The Press SATURDAY, SEPTEMBER 4, 1965. Britain’s Recession

Press, Volume CIV, Issue 30847, 4 September 1965, Page 14

The Press SATURDAY, SEPTEMBER 4, 1965. Britain’s Recession

Effects of the British Government’s measures to dampen demand in the economy have become evident in recent weeks; and no-one seems to be disputing the forecast of at least 18 months of recession. On assumptions that the propensity of Britons to import will remain high and that export endeavours will not bring early results, the National Institute of Economic and Social Affairs last month forecast a rise in the number of unemployed to 500,000 by the end of next year. This would be about 2 per cent, which is below what would have been regarded as normal a few years ago. The Government will probably ameliorate hardship by increasing unemployment benefits, perhaps a small price to pay for the much-needed adjustments in British industry. Nevertheless, this is a bold course for a Government with such a slender majority, especially as it must put an end to what remains of its hopes of attaining a 25 per cent expansion in the economy by 1970.

The Government has reduced or delayed civic and State development, imposed higher taxes on business, and tightened hire-purchase controls. In consequence, several industries have cut out overtime or put their staffs on short time. The Prime Minister (Mr Wilson) summed up the situation forthrightly in a statement on a railwaymen’s wage application: “ This nation must become a high-productivity “ economy before it can become a high-wage “ economy ”,

More competitive industry, earlier delivery dates, and reduced demand for imports are the aims of the Government’s financial measures. Unemployment is the least of the dangers now to be feared. In fact, new jobs abound in Britain; and opportunities should increase. The real problem is how to secure quickly the transfer of labour to new and expanding industries from the declining industries, many of which have protective arrangements to safeguard redundant workers. Still greater dangers are the reluctance of industry to invest, while business is slack, in new equipment and the opposition of workers to the introduction of technical advances without the accustomed pay increases and expensive safeguards. Without this investment industry will not have the capacity to meet the demands which will be made upon it by a stimulated foreign trade and eventually by a revived domestic market; the result would be a further cycle of strain and inflation. Success for the Government’s policy and, indeed, for the future of British industry depends on how well this breathing space is used. The Government has the difficult task of holding down its own expenditure after a big increase in spending early this year. It has to convince the unions, against their strong inclinations, that higher productivity must precede higher pay and that new jobs in new industries are better than redundant jobs in old ones. If wages continue to rise at the present annual rate of 5 to 6 per cent —almost twice the pace recommended by the Government—unemployment, especially in export industries, is bound to soar. The Government has promised that if restraints on incomes and prices are not accepted voluntarily they will be imposed by regulation. It is a somewhat heroic course that the Government is mapping out for the country; but the only real alternative to it is drift, stagnation, and a level of unemployment that will really hurt.