The PRESS FRIDAY, MARCH 24, 1972. Choice of risks in the British Budget

Press, Volume CXII, Issue 32874, 24 March 1972, Page 8

The PRESS FRIDAY, MARCH 24, 1972. Choice of risks in the British Budget

A month ago the British Government and its economic policies looked very shaky indeed. The miners’ strike had threatened to wreck hopes of checking wage increases; unemployment was at a socially and politically unacceptable level; the Government’s legislation for entering the European Common Market was being vigorously contested in the House of Commons. The economy generally, though moving a little faster than it was early in 1971, was still showing disturbing signs of stagnation. This week’s Budget, presented by Mr Barber, should do much to restore confidence in the Government’s willingness and ability to tackle the country’s economic problems. Mr Barber certainly cannot be accused of timidity. He might, of course, be wrong. He has decided that it is better to risk more inflation than to risk industrial stagnation—and its accompanying

ills of unemployment and underemployment—on the eve of Britain’s entering the Common Market. He seeks a 10 per cent growth rate in the economy in two years; economists in Britain have estimated that anything less would fail to get a significant number of unemployed back into jobs. Critics of Mr Barber’s plans have been quick to point to another risk arising from his reflationary measures: another balance-of-payments problem. The American economy has already gone through the same difficulties. A business recession and unemployment forced Mr Nixon to stimulate the economy before he had managed to damp down inflation to an acceptable level; at least Mr Barber begins his reflationary exercise without the serious balance-of-payments problem that still afflicts the United States.

The kind of inflation being experienced in Britain has been curtailing consumer expenditure. Britons have been saving their money; for once, high unemployment has accompanied a period of inflation. Most of the taxation relief given by Mr Barber will mean extra cash in the pockets of the ordinary taxpayers. This extra spending power, the prospects of E.E.C. membership, and the relief and assistance given to companies should go a long way towards stimulating investment, particularly in modernising Industry, and a higher rate of employment Britain certainly needs all these; but the Government will still have to win the battle against rising prices. The daunting prospect of another devaluation of the pound is the spur that will drive Mr Heath’s Government to throw everything into the battle against inflation.