What Plan?

The National Plan was dreamed up by the Department of Economic Affairs back in the palmy days of 1965. At the time Harold Wilson described it as a “national crusade for higher productivity” and George Brown wrote that its embodied “all our hopes for maintaining full employment and raising our standards of living.” Not surprisingly the Labour Party has since then done its best to give the Plan a quiet burial.

In its aims the National Plan was beautifully simple. The overall objective was to increase national production by 25 per cent (i.e. £8,210 million) by 1970. It pointed out that the balance of payments had been in the red by £750 million in 1964 and that this had resulted in heavy loans from the International Monetary Fund. As a solution, the Plan envisaged a steady improvement in these figures: “we shall need to get back into balance during 1966 and then into surplus; by 1970 we shall need a surplus of about £250 million.” This was to be achieved largely by boosting exports which, during I he barren years of Conservative rule, had been expanding at an average rate of only 3 per cent a year. Now they were to be stepped up by “over 5 per cent a year up to 1970. No one can say that this target is crying for the moon(!)” On the other hand, imports were to be effectively controlled and, “taking everything into consideration”, these would grow by no more than 4 per cent a year. The trade deficit was in this way destined to be cut dramatically, from £534 million in 1964 to about £50 million in 1970.

The Plan also gave prominence to its schemes for expanding the labour force. “On industry’s present plans 800,000 more workers will be needed if the 25 per cent increase in output is to be achieved”. The hundreds of thousands of new jobs in the manufacturing and construction industries were to more than compensate for any shake-out in mining, the railways and other declining areas of employment. Prices were going to be magically frozen and, since wages would be creeping up steadily by 3-3½ per cent a year on average, “our personal consumption . . . should rise by one-fifth by 1970.” “This is not a policy of restriction. It is intended to increase the value of what our pay packets will actually buy and get away from purely paper increases cancelled out by higher prices.”

The future was going to be rosy in other ways as well. Expenditure on health and welfare services was to rise from £1,238 million in 1964/65 to £1,529 million in 1969/70. To meet the housing shortage, half a million new homes were to be built each year by 1970 (as compared to 383,000 in 1964). But these were only details when compared to the underlying ambition. Once and for all the crises and upsets of capitalism were to be abolished—by the stroke of a bureaucrat’s pen! “We have had too many crises in the last ten years . . .  Sometimes the only quick way of dealing with these crises was by cuts and squeezes at home . . . The whole point of the Plan is to break out of this vicious circle once and for all.” (their emphasis)

Although the working class in general greeted the plan with a healthy indifference, it fired the imagination of many economists. By the end of 1965, after the Plan had been in force for a grand total of four months, some of them were becoming quite enthusiastic.

The Chancellor has every reason to feel encouraged by this ending to a year in which exports rose by 7 per cent and the average monthly trade deficit was halved. Even if he did not quite hit his target of halving the total balance of payments deficit during 1965, it is now clear that he cannot have fallen far short of it . . .  Mr. Callaghan is running to time towards his objective of eliminating the payments deficit by the end of 1966.  (Financial Times, 13/1 /66)

But 1966 was a great year for wrecking illusions. The pundits had a variety of hypotheses to account for the sorry state of the economy but they were united on one issue—all was not going according to plan. Perhaps Victor Morgan, Professor of Economics at Manchester University, spoke for them all when he said:

     The year 1966 should stand as an awful warning to those of us, both in official circles and outside, who indulge in the black arts of economic forecasting. At the end of 1965, the government was confidently looking forward, on the basis of existing policies, to a rapid improvement in the balance of payments, and this view was generally shared by academic and business economists. In fact, we have been subjected to another massive dose of deflation, and the current account deficit for the first three quarters, at £234 m., was £87 m. more than in the corresponding period of 1965.
. . . the rate of growth of national output [is down] to an average of a little more than 1 per cent a year.
(Financial Times, 31/12/66)

Callaghan, however, remained optimistic. Nothing had gone fundamentally wrong, he argued. There had been setbacks, for a time economic recovery had even been halted, but dramatic improvements were just round the corner. A sign of this, he claimed, was that the government had “made a good start in repaying (the) debt to the Central Banks. Our reserves have been rising and we have resumed repayment of capital and interest on our North American loans.”

Contrast this to what has actually taken place. The final figures for 1967 will not be available for some weeks yet but even so we can see that the Plan is completely on the rocks. Far from being able to repay their debts to the International Monetary Fund and Central Banks, the British capitalist class have applied for further loans of $300 million. Despite the confident prediction that first 1966, and then 1967, would produce a positive balance of payments Callaghan has ruefully admitted that the capitalists still “need an improvement in our balance of payments of at least £500 million a year . . .”

The Plan emphasised the importance of boosting exports by means of rebates to exporters and the need for heavy investment in the nationalised industries to provide the basic growth in fuel, transport and communications which would allow industrial production as a whole to increase. Yet now the government finds itself sabotaging its own plan. Among the economic reforms which followed the devaluation of the pound, two of the most important measures were to abolish refunds to exporters to the tune of £100 million and to reduce public spending (which includes capital investment in nationalised industries) by another £100 million. Apart from all this over half a million unemployed workers know that Labour’s brash predictions about creating more jobs have not worked out. And of those workers with jobs, how many now feel confident that their ‘‘personal consumption . . .  should rise by one-fifth by 1970”?

The failure to date of the National Plan is a blow to the efforts of the ruling class to strengthen the world standing of British capital. But, in the end, they can afford to take a philosophical view of it all. After all they are still the bosses and, however persistent the difficulties that face them, they can rely on the working class to keep on churning out the profits.—Or can they?

John Crump