Austerity Plan Awaited

Press, Volume CVI, Issue 31117, 21 July 1966, Page 15

Austerity Plan Awaited

(N.Z.P.A.-Reuter—Copyright) LONDON, July 20. The Prime Minister, Mr Harold Wilson, will disclose today his massive austerity plan aimed at bolstering sterling and getting Britain out of its worst financial crisis since 1949. He is widely expected to announce a severe credit squeeze and other measures on the domestic economy —possibly including a wage and price freeze —coupled with cuts in the defence budget. These could Involve plans to pull some of Britain’s 51,000 troops out of West Germany to save part of the £9O million a year foreign exchange costs; or a speed-up of a scheduled reduction in another 50.000 troops in Malayasia and Singapore. Garrisons like that in

Hong Kong might be scaled down, and diplomatic missions are likely to be ordered to undertake an immediate economy drive. But financial experts believe the biggest savings are likely to come through fresh taxes at home, possibly taking as much as £2OO million out of the economy. Some forecast that the overall restrictions might boost unemployment to 750,000 from its present 1.1 per cent of the total work force—the lowest for 10 years. Mr Wilson has already made clear that he is ready to face up to angry reactions from trade union leaders or ministerial resignations, in order to push his policies through. His personal prestige is at stake in his determination to keep sterling strong: he has hinted that he is preparing a “package deal” to ensure once and for all that the world currency is safe from pressures.

The Prime Minister and his Cabinet thrashed out the crucial problem of what cuts to make for four hours and a half last night—the longest Cabinet meeting since the 1956 Suez crisis—and they will meet again this morning. Observers agree that Mr Wilson, a professional economist, is facing his biggest test since he became Prime Minister 21 months ago. He came to power in October, 1964, on a mandate to break once and for all the recurrent balance-of-payments crisis which have plagued Britain over the years. Observers believe the present sterling crisis reflects a lack of confidence overseas that his administration is yet able to face up to tackling this deep - seated economic challenge. Only when Mr Wilson has made his statement will it become clear whether he has won overseas approval for his policies.