THE NATION'S WEALTH
Axe, please, Mr Barber
By an Economist
It is not often that political promises have been quite so rapidly belied by political performance as by the Chancellor of the Exchequer last week. Speaking to the Amer- ican Chamber of Commerce on Wednesday Mr Barber promised 'the most fundamental review of government expenditure ever un- dertaken.' The principle underlying this re- view was to concentrate the activities of Government and public authorities on the tasks that they alone can perform.
But the publication next day of the White Paper on 'Public Expenditure 1969-70 to 1974-75' came as a direct contradiction to the Chancellor's words. The white paper merely fills in details of the first attempt to re-shape public spending last October, and it also makes perfectly plain that after six months further thought, the Government's present plans are to increase substantially its spend- ing in many areas where the tasks can largely be performed without them. From foreign aid to forestry spending is going to go up, and in the social services, which already take up one half of the national budget, the rise is sharp. Another £1,400 million is to be spent here over and above the extra £4,000 million added by the Labour administration since 1964—a remarkable trend, coming as it does on top of rapidly rising incomes in people's pockets. The only
real economies are amongst the lavish grants, loans and subsidies to industry and commerce.
So whereas government spending would have increased 3+ per cent per year. under Labour, it will only increase 2.6 per cent per year under the Tories. Many commenta- tors have claimed that this is a Tory govern- ment with policies which, at last, really are different from those of the Opposition. Now we know what the difference is-0.9 per cent per year. For all practical purposes the state will dispose of the same proportion of national resources at the end of five years of Tory rule as at the end of six years of galloping socialism.
Of course, major changes in policy cannot be introduced in a Paper of this kind. But it confirms growing fears that the new admin- istration has underestimated the size of the economic problem it has inherited. And there is the danger that such a Paper feeds the nation's appetite for self-deception. Wel- come as the new information is, therefore, no one should suppose that we have been given a glimpse of the Government's forward planning, and of what it will do. The new white paper is much better regarded as a statement and what will happen if the Gov- ernment does not do anything.
The Government does not have that alter- native. Without a dramatic reduction in the proportion of national income passing through central and local authorities, there is no hope of stopping the inflation, to say nothing (as the Tories soon will be doing) about trying to cut taxes. The sequence here is quite straightforward. With government spending at these levels, the authorities are frequently trying to borrow more money from the public than the public can be conned into lending. To close the gap the government borrows instead from the bank- ing system, in a way which increases the money supply, thus paralysing monetary policy as a weapon against inflation. If this sequence is to be avoided the Tories will have to go much further than seems likely at the moment towards confining the govern- ment's activities strictly to those tasks it alone can perform.
Failure here will only lead to further in- flation, and would finally force the issue of a statutory income policy, for which no possible case exists, but which would then seem to be the only policy left. Already an unharmonious choir of mixed voices—in- cluding Sir Fred Catherwood, the Times, Mr Harold Lever, and, sadly one must add, the Governor of the Bank of England—have been heard, advocationg an incomes policy 'of one kind or another'. Mr Lever, widely regarded as an outstanding expert in finan- cial matters, has been particularly active, and just last week has come up with the bril- liant (and beautifully timed) suggestion that the Government and the TUC should love one another, and co-operate to organise an in- comes policy. What kind of an incomes policy? Well, of course, the details would have to be worked out, but it would be—er, well, a sort of incomes policy with a 'broad- brush'. 'Broad-brush', forsooth! To be fair, a broad brush might be useful. For white- wash.
It seems difficult for clever people to un- derstand that if the market for labour is such that workpeople can successfully push up their earnings, then they will. And they will not be stopped by any form of incomes policy that is not statutory and comprehen- sive, which leads to prosecution of nonco-
operating workers and employers, and has to be enforced by the police. The economics editor of the Times seems to recognise this, and has called for 'a highly dirigiste statu- tory prices and incomes policy'.
Whether such a policy would be consis- tent with a free society seems of little conse- quence to a large chunk of articulate intel- lectual opinion. But it is to the rest of the country. How else can we explain that it is now nearly thirty years since we first set about trying to get an incomes policy? It was Sir Kingsley Wood, in the budget of 1941, who introduced what was then called a stabil- isation policy to try to keep wages and prices in balance in wartime conditions. Since then we have moved from a national wages policy into a wage pause, followed by a wage freeze, through wage restraint, past the 'norms', up
to 'the guiding light', having ignored the
'early warnings', in and out of the National Incomes Commission, reduced to the Three Wige Men, and after a tangle with the Prices and Incomes Board we have arrived at— what? This long-running comedy show has been through many changes of costume
through the 'forties, 'fifties and 'sixties but has lost its audience. Will everyone now kind- ly leave the stage so that for the 'seventies we can by popular request put on a revival of the Demon Barber, playing his part, not with a razor, but with an axe?
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