The Press MONDAY, OCTOBER 17, 1949. Election Alternative

Press, Volume LXXXV, Issue 25936, 17 October 1949, Page 6

The Press MONDAY, OCTOBER 17, 1949. Election Alternative

Even if the British Government’s decision not to go to the country this year was influenced by estimates of the feeling of the electorate—which would be a bad reason—the decision is still the right one. The measures that must be taken in support of devaluation must be taken now; they cannot wait for a change of Government or for the return of the present one, however soon the election date might be fixed. And it would be difficult to imagine more unfavourable circumstances in which to introduce new measures of economic austerity—measures for which, nevertheless, the whole-hearted co-operation of all classes must be won—than in the uncertainty and bitterness of an election campaign. The decision not to shorten the life of this Parliament does carry some reassurance, even to those who are convinced that Britain needs a change of Government. It is an assurance that the Government does not intend to let things drifts resting on hopes that devaluation alone will lead to recovery. In a sense the Government is putting itself on trial. It could go to the country now only with promises. By next spring its policies will have been working long enough to show where they are leading; the Government, to some extent at least, will then be judged on performances. Although rumours of Cabinet differences over measures _ that are now being considered by the Cabinet's economic sub-committee are probably well founded, there are encouraging signs that the Government and the Labour Party are prepared to face realities. A policy of drift would certainly lose the election next year. A policy of action must involve measures which will not please many of the Government’s supporters. The inference that the Government is confident of winning the support and co-oper-

ation of the unions and their members is encouraging. They will not be won the more easily because Government spokesmen have consistently tried to hide the truth about devaluation. Notwithstanding Mr Attlee’s claim that “ devalu- “ ation had never been put forward “as a solution ”, it is plain that many saw no compelling need for a sharp change in the direction' of current policies. Even the Chancellor of the Exchequer helped to promote this feeling of easy complacency by playing down the unpleasant internal consequences of devaluation and by giving overoptimistic estimates of the effects of devaluation on external trade. The truth is that the cost of living in Britain is bound to increase very much more sharply than Sir Stafford Cripps projected, for instance, in his broadcast. The Government is now steeling itself to tell the country that it must accept substantially higher living costs without wage increases to soften the blow. The “ consequential measures ” referred to by Mr Attlee will be awaited with anxious interest. If all the temporary advantages of devaluation are not to be lost, they must include a firm—but not absolutely inflexible—wages policy, hard pruning of Government spending and investment —not merely a trimming of the costs of administration —and measures to increase productivity, not so much of industry as a whole as of those industries which earn dollars. It will not be enough to increase production if it is high-cost production, or if it is i the wrong kind of production. As the “ Financial Times ” remarked recently: The emphasis that has been placed upon expanding the export trade in recent months is in danger of promot-

ing the view that exports are good in themselves. The truth is that exports are of use to the country only in the sense that they bring in imports either immediately or in the foreseeable future. And the fewer exports we can send out in exchange for a given quantity of imports the better off we shall be. The last sentence expresses succinctly one of the debit items which must be set against the advantages, actual and potential, of devaluation. Britain will now receive fewer dollars for the same quantity of exports. More dollars must be spent to obtain the same quantity of imports. The “ Manchester “ Guardian ” estimated that the extra quantity of goods that Britain needs to sell for dollars represents nearly 10 per cent, of the country’s total output of manufactures; and productivity in the manufacturing industries increased by only 6 per cent, between the first quarter of 1948 and the first quarter of this year. Longer working hours and payment by results will undoubtedly increase production; but they will not be enough on their own. There will have to be a very substantial diversion of present production from the home and sterling export markets to the United States and Canada. Not a great deal of this present production can be withdrawn from the export sterling markets without soon causing bal-ance-of-payments difficulties with the sterling countries which would threaten Britain’s non-dollar imports. The major diversion, therefore, will have to be from the home market; and this involves a twofold problem for the Government and for industry. The demand of the home market must be reduced by the Government’s own economic policies; but at the same time industry must be given the means and the inducement to pass from ’ the secure and easy markets of the sterling area to the difficult and uncertain markets of North America. As a correspondent from New York reported a few days ago, business concerns are reluctant to take these risks; and the reason is that their profit margins ar? cut so fine by taxa£*n that risks are not justified. - Xx

The Government might have n< more difficult task than to convince its supporters that a policy o austerity for home consumers mus go hand-in-hand with taxation re lief for industry. It will be regret table if it does not try.