BUT the problem of inflation will not be solved by changes in the tax structure alone.
Some of the measures often advocated by Labour Party people are the restoration of price subsi dies, a return to price and other controls and the restoration of rent controls by the repeal of the Rent Act.
The Cohen Council does not think such measures would help; and they would clearly not be enough by themselves as the Labour Government was doing these things in 1950 when the T.U.C. repudiated restraint and the country was in the grip of inflation. At last year's Labour Party Conference Morgan Phillips promised that the policy statement on "The Control of Industry" which is to be published this summer is to provide the "complete and concrete answer " to the cast of living problem. Using precious revenue to hid for shares in the market will certainly not help the next Labour Government to control inflation; indeed it would tend to raise share values, stimulate wage claims and make the situation worse. There have recently been differences of opinion between the Labour Party and the T.U.C. about what the new policy statement should propose. The T.U.C. did not like Mr. Ciaitskell saying, on February 7, that wage increases should be limited to 5s. or 10s. a year.
THE last thing proposed by the last Labour Government to deal with inflation was the introduction of legislation for the limitation of dividends. The Cohen Council does not recommend this; but its arguments are not altogether convincing. It argues that the earnings industry would be invested more wisely if distributed to shareholders, but they are often simply spent when distributed whereas they are invested or put to reserve when retained and company saving has a useful anti-inflationary effect. The Council admits that " industry would not have been able to find from the market the funds rtecessary to carry out the capital investment which has. in fact, taken place if it had not, in the post war inflationary period, ploughed back a large amount of profits". It also admits that " the economy might be in a healthier position if there were greater diffusion of real income fi orn the company qua company not merely to its shareholders but to its customers ". But the way to encourage companies to use surpluses to reduce prices rather than to increase dividends is to limit the dividends of shareholders.
Sharing Sharing THIS course is commended in Fr. Andrew 'Gordon's C.S.G. pamphlet "Property in the Christian Tradition"; . and many Conservatives as well as Catholics have urged that workers should share to some extent in the surplus earnings of industry. They do in fact receive 50 per cent. of all surpluses after a cumulative dividend has been paid on capital in the case of the Chancellor's own company. John Heathcoat and Company Ltd., of Tiverton.
When the Conservatives were first returned in 1951 they promised to " take the initiative in the field of partnership ": and they may not have much longer to implement this pledge. If the Cohen Council had wanted to maintain its reputation for impartiality it might reasonably have made some kind of gesture to the Unions instead of simply endorsing practically everything that the Conservative Government has done.
Fundamentally the problem of bringing inflation under control is a matter of inducing the Unions to exercise restraint in a full employment economy, that is of convincing them that the earnings of industry are being divided fairly. It is no use simply bringing pressure to bear through the credit squeeze since that has such an adverse effect upon capital investment and production and leads, if not to strikes. to sullen discontent and restrictive practices. As Mr. Lydall argued in the "Economic Journal " last September, the credit squeeze is an ineffective instrument even in the case of poor companies. The T.U.C. have repeatedly demanded the introduction of legislation about dividends and some Conservatives. such as Mr. Cyril Osborne and Lord Balfour of Inchrye, have urged the same course.
FOR a long time, Quadragesinto Anno tells us, "capital was able to appropriate too much to itself; it claimed all the products and profits and left to the worker the barest minimum." "Every effort must therefore be made", it continued, that at least in future a just share only of the fruits of production be permitted to accumulate in the hands of the wealthy and that an ample sufficiency be supplied to the workers . . . We deem it advisable that the wage contract should, where possible, be modified somewhat by a contract of partnership."
Unless we in Britain take this advice seriously we are likely to continue to be faced with inflation, rising prices and recurrent crises. The Unions are unlikely to take more notice of the report of the Cohen Council than of Sir Stafford Cripps' White Paper unless some far-reaching changes are made.