§ Since overseas demand for consumer goods showed signs of declining, I came to the conclusion that unduly to depress the level of consumer demand at home would be unnecessary and harmful. There was some quite reasonable criticism of my judgment at the time, but despite that, things have turned out very much as I expected. Although the volume of consumption remained low in the earlier part of 1952, it showed signs of increasing towards the end; over the financial year as a whole, it was probably about level with the previous year.
§ At the same time, as the Committee will remember, I came to the conclusion, with much regret, that I must keep down the demands, mainly for home investment, on the metal-using industries, in order to free resources not only for increased defence production, but also for an increased volume of exports in this class of goods. In the event, there was a slight fall in fixed investment; that is to say, in new factories built, new plant and machinery installed, and so forth. This was partly offset, as I forecast, by an increase in other building work, largely the result of the great energy and drive shown by my right hon. Friend the Minister of Housing and Local Government. I am sure we are all glad to see him back well again with with us.
36§ There was, however, a most significant change in the other form of investment—investment in stocks of finished goods and work in progress. In 1951, there had been a substantial increase in this kind of investment, following smaller increases in early years. In 1952, partly as a result of our monetary policy, this increase stopped, so that during the year the volume of stocks and work in progress in the United Kingdom seems to have remained about level. It is not correct to say that these stocks declined. The fact that stocks remained about level in 1952 meant a considerable fall compared with the previous year in this form of demand upon our productive capacity. This—and I want the Committee to note this—more than outweighed the increased claims of defence production, which were a little greater than we expected. The net result was a considerable reduction of total home demand, and the freeing of resources for export. In this way, our policy at home made its contribution to the task of our exporters.
§ But when the exporters came to sell abroad many of them met with the difficulties I have already mentioned. Exports to the sterling area, and of consumer goods generally, fell. We sold a little more in non-sterling markets, particularly in the dollar areas, while at the same time the value of our exports of metal and engineering goods rose considerably, partly as a result of our policy of limiting home demand in the metal-using industries. In all, we succeeded in getting an increased income from exports during the year. This was, however, due to higher prices; the volume of our exports, instead of showing a small increase, as we hoped, declined. This, taken with the decline in home demand I have already mentioned, meant that there was a considerable decline over the year in the total demands on our productive capacity.
§ Leaving aside for later consideration our serious export difficulty, the general easing of demand transformed the aspect of our economy. Although there were still a few difficult patches, over the economy as a whole the menace of inflation through excessive demand was lifted. With our monetary and other policies working, as I have tried to show, with the tide of economic forces, we had brought a new flexibility into our affairs. This 37 showed itself in many ways. We were able to get some better adjustments of our resources of manpower; more men went into the coal mines, and into the aircraft and other defence industries.
§ We were especially satisfied that, in this and other ways, employment was maintained far more successfully than some of our critics forecast. But we were on the watch all the time for the effect on production. It was inevitable that this should be affected, and as the Committee know, some drop did take place, due both to the shortage of steel and to the falling off in demand, particularly for textiles and other consumer goods. But the measures taken at the time of the last Budget—and hon. Members will remember our discussions on the textile depression—helped to bring about a recovery, by the end of the year, both in production and in areas of unemployment.
§ Much has still to be done, as I shall show, for production and exports; but great advances were made in the course of the year in bringing back a sense of reality into our economic affairs and in freeing everybody—manufacturers, traders and consumers alike—from restrictions and controls. We were able to return to private hands trading in a number of commodities—lead, zinc, tea, timber, fertilisers and others. In consultation with the farmers, we started on the process of bringing greater freedom to agriculture without upsetting—and, indeed, enhancing—the importance of the drive for greater production. We were able to get rid of price control over a large number of articles without seeing a runaway rise in prices. In fact the Index of Retail Prices has since last June kept remarkably steady. All this has both helped and been helped by that most intangible of all our assets—confidence in our policy and in the £ sterling.
§ Events during the year had their effect on the financial position of companies. Although experience in different industries varied, trading profits, taken as a whole, were less than in 1951. Yet companies in general did not have to finance rising costs of replacing stocks. Encouraged by our monetary policy—they were able to repay debt, particularly advances made by the banks. The total of bank advances and commercial bills dis- 38 counted, under the influence of our monetary policy, declined in the financial year as a whole by £254 million.