GOLD AND DOLLAR RESERVES (Hansard, 2 July 1952)

§ The Chancellor of the Exchequer (Mr. R. A. Butler)
With your permission. Mr. Speaker, I should like to make a short statement on the gold and dollar position.
The gold and dollar deficit of the sterling area during the past quarter amounted to 14 million dollars. There was a net refund to the United States of America of one million dollars of E.R.P. money. The gold and dollar reserves, therefore, fell by 15 million dollars in the quarter. This compares with a deficit of 636 million dollars in the first quarter of the year, of which 299 million dollars was lost in January, 266 million dollars in February and 71 million dollars in March. At 30th June the reserves stood at 1,685 million dollars, compared with 1,700 million dollars on 31st March, 1952.
It is too early to give a detailed analysis of the reasons for this considerable improvement. But I should mention that we had receipts of 202 million dollars of defence aid from the United States of America as against ten million dollars in the first quarter of the year, and that our E.P.U. gold settlements amounted to 143 million dollars, compared with 219 million dollars in the first quarter. Again, we have started to see the effect upon our imports from the dollar area of the cuts which we in the United Kingdom have had to make; and also the effect of the action taken following the Commonwealth Finance Ministers Meeting by other members of the sterling area. The fall in imports has not, however, involved a reduction in the total quantity of stocks of essential imported foods and raw materials.
There are also seasonal influences which have worked in our favour during the quarter just ended. For all these reasons I must repeat what I said to the House on 12th June. First, that we have gained a respite, but the task before us is long and hard; and, second, that we must put the balance of payments first in all our considerations and that we shall continue to take whatever further measures prove necessary to maintain confidence in sterling and to balance our payments.
In future, since the E.P.U. balance is announced monthly, the figures for the 445 gold and dollar reserves will also be published monthly. I will give explanations of them to the House from time to time, as may seem necessary.

§ Mr. Gaitskell
I should like to ask the Chancellor why, in calculating the deficit or, as it may be, the surplus of the sterling area, he now includes economic aid from the United States of America, whereas previously both Sir Stafford Cripps and I always counted it separately? Does he not think that, for the purpose of comparison, it would be better to continue with the old practice, in which event I think that it would be correct to say that the deficit in the third quarter was 216 million dollars—that is, without counting any economic aid? Would the Chancellor confirm whether or not that figure is correct?
Would he also tell us what the rate of deficit has been in the last three weeks since he made the last statement? He has given us monthly figures for the first quarter of this year. I am not asking for all the monthly figures for the second quarter, but could we know the latest position? Thirdly, what further measures does he contemplate to deal with the dangerous situation disclosed by the low reserves and the fact that we are barely—in fact, not—in balance, despite substantial economic aid?

§ Mr. Butler
The answer to the first point is that there is really no difference between the right hon. Gentleman and myself. I took the trouble in my statement to illustrate the exact amount of aid, so it really comes to the same thing. I will certainly look into what he has said, because it is the desire of the Government to place before the House and the country the exact position so that we all know where we are. That is why I included the amount of aid in the statement. If the right hon. Gentleman adds up the two figures, he will find that his mathematics are correct, except that I make allowance for one million dollars of E.R.P. money which he has not taken into his calculations.
On the second point about the differences in the various months, I have not got the exact figure between the exact dates, but I can say that there was a deficit of 38 million dollars in April, a plus of 16 million dollars in May and a plus of 8 million dollars in June.

§ Mr. Gaitskell
That includes economic aid?

§ Mr. Butler
Yes.

§ Mr. Gaitskell
Without economic aid?

§ Mr. Butler
The right hon. Gentleman will have to subtract the amount given in my statement. That I think he can do. He has shown his great mathematical ability. On the last point about when we intend to announce our further measures, the right hon. Gentleman can take it that they will be announced at the right time and that they will be appropriate.

§ Mr. Gaitskell
I will try to get my arithmetic right. I can only answer my own question if I can have a little more information. What the Chancellor has not disclosed to the House is the amount of economic aid which we have obtained in the last month. I think that he said that we had a small deficit, but what was the total amount of the aid? The right hon. Gentleman would probably agree that what really matters is the position before counting any aid. I would submit to him that, in presenting these accounts, it is very much better to count aid independently. Could he tell us what were the figures for economic aid granted in the last month?

§ Mr. Butler
I have not got the figures divided up into these periods, but if the right hon. Gentleman wants them I will do my best to give them. Perhaps he will put down a Question.

§ Mr. Dalton
Is the Chancellor aware that the position regarding the European Payments Union has for a long time been giving considerable disquiet both to the members of this Administration and to those of the previous one? We are still losing gold to Europe. Would I be right in supposing that the countries which are gaining the gold that we are losing are still primarily Belgium and Germany?

§ Mr. Butler
The right hon. Gentleman, as well as the whole House, must be well aware that at one time we had a surplus with the Union and that, unfortunately, we have a deficit which, owing to the tranche we are now in, has to be paid in gold. As a result of the recent discussions in Paris, in which I took part, we have, therefore, arranged to reduce our deficit by the sum of £8,929,000, as a result of the arrangements by which 50 million dollars of the Belgian credit to 447 the Union is to be transformed into bilateral credits to the United Kingdom and France to be repaid by deliveries of armaments over two years, and to that extent we shall relieve ourselves of gold payments. If I may say so, it will be the continual anxiety of the Government to try to relieve the United Kingdom of this great burden.

§ Mr. Dalton
That is not an answer to my question. The question I asked the Chancellor was who is getting the gold we are losing? Is it not still the case that the principal beneficiaries through this operation are Belgium and Germany?

§ Mr. Butler
I do not think it is a case of being a beneficiary, because, after all, a payments union is a reflection of the transactions of trade, and if we were to restore our balance, we should not have to pay so much. I do not think we must make it a reproach to any nation where they have a credit, but the facts, broadly, are as the right hon. Gentleman has said.

§ Mr. Gaitskell
May I ask the Chancellor whether he will not agree that the Union was set up—[Interruption.] I see the Prime Minister is leaving. It is all right, he has had a hard time this afternoon. Is it not a fact that when the European Payments Union was formed, there was a general understanding that each country should keep in balance with the Union, and that there is an obligation on creditor countries with surpluses also to take all possible steps to get themselves back into balance again? Does he consider that adequate action to that end is being taken by Belgium and Germany?

§ Mr. Butler
I must be careful in my remarks not to make any criticism in any way of the actions of foreign Governments, but the right hon. Gentleman will be satisfied to note that the most intimate conversations took place in Paris between myself, representing the United Kingdom, and the Finance Ministers of the countries concerned. I am satisfied that they are well aware of the necessity of reducing their imports from America and so governing their trade that they are in a position to satisfy the right hon. Gentleman as well as myself.

§ The Prime Minister
May I go now?

§ Mr. Osborne
Is it not correct that, though our gold and dollar position is 448 still precarious, the position which the Chancellor has revealed this afternoon shows a great improvement compared with the same period last year? Can he also explain why it is that the Opposition look so glum when things are improving, and were so cheerful when we were meeting the difficulties that face us in Korea?

§ Mr. Butler
I can only say, in reply to that question, that certainly there is an improvement, and I should add that the scale of American aid is very much less than in the period to which the right hon. Gentleman was referring. Although I think that, in the circumstances, we should be united in agreeing that there has been an improvement, if we are to get a surplus we have still a great deal of difficulty in the final working out.

§ Mr. Speaker
Order. There is no Question before the House.