CAB129-45 — Page 22

11657-Economic Survey Galley 3

INTRODUCTION

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1. This is the fifth in the series of annual Economic Surveys. When the first was published in February 1947, the prospect was extremely serious. The country was in the throes of an acute fuel crisis; production was further impeded by severe shortages of steel and other key materials and by transport bottlenecks arising mainly from deficiencies in rolling-stock; there was a large and rapidly widening gap in the overseas balance of payments, particu- larly in the dollar balance, and as a result the American and Canadian loans were fast draining away. The main theme of that Survey, and of the three that followed, was the need to keep inflation in check at home so that the United Kingdom could establish its balance of payments on a sound footing and achieve a reasonable standard of living that would not be dependent on external aid. The particular requirements each year were more and more efficient-production, more exports and the maintenance of a high level of investment; for these requirements to be met it was essential that claims for personal consumption should be limited, and the importance of wage and dividend restraint and increased savings has therefore been a constant theme of the Survey.

2. Since 1947, with the help of Marshali Aid, great progress has been made along the road marked out in the Survey, and by the end of 1950 it could fairly be claimed that the immediate task of post-war recovery was completed. Thanks largely to a steady rise in productivity, the volume of industrial production last year was some 30 per cent. greater than in 1947, and with the notable exception of coal, and to a lesser extent of generating capacity, the most serious of the shortages which affected industry four years ago had been successfully overcome. At the same time, the volume of exports had been raised to over 60 per cent. above the 1947 level, and as a result the United Kingdom managed in 1950 to attain a surplus of £189 million on its overseas balance of payments, in contrast to a deficit of £558 million in 1947. In assessing this change, however, it is important to note that the United Kingdom's stocks of food and raw materials were run down to a considerable extent during 1950 because world scarcities developed; if imports had come up to the levels intended, last year's surplus would have been substantially smaller. Nevertheless, a striking improvement did take place in the external balance, and this was accompanied by the transformation of the Sterling Area's gold and dollar position from a deficit of $4,131 million in 1947 to a surplus of $804 million in 1950.

3. The fruits of these achievements were to be seen last year in every aspect of the nation's economic life. Its productive equipment had been extended and modernised, in some industries almost beyond recognition. Personal consumption had been raised by 5 per cent. or so above the 1947 level, though supplies of meat and sugar both remained well below pre-war. shortage of housing was still acute, but the number of new homes provided since the war had risen to over a million. At the same time there had been a great extension of the social services.

The

4. These were in themselves substantial gains, but the real significance of the progress made since 1947 lay in the fact that at the end of 1950, for the first time since the war, the United Kingdom was fully solvent and fully independent of outside aid. The fundamental maladjustment in the balance of payments inherited from the war had in large measure been overcome, and the gold and dollar reserves stood at a higher level than at any time for more than ten years. This is not to say that the pre-war position was restored. The reserves were in real terms worth only about one-third of their value in 1938; no more than a start had been made in rebuilding the country's overseas assets which had been so heavily reduced to pay for the war; and there still remained a huge burden of overseas indebted- ness amounting at the end of 1950 to over £3,500 million (compared with £760 million in August 1938). None the less, the basic strength of the economy was such that the Government felt able to agree to the suspension of Marshall Aid from 1st January, 1951.

5. The economic recovery of the United Kingdom during the past four years bears eloquent testimony to the generosity of the American people and the constructive statesmanship of their leaders in launching the European Recovery Programme. Without the aid received under that programme and from other members of the Commonwealth, the United Kingdom would be in no position today to undertake an additional burden of rearmament and thus play its full part in the defence of the West. As it is, this task will ental heavy sacrifices and the postponement of many new comforts which might otherwise have resulted from the labours of recent years, but unhappily there appears to be no other way of safeguarding our security and our inde- pendence. The Soviet Government has for long pursued an aggressive and intransigent policy towards the free world, and its huge armies are a menace

Waga:220dr5are impregnable may we hope to be able to concentrat once

us all. Not until the Communist leaders have been convinced that the of 587

more on peaceful development.

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