THE TABLET July 12th. 1958. VOL. 212. No. 6164

THE TABLET

Published as a Newspaper

A WEEKLY NEWSPAPER & REVIEW

Pro Ecclesia Dei, Pro Regina et Patria

FOUNDED IN 1840

JULY 12th, 1958

NINE PENCE

Scientists Summit : The Experts Discuss the Bombs Expectancy in Paris : L ’Expérience de Gaulle. By F rank Macmillan

Obstructions on a Frontier: Apprehensions in Western Poland National Character at Brussels : Reflections a t the International Fair

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The Crock of Gold : The Memoirs of Lady Diana Cooper. By Sir Shane Leslie

Catholic Cinema : An International Meeting in Paris. By J. A. V. Burke

St. George s Cathedral, Southwark : The Re-opening Last Week

Critics’ Columns : Notebook : Book Reviews : Letters : Chess

THE SQUEEZE RELAXED

jpO R some months past the Labour Party has been tell­

ing us that the danger of a slump is more imminent than the threat of inflation. The recession that has visited the United States, they have been saying, is on its way across the Atlantic. When, therefore, the Chancellor of the Exchequer announced his lifting of certain credit restrictions last week, the Labour Party thought that at last they had converted him to a proper realisation of the circumstances around him. This is not wholly true. The American recession is probably now touching bottom, and the damage it can do to Britain is becoming increasingly limited. On the other hand, there are signs of recession in Britain and on the continent, but they appear to be arising spontaneously and are quite independent of what is happening on the other side of the Atlantic.

Nevertheless, it is fair to say that the Chancellor, in taking the ceiling off bank advances and in loosening various restrictions on credit, is in fact following the line that Labour would have him pursue. But what is interesting about the changes is not so much that they are mildly reflationary, but that they emphasise once again the dilemma of the Chancellor and the paucity of the weapons he has at his command. Roughly, they arc only two. One is the Budget. But the trouble with the Budget is firstly that it can happen (normally) only once a year and secondly that its complexity is such that it has to be constructed over several months and from a set of circumstances that may well have changed by the time it is due for delivery. The Chancellor has, otherwise, an armoury of credit restrictions. But though these can be brought into almost immediate use they do not. as the Budget does, have immediate effect. Thus it was that the Chancellor had to make his first cut in Bank rate only a few weeks after introducing an unmistakeably standstill Budget. There was nothing inconsistent in his doing so; his policy made very good sense. But it was liable to extreme misunderstanding and particularly in wage negotiation. A \ per cent, cut in Bank rate, the practical effect of which may be slight for many months, assumes an altogether unreasonable significance in the wages struggle. Any fresh weapon that the Chancellor can forge for himself is therefore worth close examination and indeed a trial.

He has in fact forged one. He is requiring the commercial banks to deposit with the Bank of England a proportion of their gross deposits to be determined by the Bank of England. No bank will be able to call on this deposit without special permission from the Bank of England—the cash will be in fact frozen. Experience alone will tell us how this system will work; proportions and frequency of change are both unknown. But the chances are that the device could in an emergency limit credit much faster than Bank rate alone. At any rate no harm will be done in giving the device an experimental run.

Oddly enough the Economist is highly critical of the arrangement. Why, it argues, should experiments of this kind be made when the Radcliffe Committee is sitting to find exactly the answers to problems such as now face the Chancellor ? To this there are two replies. One is that the Chancellor has to run the country now ; much as he would like the Radcliffe Committee’s advice, he cannot afford to wait for it. Secondly, it is very difficult to know in advance how new economic weapons will shape in battle. One can be fairly sure that, if the Economist is not grateful to the Chancellor, the Radcliffe Committee is.