I beg to move,
That this House welcomes the determination of Her Majesty's Government to maintain the progress so far made towards improving the balance of overseas payments and to take such further measures as may be necessary for the economic security of the country.
I made a statement in the House on 12th June, and I emphasised then that it was the fixed purpose of Her Majesty's Government to establish our economy on a secure basis and to put the balance of payments first in all our considerations Policy is and has been a continuous process, and I will tell hon. Members how our continuing policies have already achieved definite results. But I shall also stress the need for renewed and intensified effort.
This is not a time when a Chancellor of the Exchequer can announce changes in taxation or impose fresh charges, or in some way carry out his classical role of fleecing the taxpayer. Heaven forbid that we should have another Finance Bill—[HON. MEMBERS: "Hear, hear."]—and I feel that that is voiced in various quarters of the House. The Government have however, reviewed the position with the utmost sense of responsibility. We are satisfied that the steps we are taking now, those we have taken and those we propose, will steer our country through the very real anxieties of the future, not in a negative, fearful mood, but with courage, imagination and, above all, resolution.
A difficult time is not a time of crisis but a time of opportunity, and it is in this spirit that I shall tell the House of the steady and systematic manner in which we are holding our present position and of the radical approach we must make to the much longer and harder task of restoring once more our economic strength. This strength, as the House will realise, is vital if we are to maintain our standard of living and to restore, as we are gradually doing under the lead of my right hon. Friend the Foreign Secretary, whom we are so glad to see back with us again, our position of influence and leadership in the free world.
On assuming power, the Government were faced with the immediate task of averting a major balance of payments crisis. Unless we succeeded, all would be lost. We are now half-way through the calendar year and it is still too early for the figures for the first half-year to be firm, but it is clear that substantial progress has been made.
We had two objectives for the United Kingdom. The first related to our current balance with the non-sterling world, and the second to our current balance with the world as a whole. The first was to bring the United Kingdom into current balance with the non-sterling world in the second half of this year, after taking credit for defence aid from the United States.
The House will remember that we started front the position that in the second half of 1951, when U.S. aid was negligible, the United Kingdom current deficit with the non-sterling world was running at an annual rate of no less than £1,200 million. In the first six months of this year, I estimate that, after taking credit for defence aid, which amounted to about £75 million, our current deficit had been reduced to an annual rate of some £400 million—that is, one-third of what it was before.
Our second objective was to achieve in the latter half of this year at least a balance in the United Kingdom's accounts with the world as a whole, excluding United States aid. The position from which we started was that in the second half of 1951 our current deficit on this basis was running at an annual rate of £850 million a year. We now estimate that in the first quarter of 1952 this deficit was reduced to an annual rate of about £150 million, that is, to nearly one-sixth, and in the second quarter there has probably been a further significant improvement.
So far, so good; but what of the half year now beginning? There are, of course, as the House will realise, great uncertainties in looking ahead even for so short a time. Our surpluses and deficits are the small marginal differences between the vast totals of payments and earnings involved in our share of the world's trade. Very small changes in the world situation can alter the total of payments or earnings enough to make a very big difference to the comparatively small figure of a deficit or a surplus. But, bearing in mind this uncertainty, which may work either way, I will now examine our prospects in the current half year.
First, what has been the effect of our import cuts? In the third quarter of last year our imports from all sources—that is, on the c.i.f. basis shown in the Trade Returns—were at an annual rate of £4,250 million. In the fourth quarter the rate fell to £4,000 million. In the first quarter of this year it fell a little further to £3,950 million and in the second quarter, which has just ended, the annual rate was down to £3,700 million, a very substantial drop indeed. However, taking into account the export situation, we were not satisfied that we should get through without further reduction in our buying programmes for the second half of this year. I therefore had to insist that our forward purchases should be strictly limited, so that the rate of imports will continue to fall even more sharply during the next few months.
We have managed to keep up—in this general action we have taken —the general level of the basic rations, but this has been possible only by' a very drastic cut in other foods. Imports of unrationed foods, apart, of course, from wheat and flour, represent about one-third of our food and agricultural imports from all sources. In the second half of this year they will now be about 25 per cent. less than they were in the second half of 1951. This figure covers the whole range—canned meats, fruit and vegetables, confectionery and the like.
What about our policy on raw materials? We have consistently aimed in our policy on raw materials to maintain employment and production in industry and agriculture. But we have had to find room in our programme for the very large increase in imports of steel for the engineering industry. This has meant heavy savings elsewhere; for example, imports of paper and pulp for the remainder of this year will probably be less than half what they were in the latter part of 1951. We have already reduced our purchases of dollar tobacco very heavily. Recent decisions will mean that our imports of manufactured goods —other than machinery and defence supplies—will be about 40 per cent. less during the second half of this year than in the second half of 1951. For 1953 we have already taken the decision to limit future programmes of imports from the non-sterling world strictly to what we can afford.
Incidentally, let me make it clear that, taking 1952 as a whole, we expect our basic stocks in total of imported foodstuffs and raw materials to remain fairly steady. In the last six months they have actually increased. During the next six months they will fall, but probably by less than the amount of the rise in the first half year. I am sorry to tell the House that we have had to cut imports, but our action, combined with the immediate extra export earnings, which I shall describe, is calculated to make a decisive contribution to our achieving a balance during the next six months.
Now I want to talk about extra export earnings. The Government have decided that we must make more coal available for export. In the first 29 weeks of this year 2½ million more tons have been produced than in the same period of last year. On 12th July the total distributed stocks were 3¾ million tons higher, that is, at 16.9 million, than at the same time in 1951. At the same date there were 18,000 more men in the mines and 6,400 more were working at the face—which is the vital figure. This larger labour force should show increasing results in output as the year goes on. I hope that those who have toiled to produce these extra tons will realise how invaluable is their contribution to our recovery and how much they will be applauded at home and overseas.