Political commentary
Admirably boring
Colin Welch
Of Sir Geoffrey Howe it is said that even in him there is imprisoned a politician struggling to get out. If any compliment is intended, it is not so taken by me. The word 'politician' in this context clearly means a man who, to curry favour, will give away what is not his, debauch the currency, mortgage the future, tell lies, make pro- mises he is in no position to fulfil, base nonsensical plans on nonsensical data fed into a Treasury computer, and end in the ditch after a dash for growth. If there is really such a politician in Sir Geoffrey, I am happy to say that he is still firmly under lock and key. The Budget is exactly as Mrs Thatcher promised it would be: sound and responsible. The Financial Times asked for a boring Budget. It has got one, admirably boring and cautious, which was presumably what it really wanted, and quite rightly so when one recalls the abrupt disaster which followed Budgets devised in part by Sir Alec Cairncross (much quoted by Mr Foot on Tuesday) and hailed as bold and ex- citing. Remember the selective employment tax Budget fiasco?
Mr Foot received Sir Geoffrey's long monologue with an ill grace: a trivial Budget full of trivial measures. He com- plimented the Chancellor on his presenta- tion of it, but did so only, as he made sourly clear, because it was the custom to do so. His great predecessor, Hugh Gaitskell, for one was always more warm and generous and indeed it is a remarkable politician who can, like Mr Foot, combine a reputation for being a nice chap with a petty-minded in- ability to rise to such occasions.
I must confess that Sir Geoffrey wasn't quite as cautious or boring as I would have been — though of course I am not in his shoes with an election looming. I would have preferred a lower target for money supply growth — six to ten per cent this year rather than postponed till next. I would also have preferred a projected public sector borrowing requirement nearer £7 billion than the £8 billion actually adum- brated. That would have helped me to pull down interest rates, possibly the most vital objective for the government at this time, provided it is not achieved by any sort of chicanery, mirrors or arbitrary ukases. It would also have allowed me to be more generous to personal taxpayers than Sir Geoffrey actually was. I could easily have pushed up the married man's allowances and thresholds to £3,000 and higher still if, as most people expected and advised, I had concentrated entirely on relief for the per- sonal taxpayer and left industry to enjoy the benefits it got last autumn and also from falls in the exchange rate and oil prices. I don't think I would have raised the mortgage interest relief ceiling from £25,000 to £30,000, but then again I am not so near Mrs Thatcher as Sir Geoffrey is.
Nor really can anyone with any pretence to responsibility afford to ignore base elec- toral considerations. Whatever fears one may have that Sir Geoffrey has been too lax must be overwhelmed by fears of a victory for Labour in its present crazed state. There could be nothing more destructive of con- fidence, and hence of investment and pro- sperity, than a Budget over-strict, over- correct, too purist, and thus harmful to Tory prospects — though a give-away Budget in Australia did Mr Fraser no good at all!
One non-problem I am sure Sir Geoffrey was right not to panic about. This is the allegedly appalling loss of revenue conse- quent on falling oil prices. For one thing, lower oil prices will help activity throughout the economy, thus generating extra revenue to compensate at least partly for whatever is lost. For another, if the revenue lost does prove intolerable, it can always be made good by raising the tax on oil products at the point of sale (which would also en- courage still needed economy in their use) or, just as good, by further cuts in spen- ding. To demonstrate Sir Geoffrey's cor- rectness one only has to contrast his Budget with what Mr Shore would have given us in his place: a devaluation of 30 per cent spread over two years, VAT cut, public spending, investment and borrowing heavi- ly increased, despite this interest rates perversely lowered (how?), exchange con- trols restored, taxes increased at the top and lowered at the bottom. Mr Leon Brittan correctly described this as a recipe for col- lapse, total and immediate.
It has of course been angrily shouted that Sir Geoffrey's Budget has done absolutely nothing for unemployment and job crea- tion. In fact it has done many little things and two big — the attack on the unemploy- ment and poverty trap and the cut in na- tional insurance surcharge. Beyond this, sad as it is to say, it is almost impossible to point to anything which could fruitfully be done. It is customary to say that the present level of unemployment is the present government's fault. And so it is, insofar as the monstrous levels of inflation which it in- herited could not be cured without loss of the jobs which that inflation had alone sus- tained. A cure was essential. The pain of it has been vastly increased, however, by fac-
tors for which the present government is not to blame at all. These include the expec- tations engendered by prolonged inflation; a widespread scepticism about the deter- mination of any government to tackle it large-scale misdirection of investment since the early Sixties, produced by inflation and government pressure and resulting in large' scale waste of real resources; the diversion of much output from market demands; a rise in labour costs caused by increased union power, by high unemployment paY and social benefits and by taxes; a much reduced mobility of labour between places and jobs, brought about by rent controls, council housing, high benefits and judged rescue operations, all resulting in a strange juxtaposition of overemployment and unemployment, each with its attendant disadvantages. So foul a sky as this clears not without a storm.
We must now harden our hearts to the consequent misery and distress. But we must ruefully recognise how much of it is humanly inevitable. In normal times unemployment is part of the ineluctable and salutary process of economic adapta- tion. Each unemployed person is normally on a journey, which may be long, painful and even unsuccessful, from a job or ser- vice which is no longer needed to a new and tenable one. The present pathological level of unemployment differs from the norm in degree but not in kind. It is the bitter fruit of innumerable adaptations postponed or avoided for as long as possible, and which now burst upon us all together. What should have been a slow and tolerable pro' cess of continuous adjustment comes upon us like a tidal wave, with tragic results. Nor must we ever forget that the 'crea- tion' of jobs, so often urged upon us, is by no means a costless exercise. Indeed, the cost of creating some jobs is the destruction of other jobs. The cost of reflating the whole economy would be enormous. The unemployed are not in fact in one huge reservoir, so to speak, readily accessible to a single modest wave of reflation. Rather are they in numberless little reservoirs, some very hard to get at, all at different levels, which the reflationary tide would reach a different speeds with unequal force. Tn _ reach them all inflation would have to be vast, almost enough to recreate a detnalldc. for, say, stage-coach builders. It might no: even achieve its purpose. To the extent that it did, we should once again have to forg that essential and healthy price of adapts" tion which is unemployment's onlY °al; pensating benefit and without which w.`: cannon possibly prosper or maintain tea fruitful employment. Public investment' ! moreover, is usually wasteful investinettt. The cost of it has to be borne by productive industry the employees of which nlaY„len consequence join the workless, leaving "' total unchanged or even increased.
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Mr Shore only looks kinder than Sirs Geoffrey. His kindness is in fact false, gifts poisoned.
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