Political situation is threatening.  On economic situation -
i) what ought we to do, in next stage.      }   over next
ii) what are we to say - in presenting our case. }   3 months.
In this period, no pol. capital to be made over C. Market because
can't prejudice negotiations.
I was interested in a) interest rates  b) credit, generally.


B/payments.  1962 will show continuing improvement
i) 1960: - £288 m.  1961: - £70 m.  1962:  + £150.
ii) 1959: - £152  1960 - £490  1961 - 62. £ m.  1962 - small surplus.
 ii) is inclusive of capital movement.
Reserves  576 fr. I.M.F. Aug.  Reserves 350 m. more than July, having
paid off large part of borrowings.
C/living figures.  From 100 to 120 since 1956.
B/payments will continue to improve in first half 1963 but not in
Exports:  can't rely on general improvement:  four or five lines are
  carrying most of the burden.
 Fixed investment:  will rise.
 Current expenditure (public) will also rise.
 Unwise to start reflating:  we might have to clap reservations on later.

Satisfy if we can restore our pol. posn by improvement in economy.
  But we are in different sitn now.
  After 6 years of war and 6 of Socialism, people wanted period
  of quiet govt.  They have had this.  They now are ready for
  change - esp. on home front.  won't be satisfied merely by
  demonstratg. tht. economy is healthier.
 Moreover, if we say the economy is better, incomes policy may be
  undermined.  Shd we not rather say - these are some of the things
  you can have if the incomes policy is accepted.


We can't buy ourselves out of our political difficulties.
  Our policies have gained many advantages.
 Make it plain tht. an incomes policy is a permanent feature.
 If we reflate at all, be v. careful to consider where it shd. go.  Not
  to personal consumption, certainly.
 Main need is to remain tough on incomes policy.


Improvement in economy won't itself solve our political problem.
  But C. Market will be the main issue.


Indicate targets which are worth sacrifices involved by wages policy.


New mood - good time since 1951 - now they want more.
  C. Market will be a theme, but can't be put forward now.
 National efficiency isn't high enough.  Our theme shd. be - revival
  of efficiency.  Not easy for us now, after 11 years in office.
 Also sense of insecurity about Britain's future.


People are tired of us, but also of emphasis on material things.  There
  is need for new enthusiasms.  C. Market will provide new &
  vivid controversy.  In addn, we must seek for new ideas in other
  fields, work them out & present them.
 Some progress in international affairs wd. help.


Agree tht. economic improvement won't win us next election.
  But I wd. not reflate.  Lower Bldg. Socy. rates would help.
 I wd. hold off pressure for increase in O.A.P. as long as possible.
  But public service pensions shd. be increased - pari passu
  with any increase in public assistance.
 Wages policy vital - as permanent.  But some anomalies must be
  rectified - e.g. nurses.
 Endorse Hail.'s view.  Linked with end of Empire.  Entry into
  C. Market cd. give us a new enthusiasm.
 M'while, we shd. claim we have won (by policy since last July)
  a sound base for expansion.


We must continue economic policy.  At this stage consolidate our
  own supporters.  Support S.Ll. in holding a stiff line.
 Incomes policy.  Develop this on permanent policy.  But some
  anomalies will have to be removed, sooner or later.
  Special claims of nurses, probation officers and nurses.
 New ideas - stress competition.  Link with C. Market.


Need for incomes policy after we had bn. in office 10 years - this
  alone wd. have accounted for our loss of popularity.  But we
  must hang on it for some time yet.  Don't relax even for nurses.
  Esp. in areas which have caused us unpopularity.


Support Ch.H. and R.A.B.
 Don't relax.  We don't need quick prosperity.  We need a steady rise
  coming twds. peak in autumn '63.
 Incomes.  It's not possible to petrify all differentials at point they
  happened to be at in July, 1962. Nurses.
 Targets:  don't assign dates.
 More speed in pressing desirable policies.
                    x/ Lack of confidence between Ministers & business people.
 Malaise - not end of Empire - rather a feeling tht. Tories have no
  sense of purpose.


 "Permanent incomes policy."  Govt. can't impose it.  Must be done
  with consent of employers and unions.  Can't get it from
  N.E.D.C. w'in a year.  In this intermediate phase we must be
  more flexible - e.g. revaluate status of certain classes of worker
  w'out leading to leap-frogging.
 We, as Govt., shd. interest ourselves more in fixing prices.
 Can't buy popularity.  Most we can hope for is respect for what we
  have done.  We have established base for expansion.


W'out incomes policy we are bound to fail.
  Tough speeches needed to keep workers from claiming
 Building & civil engineering is key thing in affluent society.
  Work of P.O. & M/Ed. in getting economic bldg.  M/Housing
  has not done this for houses:  we need more pre-fabrication.
 Incomes policy needs to be supplemented by attack on restrictive
  practices by labour.


Intermediate phase before c. Market period.  Can't wait for
  second.  (Oct.)
  Can claim no economic crisis this summer.
  Wages policy - shd. relate it more directly to growth.
  Disappointed at slow pace of N.E.D.C. - get some of its work
  going even if we have to go slow in getting it to endorse incomes
 After 11 years we are giving impression of not being interested in
  people's lives.  Housing:  can't rest on 300.000 achievement.
           Consumer:  some legn needed next session.
           Rights of individual:  Franks report 5 years' ago.
                    Look now at Ombudsman.
           x/ also:  we must do more.  P.M. may have to act.


From now on, we must devote more time in Cab. to these things.
   Resume this evening - at 6 p.m.

Taken from C.C. 30(62) - Meeting held on 3 May 1962