Great Britain: Could Have Been Worse--But Is It Good Enough?

Britons love to buck the tide. While even Russia and the satellites are marching their economies away from centralization and toward the profit motive, Britain's new Labor government is charging right ahead to renationalize the steel industry.

In the House of Commons last week, the Tories were joined by the small Liberal Party in an attempt to condemn Labor for its announced steel plan. Britain's steel industry certainly needs some measures to make it more competitive in the world market, where last year it ranked fifth in output (behind the U.S., Russia, West Germany and Japan). British steel, though technologically advanced, suffers from too many inefficient small firms, and Labor economists argue that if the industry is not nationalized, a massive number of mergers, leading to monopoly situations and price fixing, are bound to occur. The Conservatives admit the problem, but deny that nationalization is the answer. Iain Macleod, lately returned to the Tory front bench after a disgruntled self-exile in journalism, called steel nationalization "the application by small and foolish men of a 19th century solution to a mid-20th century problem."

With its thin majority, Labor had to haul in M.P.s in wheelchairs and on crutches to save itself, 307 to 301. Had the motion passed, Prime Minister Harold Wilson's government could have fallen.

Still Compassionate. With the opening steel skirmish won, Wilson turned coolly to the next item on his agenda, an emergency "autumn budget" designed to ease Britain's painful $2 billion balance-of-payments deficit until the regular budget is drawn up in April. At the same time, Wilson saw a chance to nail down votes for a probable spring election by passing some promised social-welfare measures.

It was the first parliamentary test for the new Chancellor of the Exchequer, James Callaghan, 52, who tried to symbolize new approaches by carrying his speech in a plain manila envelope rather than the traditional battered attache case. Known as "the Mod from the Treasury" because of his sharp wardrobe, Callaghan on this occasion was all business, shunned the customary tumbler of "amber liquid" resorted to by Chancellors during their long, dry budgetary speeches. But Callaghan was less of an innovator in the budget itself. Main points:

> From cough drops to corn plasters, all prescriptions written under the National Health Service will forthwith be free: a 280 prescription charge on each item was abolished.

> Widows' pensions were tripled (to $4.20 a week), old-age and disability payments increased by 20%, to show that even in times of economic stress, Britain can be "humane and compassionate."

> An already punishing gasoline tax was increased by sixpence (70), thus raising the cost of one "Imperial gallon" (a fifth again as capacious as its U.S. equivalent) to 750.

> Income tax, which is paid by companies as well as individuals, was raised in the higher brackets by sixpence on the pound, thus bringing the British tax rate back to approximately where it was in 1959, when the Tories cut it. A previously programmed capital-gains tax was deferred until April, to the temporary relief of businessmen.