Sociallet Challenge, 328/9 Upper Street, London N1.
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Inst to give che Chancellor some room for manoeuvre. After all, the rate of inflation has fallen to single figures. Interest rilles reduced dramatically. pound has recovered from its plunge in October 1976 and UK reserves have increased five-fold World commodity have been falling, and some small growih is expected in the UK economy this year the first time since 1973. So this picture does provide some hope of reducing the high levels of unemployFAVOURABLE The financial background is much more Tavourable than . I the for several years something can be done about Ihe real econom return to the stop-go of the 1950x and the 1960%. And the fiest thing is to give people bonanza in the Budget.
FORECAST At least, that was the pleture last autumn. Today cvcrything looks rather reason basically lies in what has happened to the exchange trade. For Healey's plans for the future were based on the forecast by the Treasury of a large UK (trade in goods services and trade in invisibles insurance, shipping).
The forecast surplus of about [1.5 hillion. Il was based on the assumption that the UK exchange would remain unchanged and that there would be a fairly large growth in world trade in 1978. Both of these assump tions have turned out to be wTOng, Let's look at euch of them in turn. First, the exchange rate. THE Budget Speech by the Chancellor of the Exchequer, Denis Healey, will be the first one to be broadcast [by radio] in this country. And all the expectations are that cuts in income-tax will be announced of the order of around £2 billion.
Is this the start of the long-heralded expansion of the British economy, with the revenue from North Sea oil eliminating the previous ever-present balance of payments problems? The CPS, a group of socialist Good have been The prices - for seent to so at last exports -dealiag make different.
will run out, Now look and price banking, tourism, was for a When the conforming conditions DELODE apparcat.
oF that is, than this and situation the by constant!
So in the economy slightly currency trade. ten there in detres. In chis to the IME's revenues for their Joan tin became very and with inflation Haw rapidiy talling because of cuts in living standards, there was a that is not huge speculative demand for forecast 1978 pear reflate sterling. In October alone E3 billion flowed into the country.
In order to try and chminate These speculative flows, the energy of sterling to rise. But, as we from the LiK more expersive imports into the UK cheaper. And this, on top of a which 1977 imports of consumer *14 Bod bearly per cent, whereax expenditure on UK produced items remained immediately predict a rapid end to any prospects of sustained growth for it will just suck in imports. Notice here how the revenue from North Sea od has disappeared. Tostead of being inverted in the UK industries, it will he used simply in arder 1o halance Like North Sea gas betore il it will be used to finanor tradi deficits and to pay off forcipn way. the used regenerate manufacturing in dustry, but abviously they will lowards the industry which is most efficient -and UK industry.
Ver why cant exports be CHISES icreased to compensate for increased imports? After all, production ineans greater employment, and prosperity.
This bring us back to the second Trensury assumiption:
world trade. Last nutume the Trade in manufactured goods would increase by 9 per cent in HALVED The lares: Torecasti ha ve halved this increase. Indeed grost in the world economy will be Do greater than last and the high international levels of unemthe LiK, export of goods anc servles are about ore third ol Gross Doutestic Product, this has depressing Implications for furure prospects.
But the siruation is worse than that, The forecasts are for a world recession in 1979, and lo combat this, various peogle (ecluding Mr. Callaghan) are urging a coordinated boost lo demand by all the major industrial countries.
until the something abour its balance of payments deficit. The US will not do anything. al presen abour its balance of payment:
deficit (which means doin, something about its importes consumption) unti West Germany reflates, : And every country is worried abu Japanese export penetration TRADE WARS onl the economy depressed and un stable. will huls or prolec tion and trade wars in the air the world is also awash with American dollars in disturbingly similar manner to the late 1960; just price to the acceleration of inflation.
Insum there is noc a very grear deal Healey can do. His budge will be a caulious one winch will not produce any substantial Tall in unemployment. The pros pects of an inefficient cconomy in an anarchic world in which the post-1945 long boom has disappeared, and che economic challenge dominance is intensited. Care indeed dismal for the workin Government can only sahilise 630105I5 Irsing to fonce the working class to bear the burden of the sie wirdraw al of British Irvous Trom Treb and leing the Iris propir deserine their oun The Communis Panie in taru arr in insis Neither 0 communis not le pro-Moscon wings hase any meaninglat states sary thes per hefen. Castlions roder acc mier osoumble chan neer the preeeling threr rejecling weisrisaism and soria interna democracy par an a laxery hut ae a nica
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old Healey. Just think/ if 1 be paying less tax!