Fresh U.K. Credit Cuts Imminent

Press, Volume CVI, Issue 31116, 20 July 1966, Page 13

Fresh U.K. Credit Cuts Imminent

(N.Z. Press Assn. —Copyright! LONDON, July 19. Mr Harold Wilson came back today from Moscow to face one of his biggest personal tests since he became the Prime Minister 21 months ago. He is believed to be willing to face ministerial resignations if that is the only way he can force his austerity measures through. Since last Thursday, when he announced that there would be a second phase to his disinflationary programme, the Cabinet has been reported to be split over where further economies should be made. The biggest cuts are expected to centre on overseas defence spending and, possibly domestic projects such as roads and housing.

Fresh taxes and tougher curbs on credit are expected in addition to last week’s restrictions, when the bank rate —the key lending rate—was stepped up from 6 to 7 per cent. Millions of pounds were wiped off the market value of shares since then. Financial experts expect this trend to be repeated until Mr Wilson makes his major statement to Parliament tomorrow. Only then will the Government know whether it has won overseas approval for its steps to bolster sterling and the economy. The sterllng-dollar rate also dropped as financial experts waited for Mr Wilson to disclose his further austerity measures—anticipated to be the toughest since 1945. Mr Wilson is due to preside over a crucial Cabinet meeting this afternoon or evening and nuke his state-

ment to Parliament tomorrow. Dealers said that international centres were as confused as the London foreign exchange market, with business virtually at a halt as the Bank of England reportedly moved in to support forward sterling rates. Informed observers believe that the Government will: Cut overseas military spending, trimming the strength of British garrisons where possible—especially in Hong Kong, Malaysia and Singapore; Reduce future British aid to developing nations; Impose wide-ranging internal restrictions, possibly involving a standstill on wages, prices and dividends as well as higher taxes and tougher curbs on credit. Leaders of the 8.5 millionstrong Trades Union Congress

has called on the Chancellor of the Exchequer, Mr Callaghan, to discuss reports that the measures might involve temporary unemployment of up to 750,000 workers. The Conservative Opposition leader, Mr Heath, who has accused the Government of complacency and incompetence, yesterday presided over a meeting of his “shadow cabinet” to discuss the crisis. He told Parliament yesterday that Mr Wilson’s decision to announce his measures on Wednesday—instead of next week, as originally planned—“confirms absolutely the total unpreparedness of the Government for the economic storm which has hit the country.” Mr Callaghan will delay his departure for Bonn until after Mr Wilson’s statement so that he will have the Prime Minister’s authority behind him in a new bid to get West Germany to pay more towards foreign exchange costs of the British Army of the Rhine.