THE NATION'S WEALTH
The tariff trail
By 'AN ECONOMIST'
So many clues have been scattered about in the last few days pointing to the true pur- pose of the Heath administration's economic policies that most commentators have been at first suspicious, then incredulous. Surely that business about lower tariffs on imported cars was a false trail, not to be taken seriously? After all, it would only help to bring some discipline to bear in our chaotic motor industry, and it might also bring down the cost of cars to the British con- sumer. They wouldn't do that, would they? It makes too much sense.
The trouble is that for as long as most people can remember the state has been interfering more and more in industrial affairs. But now the Heath government has not only said that it is going to move in the opposite direction, but it is actually doing so. Commentators, having become addicted to interventionism, react with every kind of acute withdrawal symptom. It ought to have become obvious by now, however, that this government believes in competition in industry, not control of industry, and that it is steadily insisting on a more penetrating, more far-reaching degree of competition than we have known for two generations.
Take, to begin with, not cars, of which more anon, but banking. The banks are going to be made to compete in price as well as in service for the first time since the end of the war. The cartel agreement on interest rates paid to depositors is to he abolished. The old-style physical, or quan- titative, or plainly political controls over lending are to be abandoned, and the Bank of England is going to prop up the gilt- edged market far less than it has done for the last decade. All these measures help to reintroduce competition and market mech- anisms where they have long been absent.
Take, next, the really interesting speech the Secretary for Trade and Industry gave during his visit to Scotland; not the one in Aberdeen, but the one in Glasgow, which received much less notice. Opening a new all-weather shipbuilding berth on the Clyde, Mr Davies said that it was not too soon to withdraw government support from the ship- building industry. Just that. And on the Clyde, too. He added that the longer the support continued the greater the danger that the industry would not be able `to put its weight on its own feet'—a minor variation on the original phrase which has provoked so much ridicule and disbelief.
But what is good for ships is a fortiori good for cars, and Mr Davies clearly meant exactly what he said about lower tariffs. Far from being a gaffe due to political in- experience, Mr Davies handled the question from the floor of the Scottish Tory meeting which started the affair, and the subsequent grillings from journalists and radio inter- viewers, with great aplomb. Indeed, his con- fidence clearly indicates that there is strong support from other Cabinet colleagues, in- cluding probably the Prime Minister, for the use of tariff reductions to tone up British industry. No doubt a policy along these lines will he closely examined by the new Commission for Competition which is expected to replace the Monopolies Com- mission shortly, So we are heading for a more competitive society, and there seems to be every sign of growing confidence in the government and in the country about the outcome. Investors are at last looking to a brighter future and surprised themselves by pushing the Financial Times index of share prices to within a whisker of 400 last week. Small investors surprised the authorities by turning in the best figures for national savings for six years. Everyone is surprised (but should not he) that the balance of payments surplus runs along at about £400 million a year, but no one is surprised (though we all should be) that during the recent currency upheaval it was taken for granted that sterling would not he up-valued or even allowed to float. Confidence has not yet reached that far, evidently. But if it were to, we might at last enjoy the often promised economic miracle.
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