stands by his pledge to the Commonwealth and asks for further time to re- negotiate with the Six he will gain a great deal of support in the country, including the labour movement. He sill avoid the awkward electoral objection of a rise in the British cost of living which union with the Six entails. There is also a great deal to be said for entering the Common Market when our own economy is expanding and when the economies of some of the Euro- pean countries are running into trouble. The terms for our entry might then be considerably improved.
These are no doubt all possible developments on the economic front. Looking back, it seems amazing that the Government should have pur- sued for so long the electorally dangerous policies of restraining growth and interfering with the old wage-fixing procedures. Politics apart, it seems incredible that the Government should have pursued for so long the insane eco- nomic policy of an indiscriminate, overall de- flation, calculated to raise, not lower, industrial costs, restrain sound industrial investment and in- crease industrial despondency. It may be that
what Mr. Macleod has in his bag is a measure of economic common sense. It should be let out at once.
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