HC Deb 04 July 1951 vol 489 cc2320-5
The Chancellor of the Exchequer (Mr. Gaitskell)

With permission, Mr. Speaker, I should like to make a statement on the gold and dollar position of the sterling area.

During the second quarter of 1951 the gold and dollar surplus of the sterling area amounted to 54 million dollars compared with a surplus of 360 million dollars in the first quarter of 1951 and of 398 million dollars in the fourth quarter of 1950. Receipts under the European Recovery Programme in respect of allotments made before the end of 1950, amounted to 55 million dollars compared with 98 million dollars in the first quarter and 145 million dollars in the fourth quarter of 1950. The gold and dollar reserves rose during the second quarter by 109 million dollars and amounted to 3,867 million dollars on 30th June, compared with 3,758 million dollars on 31st March and 3,300 million dollars on 31st December, 1950.

Three factors are mainly responsible for the decline in the surplus in the second quarter. The first is an increase in expenditure on imports from the dollar area, both by the United Kingdom and by countries in the rest of the sterling area. The second is a decline in earnings from exports from the rest of the sterling area to the dollar area, which is in part seasonal. Against this, but only partly offsetting it, United Kingdom exports to the dollar area have shown a welcome increase.

The third factor is a reduction in net receipts of gold and dollars from non-dollar countries, particularly from the European Payments Union. In the second quarter, receipts from the E.P.U. in settlement of the United Kingdom's surplus, amounted to only 17 million dollars compared with 76 million dollars in the first quarter. It is quite likely that these less favourable influences will continue during the next few months.

R. A. Butler

In view of the sober statement that has been made by the right hon. Gentleman, can he give the House any further information about the increase in our exports to the dollar area? Further, with reference to the very serious sentence with which he concluded his statement, namely: It is quite likely that these less favourable influences will continue during the next few months, can the Chancellor indicate in any way any change or different conception of Government policy, which he may have in his mind at present, which has partly affected certain of the three considerations which he gave?

Mr. Gaitskell

The figures of dollar exports are published in the ordinary way every month. There is nothing that I can now usefully add to these figures. As regards the second part of the right hon. Gentleman's supplementary question, we cannot, of course, and could not expect our dollar surplus to continue indefinitely at the same high level at which it had been running before. I did warn the House, on the last occasion I made such a statement, that it was not likely to continue. So far as policy is concerned, it would not, in my view, be wise in present circumstances, for example, to cut down on essential dollar imports of materials for stockpiling and other purposes because the surplus this quarter has been very much smaller than it was last quarter.

Mr. S. Silverman

Will my right hon. Friend say how long it will be, if the present trend of prices continues, before the surplus becomes a deficit? Would my right hon. Friend further confirm that the change in our fortunes in this respect is the direct result of the accelerated scramble for raw materials all over the world due to the increased armaments programme started last September? Does not all this confirm the wisdom of the speech made by the Minister of Defence in saying that we should welcome the first—

Mr. Speaker

We cannot go back to that question now. We have finished with it.

Mr. Gaitskell

I cannot agree with my hon. Friend's analysis. The decline in the sterling area receipts of dollars on account of the fall in the price of some of the sterling area materials is obviously no indication of an uncontrolled scramble for raw materials.

Mr. Clement Davies

With reference to the last sentence in the Chancellor's statement, surely he has made a closer estimate of what is to happen. Cannot he give the House and the country more definite information of what the estimate for the next quarter is likely to be?

Mr. Gaitskell

There are so many uncertain factors that it is extremely difficult to give a precise estimate. I should prefer to rest on what I have already said. I am trying to be as fair and direct with the House as I can be. I think that these unfavourable tendencies will continue, but exactly how next quarter's figures will turn out it is not possible to say at present.

Sir H. Williams

Would it not be better if in future we abandoned the Economic Survey, which is a rather bad edition of "Old Moore's Almanac" and have a monthly statement? Then we should not be led astray.

Mr. Gaitskell

I could not agree that hon. Members are led astray.

Colonel Crosthwaite-Eyre

Will the Chancellor give an assurance that nothing that he has said today means that we shall not be able to honour our commitments under Bretton Woods and the Anglo-American Financial Agreement of 1946?

Mr. Gaitskell indicated assent.

Mr. Edelman

As the terms of trade have changed since devaluation, and as Britain is not getting a fair value for her export of manufactures, will the Chancellor now consider revaluing the £?

Sir W. Smithers

Is it not obvious that the real reason for the Chancellor's statement is that the £ was devalued, and that its devaluation was proof that the philosophy of Socialism had ruined British credit?

Mr. Shepherd

As a good deal of this change arose from the changed trade relations with countries in the sterling area outside the United Kingdom, is the Chancellor contemplating any conversations with those countries to see if they can do anything to assist us?

Mr. Gaitskell

We have, in the last few years, had conferences of sterling area Commonwealth Finance Ministers, and though no precise arrangements have yet been made for another conference, I think it is quite likely that in the course of the next few months some such gathering may take place.

Mr. S. Silverman

Are we to gather from what my right hon. Friend said in answer to my supplementary question that, speaking with all the authority and responsibility that attaches to his office, he is inviting the House to believe that the change in our circumstances is not mainly occasioned by the consequences of the re-armament programme here and elsewhere?

Mr. Gaitskell

I would not say that it was occasioned by a world scramble for raw materials. It is due to three factors, one of which is the increased imports of dollar materials and other commodities by the United Kingdom and the rest of the sterling area. One can say that to the extent that we pay higher prices for them that is part of the general world inflationary position. The second factor is the decline in dollar receipts from sales from the rest of the sterling area occasioned by a fall in the prices of certain sterling area raw materials.

Mr. Silverman

Will my right hon. Friend now please answer the question I did ask him?

Mr. Donnelly

Can my right hon. Friend give the House any idea, in view of the continuing fall in this surplus, how long we can sustain a re-armament programme such as we are carrying at the moment?

Mr. Ivor Owen Thomas

Can my right hon. Friend say whether there is any possibility, or any intention, of His Majesty's Government approaching the other members of the North Atlantic Treaty Organisation and inquiring into the possibility of some effective economic co-operation as a necessary corollary to military co-operation?

Mr. Gaitskell

I would remind my hon. Friend that there already exists a very great measure of economic co-operation, for example, in the International Materials Conference, and in the recent setting up of the Finance and Economic Board of the N.A.T.O. powers.