This year’s budget was the most severe and deflationary of any since the end of the last war. Altogether, it withdrew nearly £1,000 million of spending power from the economy—an unprecedented amount. The devaluation of last November, the January cuts in Government spending, and the budget in March may produce a fall in living standards of the British working class of an order not seen since the 1920’s. Estimates of the rise in the cost of living arising from devaluation ranged from 3½ to 5 per cent. The budget has added further considerable burdens; estimates of the overall cost of living increase for 1968 are now in the order of 8 or 9 per cent. One only has to contrast this with the Government’s norm for wage increases—3½ per cent. Even allowing for the expected 5 per cent rise in wage rates in the first six months of this year (due to the bulge arising from the period of restraint last year) this will not compensate for the increase in prices. Of course wage rates and earnings are not the same thing. Only a minority of wage earners today take home wages as low as the official minimum rates—their take home pay depends on bonus, piece rates and so on. In the coming months there is every possibility that these take-home wages will either be stable or fall. Therefore the price increases will hit harder than bourgeois economists would have us believe. Nor is this all. Along with the slowdown in housing and other social services, there is the threat of unemployment for those in work and little prospect for those now unemployed of finding work. The British working-class is going to suffer.

How does gold come into the picture? The recent turmoil that led to a two tier system of prices for gold may be seen as an indication of the international character of the crisis besetting capitalism. There can be little doubt that the long boom enjoyed by capitalism since the begining of the fifties is now over, and capitalism is once again displaying most of the features that bourgeois pundits claimed it had lost. Rising unemployment, reduction of the social services, and government retrenchment are now common to many capitalist countries, not something peculiar to Britain. They have been accompanied by persistent international inflation. The usa has contributed to this problem by its massive balance of payments deficit. This deficit arises from two sources: a) the export of capital, much of it to Western Europe and b) its overseas military expenditure. It has been financed by other capitalist countries holding dollar reserves. So long as such (paper) dollars were assumed to be as good as gold, i.e. interchangeable with gold, there was not too much concern. However, over the last few years the us gold stock has been steadily drained by conversions, thus throwing into question the ability of the us to meet its obligations for gold. Hence the flight from the dollar into gold (which of course put further pressure on the dollar). This flight was not so much precipitated by the devaluation of the pound, rather it was accelerated and thus reached crisis proportions earlier than might have otherwise been the case. Since both the pound and the dollar have acted as the twin international currencies since 1945, the pound acted as the first line of defence for the dollar.

It was clear that the 14 per cent devaluation of Sterling would not take effect in the uncertain international climate, unless the British balance of payments was corrected fairly rapidly. Further speculation against the pound could only be staved off if this was done. Given the logic of the situation and the strategy pursued by the Labour Government, the April budget was the inevitable outcome. This budget had to do a number of things. Its first task was to correct the balance of payments, and so allay the speculators. Secondly, it had to help ward off the attack on the dollar, because any further devaluation of the pound would have inevitably led to the devaluation of the dollar. Thirdly, the budget—by deflating the economy—had to produce more unemployment. This is an important element because the present policy of the Government is based upon the assumption that there will be an export-led boom at the end of the year, and it wants to create the capacity to meet this. It is now quite obvious that the expectation is that even when such a boom gets under way there will still be a pool of unemployment to act as a deterrent on the labour market.

British capitalism urgently needs to keep its labour costs down in the coming period so that it can meet the international economic competition that is becoming much fiercer than at any time since the thirties. Therefore, along with the budget the Government has decided to reinforce its unemployment policy with the whip of the Prices and Incomes Act. This is necessary because even when there is a large number of unemployed, wages in some industries still go up: very often the regional variations in unemployment occur in such a way as to reduce the pressures in the labour market in certain areas and industries. Therefore the Act will have to be used to stop any group of workers using a propitious situation which may arise because of export demand from obtaining wage increases. The Act is thus a further attack on basic trade union rights.

This struggle for basic trade union rights is a crucial one for the whole of the British trade union movement. It will not be a struggle about ‘abstract’ principles, but a very concrete one for nearly every worker, concerning his living standards. As prices march steadily upwards, so will the industrial temperature.