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without endangering confidence in sterling and thus acceleratage 174 of 200.

suggests that new procedures are required to ensure that our non-sterling imports do not exceed their agreed programmed level and to introduce a quicker response than now exists to changes in our balance of payments situation.

28. A new procedure has therefore been devised, which we recommend should come into operation at the end of this year, by which the Ministry of Food, the Ministry of Materials and the Board of Trade (manufactured goods) will have six- monthly quotas of non-sterling import expenditure within which they will be required to work. (For the other parts of the import programme, the existing procedure will continue to apply.) Submissions will be made to Ministers at three- monthly intervals for the establishment and revision of these quotas. Within their quotas, Departments will have a greater freedom to arrange their purchases to the best effect; there will be tighter central control in total, but less in detail. It is hoped that this procedure will permit a more continuous and flexible development of imports than the present system, and should, in particular, avoid the need for sudden emergency crash action.

29. Under the new procedure, it is necessary to fix preliminary quotas for the first half of 1953 now for the three Departments which will be subject to these quotas. These would guide Departments in making forward commitments between now and the next programme review in October, when definite quotas would be fixed for the first half of 1953 and preliminary quotas fixed for the second half of 1953. This would be followed by further review of the quotas in January, and then again in April and so on.

30. It is desirable, in fixing the preliminary quotas, to take a cautious view of import capabilities, for in this context the bad consequences of over-optimism are much more damaging than those of pessimism. If the review in October shows that the preliminary quotas were fixed too low, they can be increased; if they have been fixed too high, excessive forward commitments will probably have been made. This indicates that a level of about £800 million for total non-sterling imports, compared with the programme of £895 million, might be appropriate for this purpose. A statistical calculation on the estimates in Table 5, designed to bring about United Kingdom current balance with the non-sterling world (after spreading seasonal and fortuitous elements) would indicate a level of £810-820 million. For the reasons indicated above, a slightly lower figure would be most suitable.

June 1952.

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