A letter of doubtful intent
'Who now governs Britain' asked Mr Duncan Sandys in Monday's debate on Mr Roy Jenkins's Letter of Intent: 'the international bankers or the TUC?' A good question—to which the short answer is that the TUC governs the Government, leaving the international bankers free to govern Britain. Nor is it fair to blame them for so doing: after all, as every schoolboy knows, nature abhors a vacuum; and someone has got to do the job. Morever the self-styled Government's double abdication has been wholly voluntary: it has yielded to the trade unionists and the bankers not because it lacks the power to gov- ern, but because it lacks the will—and probably the ability too.
And of these two acts of abdication it is that embodied in the Chancellor's Letter of Intent which is likely to have the more serious consequences for the country. Of course, it goes without say- ing that the TUC'S declaration of intent to 'take immediate energetic steps' to stop those unconstitutional strikes of which it disapproves is scarcely worth the paper it was written on. The sincer- ity of Mr Victor Feather is not in doubt; but the plain fact of the matter is that the TUC can no more impose its will on men like Mr Jones of the TGWU and Mr Hugh Scanlon of the AEF (now that the threat of government legislation has been removed) than Mr Jones or Mr Scanlon can impose their will on every single shop steward or rank and file member of their unions. But, equally, Mrs Castle's proposed Bill which the roc's-academic sanctions have replaced was both objectionable in principle (be- cause of the arbitrary powers it would have given to the Government) and use- less in practice (because in a free society no government would have dared to use powers of this kind). If nothing has been gained, nothing (except what was left of the Government's credibility) has been lost. It was always clear that the task of setting industrial relations within the framework of law would have to await the return of a Tory government.
The Letter of Intent is a different matter altogether. In it, the Chancellor has pledged to the International Mone- tary Fund that his 'objective is to obtain a surplus of at least £300 million on the current and long-term capital account of the balance of payments' in the present financial year, that this is to be achieved by a continuing credit squeeze and deflation of home demand, and that, al- though 'the Government believes that the policies set forth in this letter are adequate to achieve the objectives of its programme', it 'will take any further measures that may become appropriate for this purpose' (and, indeed, will con- sult the IMF about what such measures should be).
Now, an overall surplus of £300 million (never mind the 'at least') re- quires, on the Treasury's own admission, a current account surplus of some £450 million. In the last financial year the current account was in deficit to the tune of over £300 million. In other words, Mr Jenkins is solemnly promising an improvement of no less than £750 million in a single year. This is ludi- crous. It is both to be hoped and to be expected that there will be a significant improvement in Britain's trade balance this year, but nothing on this scale is remotely possible. The Chancellor's letter, moreover, was written before the Board of Trade's opportune 'discovery' that the so-called 'balancing item' in the balance of payments (the Treasury's euphemism for errors and omissions) contained some £150 million a year of unrecorded exports. But even if Mr Jenkins now, retrospectively, incorpor- ates this into his IMF figuring, he is still basing his whole Letter of Intent, and his entire economic policy, on securing a current account improvement of some £600 million in a single year—infinitely more than the most successful (and luckiest) Chancellor has ever achieved in the past.
The more cynical Government apolo- gists may argue that all that this shows is that we are not in the thrall of the bankers after all: that they were bound to lend us the $1,000 million anyway, if only to stave off an international finan. cial crash, and that the Treasury in- serted- a spurious balance of payments 'objective' into its Letter of Intent simply to save Mr Schweitzer's face. Alas, this is at best only a half-truth. It is true that we do have a qualified power of blackmail over the bankers, and that they may well lend us more (if we ask nicely enough) even if we don't meet our 'objective'. But the £300 million figure is there at the IMF'S insistence, 'and its non- achievement still spells danger—even though that danger is not of the bankers foreclosing, but of serious recession.
The economic outlook has already changed drastically since the Budget only two months ago. This is partly because of Mr Crossman's decision to raise £200 million more in increased social security payments later this year than he will pay out in increased benefits. But far more im- . portant has been the dramatic intensifi- cation of the credit squeeze as world- wide interest rates have been pushed higher and higher as a result of America's attempt to halt her own internal inflation. Already, industrialists arc cutting back expansion plans left, right and centre, and the bankruptcy courts are preparing for a bumper year. In the House this week, Mr Jenkins. tackled on this point, made the equivocal reply that 'some of the dangers of recession have been exagger- ated in recent days'. Perhaps they have, if we could rely on the Chancellor's massive export (or import-saving) boom, which is what his Letter of intent implies: that at least would keep the factories hum- ming at a tolerable level. But since we emphatically cannot reply on any such boom. the economic outlook is for the worst recession since Labour came to power. And (in the long run) for the worst kind of recession, too; for instead of an export-led boom the prospect is of an investment-led recession.
Yet however great the Government's economic folly. its political stupidity is even greater. For economic management is a difficult art, and at least there is likely to be a worthwhile improvement in the balance of payments this financial year —there may even be, for the first time since Labour took office, a surplus. Yet because that surplus will be substantially less than £300 million it will seem like a failure--just as any minuscule improve- ment on the industrial relations front will seem a failure when compared with the Prime Minister's hyperbole and rodo- montade. This Government came into power by promising the earth, and then inevitably there came the public dis- illusionment when it failed to deliver. Yet so far from learning its lesson, it has gone on, under Mr Wilson's inspiration, promising what it cannot hope to per- form, and each time the disillusion has bitten deeper. And now, nearly five years later, it is doing it again. The only hope is thatiit will destroy itself by this process before it destroys the self-confidence of the nation.
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