British Analysts Give Lamont's Plan Lukewarm Reception
BRITAIN'S business leaders were cautious about an economic recovery package unwrapped last Thursday by Norman Lamont, the chancellor of the exchequer. Trade union leaders were downright hostile.
But Mr. Lamont's measures have given government supporters hope that the deepening recession can be turned around.
Lamont's statement to parliament, based largely on attempts to stimulate growth and curb public spending, was the government's response to weeks of political turmoil and uncertainty unleashed by Britain's Sept. 16 withdrawal from the European Exchange Rate Mechanism and currency devaluation.
John Townend, chairman of the Conservative finance committee in the House of Commons, congratulated Lamont on his "courage and determination." But Howard Davies, director general of the Confederation of British Industry, said no one could be certain that the chancellor's moves would be sufficient to pull the country out of recession. Mr. Davies and Peter Morgan, leader of the Institute of Directors, both called for interest-rate cuts beyond the 1-percent drop ordered by Lamont.
Leading analysts noted that even if the Lamont measures had the desired effect, recovery would be painfully slow. Gavin Davies, chief economist in London of Goldman Sachs, described Treasury forecasts of 1 percent economic growth in the next year as "modest but accurate."
Key elements in the chancellor's package are special help for housing and car industries; a 1.5-percent curb on pay increases for 5 million public-sector workers; a cut in the base lending rate from 8 to 7 percent (the lowest in 15 years); and tax incentives to industry to encourage investment.