U.K. Balance Analysed

Press, Volume CVI, Issue 31143, 20 August 1966, Page 15

U.K. Balance Analysed

(N.Z. Press Assn. —Copyright) LONDON, Aug, 18. A leading research organisation forecast today that Britain’s overseas balance would be in the black next year—but at a cost of almost total standstill in economic growth. This was the first detailed analysis of the Labour Government’s new austerity measures published by an independent research group. It was presented in the quarterly economic review of the Institute for Economic and Social Research. It predicted that Britain would end this year with a foreign exchange deficit of £lsom.

In 1967, it forecast a surplus of £27sm—or about onethird of the amount Britain must repay to foreign creditors by the end of the decade. The review said most of the improvement would be due to tax, credit and other squeeze measures holding imports down. It said the Government’s measures to cut overseas spending—both by British tourists and Britain’s military forces —would probably save only about half of the £lsom predicted by Mr Wilson. “Experience of previous government economy campaigns makes it difficult to put much confidence in the figure,” said the review. No specific overseas military cuts have yet been announced by the Government. Even though 10,000 troops are

to be withdrawn from Borneo, the Government has not yet said when they would come home. As for the £5O limit on annual vacation spending abroad, travel agents report they have been able to reorganise hotel and air bookings on package tours to the ooint where they do not exnect any serious drop in business. The review estimated that economic growth during the next 18 months would be at an annual rate of only about 1 per cent. ' But looking toward 1968 and the next upswing, it warned: “It will be difficult to find effective ways of stimulating investment if industrialists come to believe that growth is now stone dead.” The institute, normally orthodox in economic affairs, ioined with Labour Party Leftists in suggesting further cuts in military expenditure and curbs on private invest; ment overseas. It also emphasised the importance of keeping wages down in order to make British products competitive abroad. “We expect the freeze to have a fairly powerful effect in holding back the rise in hourly wage rates,” it said. The review estimated that the wage rise would be about 1 per cent during the complete freeze in effect until January and would then settle at an annual rise of about 3 per cent. It said the price rise next year would be even lower—about 2i per cent