PRE-ELECTION BOOM? from an Oxford correspondent
There is every indication that economic activity will increase during the next fow months. Last summer it appeared that capital equipment expenditure would be increasing at a rate of 5% in 1964, but now this estimate has risen to 10%, In addition to this the Goverment has announced an increase in state investment of £400m, This combinatjon of incrdnses. makes it probable that the economy will be overstimulated, in which case deflationary’ EY Aave to bo adopted later in the year. ly this time it seems alnost certain that the Labour Party will be in power, facing the necessity of a cut in capital expenditure. Unless it adopts some form of control to spread this over both private and public expenditure, the plans to develop the depressed areas would have to be cancelled, as this would be the only part of the economy where a drastic reduction in expenditure is possible. If the Labour Party did this however it would have to accept the political consequ~ ences of losing Sonfidence of the affected sectors of the working class.
The Labour Party will, therofore, be forced to decide quickly whether the economy is to be planned or manipulated out of each diffic-— ulty as it arises.