times greater than in 1949, will probably earn an even larger surplus this year. It will be much more difficult to keep up the level of the United Kingdom's dollar exports, but there can be no doubt of the importance, both to this country and to the Sterling Area as a whole, of maintaining the dollar export drive at full pressure.
109. A substantial deterioration from the favourable situation reached in 1950 is in any case virtually inevitable despite higher total earnings, particu- larly if the Sterling Area's essential import needs (including stockpiling) are to be met in full. The growth in the gold and dollar reserves must therefore be expected to slow down, and with the elimination of Marshall Aid and the assumption of the new burden of debt service on the dollar lines of credit the reserves may cease to grow or even decline somewhat. So long as all steps are taken to keep up the level of dollar exports, and so long as dollar expenditure is confined to essentials, this prospect need give no cause for alarm. The sacrifice of further improvement in the gold and dollar position is part of the price that has to be paid for greater security: The Sterling Area is in a stronger position than for many years to meet this sacrifice, which can still be kept within tolerable bounds by vigilance and effort.
CHAPTER IV
NATIONAL INCOME AND EXPENDITURE
Prospects of Real Income
110. The preceding chapters have described separately the changes likely in the main sectors of the economy in 1951. It is now time to draw these separate strands together and to consider the development of the economy as a whole, starting with the "real" changes that may occur between 1950 and 1951, that is, changes other than those due only to changes in prices. 111. There are many difficulties in attempting to estimate real changes in national output, for one half of national output consists in the supply of services rather than of goods, and in many cases these can hardly be measured by anything but the monetary value which is set upon them at the moment. The uncertainty of the forecasts hardly needs emphasising. But however arbitrary each individual figure may be, it is only by combining a number of such estimates that a general conclusion about the prospects for the standard of living can be reached. With these reservations, the following figures are put forward to indicate the changes that appear likely in the main classes of national expenditure between 1950 and 1951. They are in terms of 1950 prices.
Changes in Output and Expenditure in 1951
£ million
Increase in resources:
Increase in national output
་
Increase in imports for current consumption(1)
350 125
less increase in exports ...
-100
375
:
:
::
:
400
50
Increase in resources available for use at home
Required for:
Increase in expenditure by public authorities(1) Increase in domestic investment(1) ..
Consequence of consumption:
Fall in civilian consumption
(1) Excludes strategic stockpiling.
450
75
112. The figure of £350 million for extra output in 1951 assumes that sufficient materials will be available to permit industrial production to rise by 4 per cent. compared with 1950; it also makes allowance for an associated increase in transport and distribution services. The table further allows for a volume of exports £100 million (about 41 per cent.) above the average level of 1950 and nearly equal to the volume reached at the end of 1950; this is the sort of increase implied in the earlier discussion in Chappen all of theforts required to achieve the objective of an externalf 587 balance. The increase in the volume of imports shown between the two
40