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John Palmer

The Notebook

[The Budget]

(Summer 1966)

From International Socialism (1st series), No.25, Summer 1966, pp.5-6.
Thanks to Ted Crawford & the late Will Fancy.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

John Palmer writes: The budget illustrates the supreme priority being given to the successful implementation of the Government’s incomes policy in its strategy to modernise the ailing British economy. The Labour leaders clearly feel that with the credit squeeze and existing deflationary measures they have deferred as far as they dare to the prejudices of the bankers anxious for a foreign payments balance at all costs. Further traditional deflation would have spelled certain disaster for Brown’s National Plan and any hopes of growth in the years to 1970. As it is production targets have been lowered de facto and it is an open question whether capital will retain sufficient confidence in the promise of future growth to maintain past levels of new industrial investment. To reassure investors the Labour leaders have kept corporation tax and capital gains tax at a relatively low level and have taken direct action through the Selective Employment Tax to ‘soften’ the labour market and thus relieve pressure on industry’s wages costs. The coming months are now bound to see an acceleration in the growth of unemployment. Capital, bankers and the State – have all expressed worry at the past sluggish rate of lay-offs, for which the shorter working week and labour ‘hoarding’ by employers have been mainly responsible. This and the higher prices which companies in retailing and construction – hit by the payroll tax – will pass on to working-class families will add a not inconsiderable element of overall deflation.

Callaghan’s refusal to implement direct controls over the export of capital to the Sterling Area – which has been used as a way of exporting capital to the non-Sterling countries as well – indicates the fear the Labour leaders have of doing anything which might dash ‘confidence’ by business, dampen investment and possibly lead to a serious recession since this would condemn all the Labour leaders’ plans for modernising British capitalism to the waste paper basket.

As the next 12 months see a slow rise in unemployment the Government and the employers are bound to attempt to use the improved situation to ram home some of the big productivity deals which they have been preparing. We can also expect a renewal of the offensive on the wages straightjacket front and new measures against the shop stewards’ movement and, in some instances, against the official union machinery itself.

The Labour leaders face a growing number of pitfalls in the path they have chosen. The budget may not prove sufficiently tough to please the bankers and so pre-empt another sterling crisis. This would undo all the remedial measures to bolster the economy so far taken. On the other hand investors may feel that the outlook for growth is already sufficiently dimmed to cutback, on investment plans. Either way the organised workers show no signs of remaining compliant in the new tougher industrial scene. The biggest pitfall for the leadership’s plans remains the growing shop floor resistance in industry and the continued re-assertion by socialists of diametrically opposite priorities for Labour and the working class.

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Last updated: 24 April 2010