More Weight to the Pound

Trying to preserve the value of the pound is a frustrating and sometimes exasperating task. Noting that British unions continue to make inflationary demands while management clings to ancient inefficiencies, Prime Minister Harold Wilson recently accused Britons of "sheer damn laziness," demanded of both sides "a full day's work for a full day's pay." But despite Wilson's exhortations and despite his government's voluntary "prices and incomes policy," which aims at limiting wage escalation to 3.5% annually, wages last year jumped by 8% while prices rose by 4.5%. Productivity increased only 3%.

Wilson last week took personal charge of last-minute efforts to avert a crippling country-wide railroad strike, persuaded the railwaymen's union to retreat from demands for a much higher wage increase and settle for the government's ceiling of 3.5%. With that, the Prime Minister not only reinforced Britain's gradual progress in strengthening the pound but demonstrated again that he is willing to take politically unpleasant measures when necessary.

Austerity in Appliances. Trying to stem inflation and hence to defend the pound, Wilson's government also stiffened the terms for consumer installment buying-for the second time in seven months. Minimum down payments on most appliances went up from 15% to 25%; in deference to Britain's climate the minimum for stoves and water heaters remained at 10%. Maximum payment times were cut from 30 to 24 months for appliances, from 36 to 30 months for furniture, from 30 to 27 months for autos. Television sets, which most Britons lease rather than buy, will require 32 instead of 20 weeks' advance rent. On top of that, the Bank of England renewed its 1965 edict that total lending by banks and loan companies may rise only 5% above the level of last March.

Swallowing some of the same austerity, the government announced plans to cut the demand for construction labor by reducing public building by $168 million during the 1966-67 fiscal year. To prod British industry into selling more abroad, the government devised a new system of capital--investment grants and formed a commission to promote mergers among companies that are too small to compete on an international scale. If these tonics fail, Whitehall will prescribe stronger medicine. "I repeat," said Wilson, "that whatever measures are needed to strengthen our balance of payments and keep sterling strong will be taken."

Taxing Timetable. The government insists that by year's end it will wipe out Britain's foreign--trade deficit. With the country strained by a probable $148 million-a-year trade loss from its economic war with Rhodesia, some U.S. and Continental bankers remain skeptical about that goal being reached. But Britain at least is moving in the right direction. By cutting its trade deficit almost in half, from 1964's $1.4 billion to $756 million last year, the country took the heaviest pressure off sterling. Last month the value of the pound rose to $2.801, its highest level since May. By month's end Britain expects to repay the last of its $890 million short-term loans from the U.S., which bolstered the pound through its worst crisis last summer. Still, 80% of Britain's monetary reserves will consist of a $2.4 billion loan from the International Monetary Fund. To repay this debt on schedule by J970 (starting in December 1967), Britain will need a $1 billion-a-year surplus from foreign trade within the next two years. It promises to be a taxing timetable.

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