On January 16th the government announced a series of cuts in public spending—mainly in the social services and in defence. These cuts followed on logically from the devaluation of last November. The package was a mixed one, made up of a number of large items and some small ones which seemed to be in the best candle-end tradition of the Treasury. But there can be no doubt that it was part of a new attempt at finding a coherent economic policy—something that has so far eluded the Labour Government. For since it came to power in 1964, although it may have had a strategy, it has been incapable of implementing policies which could permit that strategy to be put into practice with any success.
Up to the moment of devaluation, most of the remedies for the ills of British capitalism tried out by the Labour Government had been totally ineffective. Devaluation was a measure of desperation forced upon the government by circumstances. The fight to maintain the parity of the pound at $2.80 was a long and hard one, the cost of which the British working class will have to carry for some time to come. However, from the point of view of British capitalism, this struggle was not a meaningless one; the old rate had distinct advantages for all those sectors that engaged in overseas investment or operated from the City. The way in which this devaluation was carried out, and the conditions imposed, operated to the maximum disadvantage of the working class. And as with most of the measures put through by this government, the Labour Left was thrown into confusion—many having been enthusiastic advocates of devaluation, only to find now that it amounted to a further turn of the screw.
The devaluation was accompanied by the highest bank rate (8 per cent) for over 40 years. This will create considerable new burdens for all wage and salary earners, via the increased local rates which it will engender. Along with this, a new international loan was negotiated, of $3,000,000,000, which again will have to be paid for in more ways than
The first thing to be noted is the way in which, before the cuts were announced, a steady campaign was built up in the press demanding cuts in public expenditure. This campaign reached a crescendo immediately prior to the announcement, and had all the hall-marks of a carefully orchestrated effort. Back-bench opposition to the cuts was greatly weakened by means of this; having been led to believe that the main target would be the social services, much of it collapsed out of relief and gratitude when it was learnt that defence was to be cut back too.
However, let us examine what these cuts were. To take the defence cuts first, these basically hinged upon the cancellation of the fiii order, and on the speeding up of the withdrawal of troops from the Far East. At best, these will bring a saving this year of £300,000,000. Moreover, whilst there was jubilation at Westminster over this cut in defence expenditure, it seems to have been conveniently forgotten that this withdrawal was only made possible by the Indonesian generals’ coup of 1965, and by the murder of hundreds of thousands of members of the p.k.i. Moreover, with the build-up of colonial armies, there seems to be a reversion to pre-war patterns of British domination. Certainly the withdrawal signifies that from now on the United States will have to play the role of world policeman for imperialism; but it obviously does not mean any abandonment of British imperialist policies.
The other cuts announced—reduction of school building, ending of free school milk, re-introduction of prescription charges, cut-back of the housing programme, to cite the main ones—are all directed towards a further cut in working-class living standards. These measures fall into a pattern that has been fairly obvious since 1964 when the Labour Government took office. This pattern, or strategy, is one that is designed to cut down the amount of the national income going to the working class, and specifically to cut real wages. All the deflationary measures, the incomes policy, etc, have had this end in view. Stemming from devaluation, there seems to be a new set of policies emerging to implement this strategy.
The devaluation opened up the possibility of achieving a healthy balance of payments towards the end of 1968. There is no doubt that it presented British exporters with considerable opportunities, because most of their main competitors refrained from following suit. But there are a number of factors, at home and abroad, that militate against full use being taken of it.