HC Deb 04 April 1950 vol 473 cc1016-22
The Chancellor of the Exchequer (Sir Stafford Cripps)

Mr. Speaker, I should like to give to the House, if I may, with your permission, the figures of our gold and dollar position for the first quarter of this year. During that period the sterling area earned a net gold and dollar surplus of 40 million dollars compared with a deficit of 31 million dollars in the fourth quarter of 1949, a deficit of 539 million dollars in the third quarter of 1949, and a deficit of 330 million dollars in the corresponding—that is, the first—quarter of 1949. We received assistance under the European Recovery Programme, largely in the form of reimbursement for expenditure already incurred by us, amounting to 229 million dollars and we also drew on the Canadian Credit to the extent of 27 million dollars.

Thus, the gold and dollar reserves rose by 296 million dollars during the quarter so that on 31st March, 1950, they stood at 1,984 million dollars compared with 1,688 million dollars at 31st December, 1949, and 2,241 million dollars at 31st March, 1948, immediately before the European Recovery Programme was put into operation.

It is not possible so soon after the event to give a complete explanation of these changes in our position. In broad terms the various causes are known well enough, but their relative importance will not be able to be assessed until a good deal later. Looking at the position over the past six months since devaluation, and comparing it with the difficult situation we faced in the second and third quarters of 1949, I think it can be said that two main types of influence have been at work in bringing about an improvement in our affairs. The first type consists of those factors which are outside our own control and which cannot be relied upon to continue and the second is the result of policies which we have adopted to meet our difficulties and which may, we hope, have a more lasting effect.

Under the first heading, factors outside our control, which reversed tendencies that had worked so strongly against us last summer, I would refer to the two most important:

First, the renewal inflow of dollars and the resumption of buying which had been held up in anticipation of a possible devaluation.

Second, the increased demand from the dollar area for many sterling area goods. This followed a further expansion in industrial activity in the United States, and the rebuilding of their stocks of commodities. Its effect has been the more marked since it has coincided with the normal seasonal increase in dollar earnings from some of the major sterling area exports such as wool and cocoa.

Under the second category which covers the results of policy decisions, I mention the following as the most important:

First, the reduction in the United Kingdom's own expenditure on imports from the dollar area, bringing it now within the rate of 1,200 million dollars a year, which we have laid down in our programme, together with similar successful action by our partners in the sterling area, in accordance with the understandings reached at the Finance Ministers' meeting last July. This is a major achievement and a triumph of co-operative effort by Commonwealth countries of the sterling area. On its maintenance in the period immediately ahead of us depends much of our hope for the future balance of our payments with the dollar area.

Secondly, the improvement in our position with such hard currency countries as Belgium, Switzerland, and Persia, which has resulted mainly from our better competitive position following devaluation.

Thirdly, the substantial improvement of the position of the United Kingdom on invisible account, due in large measure to a reduction in expenditure over a wide range of transactions.

Finally, the recovery in our earnings from United Kingdom exports to the dollar area,

The explanations which I have given apply broadly to the whole period since devaluation. There have, of course, been changes within that period. In the early part, as I made clear in my statement on the results for the fourth quarter of 1949, the immediate and short-term effects of devaluation were particularly noticeable. Since then these more temporary effects have naturally declined in importance. But this decline has been offset, and indeed more than offset, in the first three months of this year by those other factors, which I have already mentioned, such as the increased demand for sterling area exports and the further reduction in our imports from the dollar area. Our net payments in gold and dollars to non-dollar countries and some of our payments on invisible account have recently been at a particularly low level.

The results of these last six months are undoubtedly gratifying. Whatever the results of a more detailed analysis, they reveal that we and the rest of the sterling area have made a further advance in our long and arduous campaign to close the dollar gap. But we must not be complacent as to these results or overestimate the progress which has been made. To the extent that the last quarter's results benefited by a seasonal increase in income, we must expect that a corresponding seasonal decline will affect adversely the results of the months immediately ahead of us.

Some of the saving on dollar purchases throughout the sterling area may also have been seasonal, or temporary in character. To this extent it may be balanced by higher dollar imports later in the year. We have also still been enjoying some of the temporary aftereffects of devaluation, although latterly to a smaller extent than previously; these effects, unlike the more permanent benefits of devaluation, will quickly pass. Nor can we be certain that the present level of demand for exports from the rest of the sterling area to the dollar area will be indefinitely continued, or that their prices will be maintained.

