§ It is against this background that I have to assess what should be the objectives of budgetary policy in 1961.
§ The first and obvious need is a marked improvement in our balance of payments. There is some prospect of a reduction in imports, especially as stocks of industrial materials are now at a high level. There is, unfortunately, little prospect of any improvement in the invisible account. Our commitments by way of grants to the Colonies and lending to underdeveloped and other countries are likely to continue to increase. It is clear that for the necessary improvements in our balance of 798 payments we must look mainly to the expansion of exports.
§ We expect the expansion of world trade to be resumed in the course of this year, and our export industries should find their opportunities improving. The President of the Board of Trade and I have, since last September, announced a number of measures designed to assist sales promotion overseas. We have also made a complete overhaul of the credit facilities available to our exporters. As a result a number of improvements have been made in the services offered by Export Credits Guarantee Department. Since last October we have been prepared to match foreign competition by guaranteeing suppliers' credits for longer periods than five years post-shipment, in cases where other Governments are offering similar facilities. We have also been prepared to give cover for the first five years where the credit given by the exporter is for a longer period still.
§ On 6th February the Bank of England announced special discounting arrangements to help the commercial banks to provide finance for exports. Last week the President of the Board of Trade announced three other major changes. The charges over almost the whole field for Export Credits Guarantee Department services have been reduced. In special cases there will now be a new facility for guaranteeing loans to overseas borrowers to finance exports of capital goods from this country, and small exporters are to be helped. These are important and far-reaching improvements.
§ Nevertheless, we have a long way to go in fostering the growth of our exports. We must ensure that opportunities are not lost because there is an overload of domestic demand on our productive resources. Nor can we afford to have our competitive power damaged by rising costs.
§ I will take this last point first. I have already described how, in the last twelve months, the danger of chronic cost inflation from which we suffered up to 1958 has reappeared. There is reason to fear that the cost-inflationary process will speed up further. That, I feel, is our principal menace at present, and one which it is impossible to exaggerate. Whether or not this danger develops will 799 depend not only on the policies of the Government, but also on decisions by leaders on both sides of industry with regard to wages, profit margins and prices.