The Press WEDNESDAY, JANUARY 8, 1958. Treasury Resignations

Press, Volume XCVII, Issue 28479, 8 January 1958, Page 8

The Press WEDNESDAY, JANUARY 8, 1958. Treasury Resignations

Mr Thorneycroft and his Ministerial assistants were right in resigning from the British Cabinet because they disagreed with the Government on a matter of principle. In spite of Mr Macmillan’s claim that no difference of principle is involved, they have sincerely taken the only course they felt to be open to them, however regrettable the effects may be on the eve of Mr Macmillan’s Commonwealth tour. They are right, too, because the Government, understandably enough, has apparently renegued on part of its economic and financial policy. Last year it took stern monetary measures, including the raising of the bank rate to 7 per cent., to restrain spending by private industry. To complete the plan, the Government had this year to take similar action to restrain public spending. It has failed to do so effectively. Mr Thorneycroft says he is not prepared to approve the estimates for Government expenditure in the next financial year at a total higher than the sum that will be spent this year. Mr Macmillan says the excess is “ something less ” than 1 per cent, if current Government expenditure. It may seem a. small amount; but the Chancellor and his colleagues at the Treasury counted on not merely holding expenditure at the current year’s level, but on reducing it. Clearly, a matter of principle is involved. ’ The resignations are regrettable, too, because the Government has shown, in spite of the unpopularity of the measures taken to check the sterling crisis last year, that it meant business in its fight to stabilise sterling and halt inflation in Britain; <jnd the

measures it took were effective. Sterling, which was under heavy pressure last year, has made a substantial recovery and the inflationary trend in Britain has been slowed. Confidence in sterling was restored because the Government showed that it was determined to, and

did, act; it may be shaken by the apparent reluctance of the Government to court more unpopularity by reducing its own spending. Certainly the difficulties of doing so are immense. Almost every department will havp sought more money. Very large and very desirable expansion was proposed in the nationalised industries, particularly coal, electricity and the railways. But a reduction in Government expenditure was not all that Mr Thorneycroft had planned. With the fall in commodity prices in mind, he had advocated price reductions in Britain instead of inflationary wage increases. Initially, these too would have been unpopular. Such a policy would have meant the squeezing out of high-cost producers, probably by granting tariff cuts on goods for which British prices were higher than foreign prices; the encouragement of price competition (“the more “ enterprising managements,” Mr Thorneycroft said, “ ought “ not to wait for the slowest or “weakest firms in the ring”); and selected tax cuts. Before the price cuts became effective, however, the inefficient firms would go down, causing some unemployment; price competition would mean the shattering of a cherished British illusion that it is unfair to undercut a rival; and taxes would be cut only where they provided the best incentive to work and to save. If the Government was not prepared to reduce its expenditure, it was unlikely to agree to these proposals; and it is perhaps better that Messrs Thorneycroft, Birch and Powell should resign now rather than face further disappointment later. It is small wonder that the Government, looking at its series of by-election reverses, should quail before the prospect of harsh measures. Yet a Government that cured inflation would be assured of popularity. One that halts half-way through the cure is equally assured of continued unpopularity.