§ Mr. Healey
I now turn to review the economic background of my Budget in more detail. A year ago I inherited an economy still overheated by the excessive reflation and monetary expansion of 1973. In my measures in March last year I was concerned to ensure some easing in the pressure of demand without permitting the international factors to which I have referred to inflict on us the waste of human and material resources involved in mass unemployment. At the same time I sought to ensure a shift in the structure of demand towards investment and exports.
In fact, fixed investment in manufacturing last year was 10 per cent. higher than in 1973, holding up well right to December. Exports of goods increased 7 per cent. in volume last year, and the latest figures have been very encouraging. We seem for some time now pretty well to have maintained our share of world trade in manufactures, and we may even have increased our share lately, since the volume of our exports has held up while world trade has actually fallen.
At the same time, the volume of our imports increased very little last year and has fallen since. But, as I have said, this physical shift of resources in favour of 278 our balance of payments was not sufficient to offset the enormous shift in the terms of trade against us.
The volume of personal consumption fell a little at the beginning of last year but recovered during the latter part and seems to have held up so far this year.
Thanks to the increases in demand, our gross domestic product was maintained, and for most of last year the rise in unemployment was fairly moderate. Though it has risen substantially in the last four or five months, in mid-March the percentage rate of unemployment for the United Kingdom, seasonally adjusted, was 3.2 per cent., which in contrast to most other industrialised countries was no higher than the rate of unemployment at the beginning of 1973. But we have nearly a quarter of a million workers on short time.
In the period ahead, the growth of our exports will turn critically on the recovery in world trade. Given the scale of the reflationary measures now taken in the United States and Germany, I think it sensible to work on the assumption that the recovery will be under way by around the turn of the year. Completion of the downward adjustment of stocks in the United States and the expansionary measures taken recently in France and Japan, though fairly modest, should help too.
During the first three quarters of 1974 the volume of total world imports probably grew modestly—perhaps by some 2½ per cent. In the fourth quarter an absolute decline seems to have set in, which seems likely to have continued until the present quarter. We may, however, be close to the bottom of the trough. If so, trade will begin to recover in the second half of this year. After the turn of the year. there is reason to hope that growth will be fairly rapid. By the standards of previous trade cycles, there would be nothing exceptional either about the timing of this upturn or about a rate of growth of 10–15 per cent., or even more, once it gets under way. The fastest growing element in world trade over this period will probably continue to be the imports of the oil-producer countries.