Salient Special Correspondent

Firstly, the Government has not increased taxes, despite the excessive level of internal spending. Indeed, it gave some further tax concessions, though these were relatively minor. This shows that the present Government is determined to remain known as a "low tax" Government, whether this is economically justified or not.

Secondly, Government expenditure will show another large rise in 1965-66. Total Government spending is scheduled to rise £39 million, or 7.3 per cent, to £580 million. It is true that this increase is virtually inevitable due to the rising needs of the economy. Since this is a larger rise than the revenue rise expected, it will be clearly inflationary.

Thirdly, the pattern of expenditure and increase is something of a mixed blessing. Social Services expenditure is up a satisfying £27.5 million, including £6 million more for education. Works and other capital expenditure is, however, scheduled to rise less than £2 million. Once again capital spending has borne the brunt of the Government's need to cut spending somewhere since it is determined not to increase taxes.

Fourthly, it seems that Mr. Lake is going to rely on a bank credit squeeze and controls on building activity to cut back internal demand. In the absence of tax increases these policies will, of course, have some effect. However, they mean investment rather than consumption is being cut back. To give Mr. Lake his due, though, it must be admitted that the present boom is more an investment boom than a consumption one.