In looking forward, we must bear in mind that the substantial gains over the last six months followed a period in which we lost nearly a third of our reserves of gold and dollars. Our policy is so to order our affairs that when the European Recovery Programme ends in the middle of 1952 we can stand on our own feet. without exceptional external aid. To that end we must maintain a rigorous economy in dollar expenditure and encourage the maximum dollar earning throughout the sterling area. We must conserve our strength and rebuild our resources until they are strong enough to withstand whatever strain the difficult and uncertain future may bring.

Mr. Oliver Stanley

I am sure the whole House are glad to hear—[HON. MEMBERS: "Look behind you."] I am sure the whole House are glad to hear—[Laughter.] The vast majority of the House—I except certain hon Members on the other side—are pleased to hear when something redounds to the benefit of the country and not merely to the benefit of their Government. I repeat, the whole House are glad to hear of the continued progress made now in the second quarter since we reached the dangerously low state of last autumn. If I may say so I think that the right hon. and learned Gentleman put with conspicuous fairness the various factors in the situation, some of which may be temporary. though the majority, we hope, are permanent. As far as I am concerned, I prefer to leave to the Budget discussion any suggestions we can make as to improving those factors which are within our own control and which, of course, alone in the long run can decide the fate of the dollar gap.

Sir Herbert Williams

We have listened with interest to a statement 10 minutes long containing a lot of factual information, some of it controversial. I well remember many occasions in the past—[HON. MEMBERS: "Speech."] I well remember many occasions—[HON. MEMBERS: "Speech."] The Speaker will look after me. I well remember many occasions—[HON. MEMBERS: "Speech "]—in the past when there are been protests against very long statements without the opportunity of subsequent Debate. It is absolutely wrong that the Chancellor of the Exchequer should read out a 10-minute speech—[HON. MEMBERS: "Speech "]—on matters. some of them controversial, without the House subsequently having the opportunity of discussing some of the things he has put before the House.

Mr. David Griffiths

Mr. Speaker, is it in Order for right hon. and hon. Gentlemen opposite to display as much joy as they have displayed this afternoon in view of the welcome news given by the Chancellor?

Mr. Walter Fletcher

Would it be possible for the Chancellor of the Exchequer to show how much of the great improvement in the first quarter of this year, which gives it a plus of 40 million dollars, is due to exports from this country, and how much from the rest of the sterling block, and how much is in the previous quarter, because it is extremely important to enable one to judge of the real progress. Secondly, has the right hon. and learned Gentleman provided in his figures for the servicing in dollars of the interest and repayment of the first dollar loan which falls due at the end of this year?

Sir S. Cripps

These results are the factual results of the first quarter. We have not paid any interest on the loan in the first quarter so, obviously, we do not bring it into the accounts. As regards the other point, we shall in due course, when we have time to go into the details, publish as usual the full statement as regards the balance of payments.

Viscount Hinchingbrooke

When giving for purposes of comparison figures for the quarters of 1949, did the right hon. and learned Gentleman re-value those figures in terms of current sterling rates in order to make the comparison a true one?

Sir S. Cripps

No, I gave them both in dollars so they do not require revaluing.

Mr. Osborne

Could the Chancellor inform the House whether he considers that the lower level of imports of dollar materials, which obviously forms an important factor in this welcome improvement, can be permanent or whether this is just a temporary phase?

Sir S. Cripps

Apart from seasonal factors which come in, the programme is the programme which we said last year we were adopting so far as this country is concerned—a programme of 1,200 million dollars a year. Of course part of that may come more in one part of the year than in another but, over the year, it is a final programme.

Mr. McAdden

In submitting to the House the more detailed review to which the Chancellor referred, would it be possible for him to set out how much of the progress and development of our export trade has occurred in industries which are privately owned and how much in those which are nationalised?

Sir S. Cripps

That would come in the ordinary statement made as regards exports and imports and not in the balance of payments.

Mr. Sydney Silverman

Would my right hon. and learned Friend bear in mind that the workers in the country who produce the goods out of which these figures are earned will regard his statement as a great encouragement to them, and a great reward for their discipline and hard work and restraint in these difficult years?

Sir Waldron Smithers

Although our exports to dollar countries have, naturally, increased since the pound was devalued, may I ask the Chancellor if he has taken into consideration what will happen when we have to replace our stocks of raw materials, which we cannot produce in this country but which are vital to our export trade, in terms of devalued pounds? That is when the trouble will come.

Sir S. Cripps

I am not dealing here with any future state of affairs. I am giving the House the particulars of what has happened in the first quarter of this year.

Air-Commodore Harvey

Would the right hon. and learned Gentleman not agree that in congratulating the workers it is far better to congratulate the workers and managements, who have worked as a team to bring about this result?

Sir S. Cripps

I entirely agree. It has been due to the efforts which have been made by workers and managements not only in this country, but in the entire sterling area.