§ I turn now to the way in which I see our external position developing. My assessment is based on the assumption that, following the Washington conference and. the measures I shall be announcing later in my speech, exchange markets will quieten down over the coming weeks. The Washington Conference not only relieves us of our immediate anxieties, but provides a good foundation for further new developments in the international monetary system. In his state 254 ment after the recent Washington meeting, the Managing Director of the International Monetary Fund has emphasised the importance of bringing the scheme for special drawing rights into force with the least possible delay. This in itself will mark a major advance in the working of the international monetary system. Its adoption will show that there are ways of achieving an orderly expansion of world liquidity to meet world needs and that we do not therefore have to rely entirely on the old haphazard methods, the disadvantages of which have been amply demonstrated in recent weeks. I look forward to attending a Ministerial meeting of the Group of Ten at Stockholm in 10 days' time and I hope that, as a result of these and subsequent discussions, we shall be in a position to bring in a Bill later on in this session to enable us to play our part in this scheme.
I need not add now to the statement which I made to the House yesterday on the results of the Washington Conference. But I must come back to the point that, though this crisis has not been basically about sterling as such, or about the United Kingdom economy it has once again demonstrated the importance of sterling in the international monetary system. The international use of sterling as a reserve and trading currency, while helping us sometimes, imposes heavy burdens on us at others. These are not burdens we can just shuffle off. We must discharge our obligations. The facilities now available to back sterling show that we have ample resources behind us. In the longer run, however, it must be our objective to ensure that the rôle of sterling in the international monetary system is consistent with our capacity to maintain that rôle. We can make progress only in co-operation with other countries and with international organisations. This takes time, but I must ask those who urge swifter and more dramatic courses upon us to recognise the importance of bringing about changes in a way which will not prejudice the interests of holders of sterling and will strengthen rather than weaken the world monetary system.
§ My Budget is designed to make a major contribution to the stability and sane development of the international financial system; it will create the conditions at home for a substantial and lasting surplus 255 in the United Kingdom balance of payments. This task is inescapably ours, and ours alone. Similarly, the United States authorities have shown that they are determined to deal with their own balance of payments problems—which are different in scale and nature from ours. I am confident that both of us will succeed and that by doing so we will give that firmness to the two reserve currencies which is the necessary foundation on which the international trading community must build.
§ I now come to my detailed assessment of the external position. The inevitability of devaluation last November is shown by the balance of payments figures for the fourth quarter, which show an identified deficit of about £350 million, making the deficit for 1967 as a whole £540 million. Probably more than half of this was due to special factors such as the closure of the Suez Canal and the dock strikes. But there was a continuing underlying deficit, which must be to some extent attributable to a lack of competitive strength. We have not only to eliminate this deficit and pay the cost of devaluation in less favourable terms of trade but also produce a continuing balance of payments surplus large enough to enable us to repay our debts, to rebuild our reserves and give ourselves some margin in hand to tide us over special factors and short-term fluctuations in our future fortunes. This is not just a matter of achieving a surplus this year or next; the task before us is so to reorient the economy as to enable us to achieve as soon as possible and to sustain a balance of payments surplus of the order of £500 million a year.