Dawdling No More

Faced with five by-elections this month and the highest unemployment rate (2.1%) in three years, impatient Tories have been muttering that line from that old backbench ditty: "Stop dawdling, Maudling." In his first major House of Commons speech since he succeeded Selwyn Lloyd as Chancellor of the Exchequer four months ago, Reginald Maudling last week presented a long-awaited "policy of expansion" that surprised even the most skeptical Tories with its boldness. When he had finished, he left no doubt that the economy was to dawdle no more.

Industrial investment, one of the economy's most sluggish sectors, is to be spurred by substantial new tax allowances on new plant and equipment that should pump close to $300 million a year back into industry and allow it to compete on better terms with European manufacturers. Exports, which have not risen in the last three months, are helped indirectly by the biggest cut ever made in the government's stiff sales tax on autos: the new tax, slashed from 45% to 25% of a car's value,* will save consumers close to $300 on an average medium-sized model, and increase production in a key export industry whose health directly affects many other segments of the economy. Consumer spending is already "rising vigorously" and needs no push.

Government spending will be stepped up in the hard-hit unemployment areas, such as northeast England and Scotland. New roads, factories and towns will be built to prepare for "the next wave of industrial expansion." Building, one of Britain's most inefficient industries, will be overhauled by coordinating government construction, streamlining techniques and archaic codes. Public building, which accounts for nearly half of Britain's national investment program, will be accelerated, while lagging slum clearance and new housing construction will be speeded.

In an economy as delicately poised as Britain's, expansion carries a built-in risk of inflation. However, Maudling warned that he intends to keep wages in line with productivity and, if necessary, discourage consumer spending. Applauded the Financial Times: "For the time being, he has done just what was needed."

* Caught short by the tax cut was former Chancellor Lloyd, who bought a new car a few hours before Maudling's speech, thus paid $200 in extra taxes.

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