The Press THURSDAY, JANUARY 18, 1967. U.K. Economies

Press, Volume CVIII, Issue 31580, 18 January 1968, Page 8

The Press THURSDAY, JANUARY 18, 1967. U.K. Economies

The striking features of the cuts in British Government expenditure are that many of them will have a very limited immediate effect on the Government’s spending and that none of them—except for the demobilisation of troops—will enlarge Britain’s resources to increase exports. Compelled by economic weaknesses Britain has intensified its policy of unilateral disarmament and the Prime Minister told the House of Commons that the risks must be accepted.

The cancellation of the Fill aircraft order in the United States wifi save at least £4OO million—perhaps more if the price of the aircraft Increases —over the next 10 years. The cost of maintaining forces in the Persian Gulf, Singapore, and Malaysia at the present level would be not less than £4OO million in the next four years. The initial savings achieved by the proposed withdrawal will not be large. The scrapping of aircraft carriers and the reduction of the nuclear submarine programme both mean savings, but only after several years. Negotiations have yet to be held on the reduction of spending on British forces in Germany. Cuts in reading expenditure will take time to show up in the Government’s accounts. A two-year delay in the raising of the minimum age for school leavers means that the change has been postponed until 1973. This delays the need to train the teachers required and to build additional classrooms. The results of this saving may be the most damaging of all to Britain’s industrial advancement. The nature of these cuts suggest that measures calculated to promote exports have been reserved for the Budget in April. Some economists have predicted labour shortages in Britain by the end of this year. The Government must ensure that labour and financial resources are being used where they will be most needed—in the export industries. Further efforts to reduce the demand from domestic consumers may be reasonably expected in Mr Jenkins’s first Budget. Higher taxes on wealthier citizens have already been mentioned by the Prime Minister in the context of the selective application of higher family benefits. The Government has avoided the more direct means of assisting poor families at the least expense to the State: this would have been the reintroduction of a means test. Housing cuts, mentioned in Mr Wilson’s speech to Parliament, should divert men and materials into export industries. The imposition of a charge on National Health medical prescriptions will probably cause more ill feeling and administrative difficulties than the saving is worth.

Mr Wilson’s repeated assurance that Britain will spring to the defence of Commonwealth countries if the need arises cannot resolve doubts about the effectiveness of the new defence policy. The air defence plan for Malaysia and Singapore, if supported by the British equipment and training, should allay some fears in those States. The precise timing of the withdrawal would depend on progress in achieving a “ new basis ” for stability and in resolving other Far Eastern problems, said Mr Wilson. Although this statement has an air of vagueness the “new basis” hints strongly at participation by Australia and New Zealand. The only crumb of comfort for Australia and New Zealand in Mr Wilson’s announcement is the evident determination of his Government to put the United Kingdom economy into better shape. A more prosperous British market will provide other Commonwealth countries with some of the funds needed to take up more defence obligations.