§ Let me first take the main achievement. The last Budget was designed primarily to rectify the adverse balance of payments. The measure of our success can be judged by the figures, which speak for themselves. The United Kingdom balance of payments on current account changed from a deficit of £398 million in 1951 to a surplus in 1952 of no less than £291 million. The figure of £291 million surely comes very near the figure of £300 million which, when I announced it to the O.E.E.C. in Paris as the surplus which we ought to aim at, year in and year out, was regarded by the cynics as stargazing.
§ Yet we have almost reached that figure. But, as I shall show, I am not content. We must keep up the progress. We must not forget that last year we were helped by United States defence aid. We received £121 million and we are grateful for it. I am sure the Committee would like to join with me in expressing that gratitude and acknowledging that it makes a big difference. Even if defence aid is excluded, the improvement between the calendar years was of an order of which the Committee can be proud—£572 million between 1951 and 1952.
§ Now, taking the financial years, in my last Budget speech I said that we must work for an improvement of £600 million between the two years. I am quite confident that we have, in fact, done better than that. With this has come a most welcome improvement in the state of our 34 gold and dollar reserves, from the desperately low level they had reached. The drain on them ceased soon after the last Budget. Throughout the summer, they held steady. In the last quarter of 1952, they rose significantly; yet in that quarter we made the payments due on the United States and Canadian loans. The rise has continued this year; at the end of last month the reserves stood at £774 million, an improvement over the 12 months of £167 million. These results represent an achievement of which the Committee and the country—and indeed the whole of the sterling area—can be justly proud.
§ Though there is still much to do, we have made a good start which it will take all the courage and confidence we can muster to maintain. Of course, there were events outside which aided and supported the benign influences of Government policy. Our economy, like our island climate, is always exposed to changes in the world economic weather, which are, to a large extent, outside our control. Last year, changes abroad, including the movement in our favour of the terms of trade, were particularly striking. Here things turned out better than our expectations. At any rate, events have shown that the general course we set was right. By our internal policies, we added that vital element—confidence in sterling—without which all our other efforts would certainly have been frustrated. I shall give my reasons for this in the remainder of this preliminary review.
§ Now for a word on what happened in the field of our external problems. Hon. Members will remember that we first set about reducing our bill for imports. Part of this we sought to do by cutting down their volume; the rest we expected to achieve as a result of a fall in their price. In the event, the change in the terms of trade—the fall in the price of our imports compared with the price of our exports—was greater than we expected. As a result, owing both to our stringent cuts and to reduced costs, our import bill was £569 million less in 1952 than in 1951.
§ At the same time, however, the cost of our military commitments overseas increased, while our income from overseas enterprises declined. Chiefly because of this, our invisible earnings declined during the year by £85 million, instead of rising as we had hoped.35
§ The remaining part of our task was to increase our earnings from exports. I put the likely export difficulties plainly before the Committee last year. I warned them of the restrictions which our partners in the sterling Commonwealth had to impose in their own and the common interest; of the falling-off in world demands for consumer goods, especially textiles; of the return of keen competition in world markets; and of the conflicting claims of home investment and a rising defence programme for the goods most in demand overseas, namely, the products of our metal-using industries.
§ As I told the Committee last year, this called for a major diversion of effort, so I sought to frame last year's Budget and the new monetary and credit policy in order to shape the proper course, not only to improve the balance of payments, but also to achieve our other objective—the checking of internal inflation.