Now this fact must be taken in conjunction with the other fact I have just emphasised, that we were already living up to our international income when we entered the present war. We cannot afford this time to accept a further loss of export trade, and continue to import as much as before. On the contmary, if we are to avoid a drastic curtailment in our volume of imports, such as might threaten our standard of life and gravely prejudice our prospects of active employment, it will be indispensable for us to increase our exports, and recapture some of the trade which we lost in the inter-war years. That will be a matter of life and death to us, for it is impossible for any country to live indefinitely beyond its international income.
In that connection let me say a word on another aspect of our external financial problem. It is vital to maintain confidence in the value of sterling. I spoke a moment ago of the debts we are incurring to many other countries in order to finance our war purchases. A large part of that debt takes the form of what are called "sterling balances," which are very much like deposit accounts which other countries are content to hold in London. It is a very convenient form of war-time borrowing, and it has been rendered possible by the confidence which sterling enjoys as a reliable international currency. It would add greatly to oar difficulties if anything were to happen to disturb that confidence and cause countries to prefer some other asset to a sterling balance. In practice, I have no doubt that confidence in sterling will be maintained as a consequence both of our performance in the war and of the steadiness of our policy both to-day and in the post-war years.
Nor will the demands of the post-war period end with high taxation. We are not likely, indeed, to be able to meet our expenditure entirely out of revenue at first. We shall have to borrow. If we are to maintain the soundness of our present financial policy and to achieve borrowing without inflationary loss of values, saving will, also, have to continue on a high level. The need for saving will be reinforced by a shortage of consumption goods until industry has changed over from war to peace conditions. Unless we consistently follow a policy which will keep purchasing power within reasonable bounds, we shall face a runaway rise in prices, a feverish boom and then disillusion and bitterness. It would be no good to rely solely on Government controls to prevent that happening. Controls must start with self-control. If self-control is weakened, Government controls will be fighting a long battle against every form of selfishness in every section of the community.
But though we cannot expect, as individuals, an immediate easing of the burden of taxation when hostilities cease, there are vital preparations for reconstruction which we can make in the field of taxation, as in other fields. We must prepare such measures as we can devise to give industrial enterprise a fair chance to meet the challenge which the future holds for all of us. Industry is entitled to know where it stands, and there is, in my judgment, a very definite contribution which taxation policy can, and should, make to the problems of reconstruction.