MR. BUTLER'S BRIGHTNESS
I N Jtly, August and September Britain as banker for the sterling area paid out gold and dollars or ran into debt , to the tune of nearly five hundred million dollars. The main reason for this was that European bankers and traders lost confidence in the ability of the pound sterling to hold its value in world markets. Yet, against this background, the Governor of the Bank of England at the Mansion HoUse dinner last Tuesday said that sterling, far from being overvalued, is in fact undervalued. The great problem, then, would seem to be to convince the rest of the world that this is so. The dinner provided the Chancellor of the Exchequer with a great oppor- tunity to achieve this.
He could have succeeded if he had been able to reassure foreign and British opinion about three. things. First, that' the Government is now aware of its sole responsibility for our economic affairs so that they depend in. no way on what the trade unions or the banks do. Second, that a very accurate appraisal of our position and prospects has now replaced the ill-informed optimism of last winter. Third, that measures will be taken which will not only stop inflation but will also build into the economy a safety margin which will protect us against further crises.
Judged by these tests, however, the Speech was disappoint- ing. On the last point, for instance, those who expected new measures to be announced were completely disappointed. Nothing is to be done until after Parliament reassembles, and it will clearly be the middle of November at least before any new measures take 'effect. There are, however, some signs that the Government is measuring up to the job—cuts in Govern- ment planning, some restrictions on the exuberant growth of the nationalised industries, and promises to support the 'credit squeeze,' which at the present moment,presses most strongly on the private sector. • Even so, one cannot help noting a kind of pained surprise in the Chancellor's statements that we are using up too much at home and not sending enough abroad, and that people are still spending excessively. What is also a little worrying perhaps is the determined effort to look on the bright side of things. It is good that; contrary to expectations, there was a surplus on our balance of payments in the first half of this year. But what is more important is that it was only achieved with the help of American aid, that it was probably very small, and should in fact be, say, fifteen times larger for safety's sake. Again, how much does it matter if production is doing well, if we are not in fact producing enough to meet the claims of exports, investment, and home consumption? Similarly, the growth of exports, though welcome, does not keep pace with the far more important increase in imports. The Chancellor noted that wages have risen, are rising, and are likely to go on rising—and left it at that. What remains to reassure opinion here and abroad that the Government has a grip on the situa- tion is the promise that the review of spending by the national- ised industries and local authorities is going ahead, and that the estimates for Government spending next year will be looked at carefully, and finally that the housing subsidies will be reduced. The Chancellor's comment that this last point is very important is perhaps the most encouraging thing in an other- wise uninteresting speech.
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