from Pat Jordan
The Financial Times of March 15th carried, as its lead story, a despatch from its United States' staff outlining the opinions of American big business on Britain's forthcoming Budget. This article was extremely revealing and is worth quoting at length to illustrate the kind of pressures which are being applied to the Government from its chicf 'ally.! The article commenced:
"Mr. Harold Wilson's speech next month to the Economic Club of New York will have to contain at least some promise of economic sacrifice by Britain wmless it is to prove utterly pointless, Wall Street will welcome further (sic) assurances from the Prime Minister that the Labour Government intends to use all the forces at its disposal to defend the parity of sterling. But his remarks will make little impact if they have been preceded eight days earlier by a Budget containing enough inflationary elements to threaten these defences, Even business economists in the UsSey though typically less sanguine about the merits of deflation than most financial men ‘generally, agree that Britain, having spent beyond its means in 1964, must now be prepared to tighten its belt for a timeecece
"It has read with misgivings, therefore, rumours from London that there is a dispute within the British Cabinet on whether the forthcoming Budget should be expansionist or deflationary...Throughout last November's sterling crisis, speculation against the Pound was less severe in the U.S. than on the Continent, and confid ce has grown since that, with a 7% Bank Rate and import surcharges, Britain will succeed in restoring temporary order to its externel accounts. Yet in practically any Wall Street discussion on Britain's economic situation, speculation will eventually crop up as to whether devaluation may not have to be resorted to in the not too distant future. .e
"The most common consensus seems to be...ethat the Budget should not even be neutral but that for the sake of confidence it should provide for at least a few more spending curbs, Thus, Wall Street will be concerned at any extension of existing welfare programmes while some reductions, too, in housing expenditure is often consideral to be called for, New tax measures directed to reducing consumer outlays will also be viewed favourably....Further, the Labour Government would give a powerful boost to confidence by dropping plans for steel nationalisation, as it would by taking more direct steps to implement its venerable incomes policy.o..
"In the prevailing atmosphere of scepticism and uncertainty, the role of the American Government has been an important one and, up to the present at any rate, a stabilising one. Leading businessmen have been going to the Treasury and the Federal Reserve Board in considerable numbers during recent weeks in search of advice on whether to cut their future losses in Britain and to take as much money and profits out of their subsidiaries as possible while the going is goode"
After referring to recent developments, namely, the gold crisis, the American balance of payments message and the declaration of what amounts to a war on the dollar and the pound by de Gaulle, the article continuess "All this has produced a clear sense among officials that confidence has now been made so scarce that results in Britain will have to be seen in very short order if the pound is to survive, And by results they no longer mean simply byuigetary and other measures..eebut, more particularly, those which will buy more confidence and, therefore, time on the international markets..eunder pressure of the confidence crisis, most of them now seem to feel that at least some of the higher demands of the Continent will have to be mete..e. ere are few illusions in Washington or New York that sterling, even with American help, ¢2uld easily survive another major attack from which the Continatal Powers were unwilling to rescue it."