§ On the external side, we have had an exceptionally good year. The surplus on current account in the balance of payments in 1958 is estimated at £455 million, as hon. Members know. This is far higher than in any other year since the war. In fact, it may be the highest for many decades. We were greatly helped by the fall in world prices which enabled us to buy the same volume of imports as in 1957 more cheaply. The volume of exports held up well in the first half of the year, fell away after that, and then recovered somewhat in the last few months of the year. For the year as a whole exports were 3½ per cent. down, and that drop, of course, had a significant effect on our economy, and was partly responsible for the rise in unemployment during 1958; but the drop in exports was somewhat smaller than might have been expected at this time last year. Invisible transactions made their customary large and very welcome contribution to the surplus.
§ The Committee is well aware that a current surplus of a particular size is not by itself a sufficient criterion of our external financial position. The United Kingdom is a large capital exporting country, and it is only when our surplus is more than big enough to cover the net capital outflow that we are able to strengthen what I may call our monetary position. This external monetary position, that is, the balance between our monetary reserves and our monetary liabilities, is really the key figure. A 32 good current surplus is, of course, a prerequisite of strength—there is no question about that—but our position at any time cannot be judged simply by that any more than it can be by the movement of the reserves.
§ I said that in these respects 1958 was a very satisfactory year. My reason for saying that is that our current surplus last year was amply sufficient to pay for our investment abroad and a healthy balance was left over to improve our monetary position. On the one hand, the reserves rose by £284 million, and, on the other, the sterling holdings of other countries and international bodies, which are part of our liabilities, of course, rose by £54 million. So we can broadly say that our monetary position last year improved by over £200 million.
§ This improvement all took place in the first half of the year which is always the seasonally favourable period. Last year the seasonal factors were reinforced to some extent by the fact that our imports were costing less, while our export earnings had not then begun to suffer seriously from the reduced purchasing power of our customers. Many of our customers were still drawing down their reserves. In the second half of the year the surplus on current account fell to £128 million, which was offset by net investment abroad, and by the capital repayments on the North American loans. There was little change in the reserves during the second half of the year, while the sterling holdings of non-sterling countries continued to rise.
§ This position of approximate stability has, as far as I can judge, continued in the early months of the present year. Exports have been running slightly lower than a year ago while imports are a little higher. As the Committee will remember, I said in my Budget speech last year that I did not expect the extraordinarily favourable relation between the value of imports and exports that obtained then to last very long.
§ At the end of 1958 we abolished the distinction between American and transferable accounts and, by doing so, unified the transferable and official rates for sterling. At the same time, in concert with a number of other European countries who had taken similar measures, we brought into effect the new arrangements for monetary co-operation in 33 Europe embodied in the European Monetary Agreement. In spite of a succession of disturbing events abroad, external sterling has been strong and the rate has shown a marked improvement since this move was made. That, I think, is tangible evidence that the rest of the world welcomed as healthy and timely this move along the course which all parties have agreed to be the right one, although the party opposite differed from us as to timing.