HC Deb 06 April 1948 vol 449 cc38-40

The very serious economic problems that confront us today fall into two broad groups; first, as to the balance of our external payments; and, second, as to the balance between our internal resources and the demands we place upon them. I will deal first with our external payments. This problem has already been very fully discussed, and I believe that today the whole country is becoming aware of the urgency of arriving at a balance of overseas payments, particularly with the dollar countries. The whole economic situation of 1948 will be dominated by our difficulty in paying for the imports without which we can neither live nor produce. The hopes that we had a year ago have not materialised. Though, in 1947, we were able to import only 75 per cent. of the volume of imports in 1938, against the 80 to 85 per cent. for which we had hoped, rising prices of imports made the actual cost £124 million more than the forecast. We got considerably less than we hoped, and we paid much more for it than we calculated.

On the export side, the rise in volume was not as great as we had planned, largely due to the set-back in production in the early months of last year, though, with the increases in price, the value of our exports was only £75 million less than the estimate. Government expenditure abroad exceeded the expectation by £36 million, due to the continuing political uncertainties throughout the world, which made it impossible for us to reduce expenditure as rapidly as we had planned. Our earnings from invisibles were £90 million below the forecast for a variety of reasons. Our net shipping earnings were only £17 million. As we are importing less than before the war, if we had as large a shipping tonnage as pre-war we could have earned a net income several times the pre-war level of £20 million, but owing to our shipping losses, the amount of tonnage available for the profitable cross-trade routes is less than before the war. In addition, oversea expenses of British ships have gone up, as has the cost of repairs in foreign ports. This cannot be avoided, owing to the pressure on our own yards.

Our net income from investments was only £51 million in 1947, a decline of £24 million on 1946 and of no less than £124 million on 1938. We have had to continue selling some of our foreign assets. On the item of interest we have had to meet charges on our war-time borrowings of over £3,500 million, and in 1947 there were particularly heavy transfers of profits by foreign firms operating in this country. Our miscellaneous invisible items cover a large range of activities, involving both receipts and expenditure abroad. There was a large increase in most of this expenditure, much of which was of a productive character, largely connected with establishing new markets and business connections overseas as part of the export drive, and, of course, also on the restoration of plant and other physical property damaged or neglected during the war.

All these adverse factors reflected themselves in the drain on our gold and dollar reserves, which stood out as the most obviously serious feature of the whole situation. The drain turned out to be more than 50 per cent. greater than our overall deficit, amounting to 1,023 million during the year. This matter has been fully explored on more than one occasion in the House, and I do not propose to deal with it again now.