HC Deb 11 March 1952 vol 497 cc1278-82

In other words, we must divert some resources from use at home. It is customary in most Budget speeches to go deeply into economics and if I do not do that it may partly be through a lack of ability and training such as was so ably shown by my predecessor. But it may also be because, after a great deal of labour, I have attempted to try to put this section, which, if it were a symphony, might be regarded as the intellectual section of the piece, in what economists call "real terms," namely, a description of how we stand with regard to our resources.

I must emphasise at the outset that, although this means an attempt to measure statistically the various elements in the equation we have to consider, the figures can be no more than estimates, and the final result, as indeed it should be with the Chancellor of the Exchequer, is an act of judgment. In order to carry out our balance of payments objective, it will be necessary for us to free resources sufficient to improve the United Kingdom's overall balance on current account, excluding defence aid from the United States, by at least £600 million in 1952–53 compared with 1951–52. In terms of money—and these are terms of money—the task looks enormous. It is, but the Committee should realise its actual size is not so great as some commentators have thought.

We can count, after all, on some improvement in our net invisible earnings, from shipping, insurance, oil and so forth which have always been and must always be a vital feature of British prosperity. I think it fair to assume that the terms of trade will be, as at present, more favourable than in the year just ending. These two factors should help us financially to the extent of between £200 and £250 million and their contribution can be deducted from the financial task.

Mr. Hugh Gaitskell (Leeds, South)

Will the right hon. Gentleman give the amount for each of them?

Mr. Butler

If the right hon. Gentleman will read carefully what I have said he will see the ratio of the two. I cannot give the actual figures for the earnings of shipping, oil and insurance. I should say myself that the invisibles would be about £150 million. The remainder—that is, £350 million to £400 million at 1951–52 prices—represents the volume of the resources we must devote, in the coming year, to our balance of payments objective.

I must deal first with imports. The volume of imports will be heavily reduced, by more than £300 million. In 1951–52, as the Committee knows, the stock of imported supplies increased greatly; in 1952–53 there is likely to be some fall in stocks overall. The result is that the volume of imports available for use in 1952–53 will be about £150 million less than in 1951–52.

In addition, we shall have to provide for a net increase of about £50 million in the volume of exports. Some may think that this is a small figure. But we must remember that our exports of consumer goods to the sterling area will probably decline. Australia has just decided on a sharp cut in imports from us, particularly of consumer goods, as a consequence of the combined plan for bringing the sterling area into balance. As part of the general plan we ourselves must sell very much more than before in non-sterling markets. This means supplying what those markets want, at the price, and at the time, they want.

At present, one of the strongest demands is for capital goods—the products of our metal-using industries. These are precisely the products which it is most difficult for us to spare, but which we must spare if we are to export and balance our payments. It means a tremendous task for our exporters. We must do everything in our power to help them and so safeguard the employment of our people.

I have now given the Committee the main factors on the external side. A big decline in imports, offset, however, to a substantial extent by a change in the stock position: some expansion in total exports, which will involve a very large expansion in non-sterling markets for which so far as we can we must try to find more capital goods. And this in the face of a decline in exports of consumer goods to sterling area markets.

The Committee should realise it, and the country should understand that this will mean a really major diversion of effort if we are to survive and pay our way. The precise magnitude of all these changes is, of course, very uncertain. But I believe that, on balance, we shall have to make do, for other uses at home, with a volume of resources about £200 million less than last year.

The next claim is the defence programme. This will take a greater volume of resources in the coming year. The instalment originally planned for the year would have put a very heavy burden on the metal-using industries, and this has had to be adjusted. My right hon. Friend the Prime Minister has recently given a very full review of the state and prospects of this programme, and of the adjustments that have already been made.

These adjustments will increase our ability to export metal goods. All that I need say now is that, taking defence as a whole, I judge that the effect of the programme embodied in the Estimates—to which I shall shortly be turning—will be to increase the claim upon resources in the coming year by over £200 million. So that is, in resources, £200 million for the balance of payments over £200 million for defence; over £400 million in all. That is the total, so far, of the additional claims on our resources. I do not think we can hope to meet all this out of an increase in production at home.

Between 1950 and 1951 the national output increased by about £250 million at constant prices. But towards the end of the year production was severely hampered by the shortage of steel. Before long we shall have extra supplies of steel from the United States. This should enable the upward movement to be resumed. It is more than usually hazardous to estimate the increase this year, when we are faced with the task of finding alternative markets for a substantial volume of exports. We must work for an increase in volume of about the same or more than last year. My Budget, when it is revealed in full, is designed to help us get this.

But this alone will not fill the gap. We must, therefore, reduce our claims at home. One of these is Government civil expenditure, which we have cut significantly. In terms of resources this claim, thanks to the economies we have made, will be over £50 million less than last year. Next comes the claim of investment, and particularly investment in plant and machinery. This is a most important field. In the long run our factories must have the equipment they need for expansion and the improvement of efficiency. But in view of the overriding need for exports of precisely those goods where the investment demand is heaviest—namely engineering products—we must take decisive steps to reduce home investment substantially.

The late Government tried more than once by physical controls and fiscal measures to check home investment; but they always failed in the face of the overwhelming monetary demand. The world will not believe that we are serious in our determination to leave no weapon unused to promote exports and defend the pound unless in this field we take action that is, and is seen to be, decisive.