Foreign News: Butler in the Kitchen

At a time when a majority of Britons are producing more, eating better, living in better houses and earning higher wages than ever before in history, Tory Chancellor of the Exchequer Richard A. ("Rab") Butler had an unpleasant duty to perform. On the first day of a new parliamentary session, he had to submit a supplementary "crisis" budget which hustled out a summer of prosperity and ushered in a winter of what looked dismayingly like oldtime austerity, as practiced by Sir Stafford Cripps. Britain is not bust but suffering from too much boom, yet Butler's nostrums bore the same cramping old labels (Higher Taxes, Lower Consumption) as those prescribed by Old Austerity himself.

Doing Too Much. Butler seemed wan and tired as he stepped up to the dispatch box amid Labor jeers and Tory silence. He started with the good news, pointing out that his "credit squeeze" (TIME, Aug. 8) had strengthened sterling and "effectively halted" the loss of Britain's reserves. British industrial production is still growing at the rate of almost 6% a year, yet "in spite of new production records, we are faced with a shortage of steel . . . For every individual unemployed there are now more than two vacancies . . . Imports have been 11% higher than they were in corresponding months in 1954."

The heart of Butler's problem is that expanding British industries are sucking in more and more costly raw materials from abroad at a time when the British themselves are using up the machinery and woolens which they should be sending abroad to pay for higher imports. The result is classical inflation: demand for goods and services far exceeds supply; prices and wages are spiraling. Britain, in a word, is trying to do too much—to keep up its armaments, invest in its Commonwealth, renovate its economy and increase its living standard, all at once.

Going Without. In such a situation, Butler had a clear-cut choice. He could aim his budget either at mightily increasing production (enabling supply to catch up with demand), or at limiting consumption. Butler's disappointing decision was "to restrain demand."

Given that decision, a Tory Chancellor dedicated to free enterprise might normally have been expected to concentrate his fire on governmental spending, i.e., on the welfare state. Yet to the dismay of his strongest supporters, Butler's heaviest blows fell on private spending. His budget called for:

¶A substantial increase in telephone and postal charges. Local calls in Britain will go up 30%.

¶A drastic boost in purchase tax, mostly on necessaries. Ironing boards, pot scourers, pastry boards, kitchen scales and shopping baskets, untaxed for the last nine years, will henceforth pay 30%. Items formerly taxed at 25%, e.g., bicycles and toothpaste, will now pay 30%; those at 50%, e.g., cars, TV sets and refrigerators, will now pay 60%.

¶A 5% hike in the tax on dividends paid out by private companies. This was Butler's sop to the trade unions, which had promised to hold back on wage demands if dividends were restrained.