BRITAIN’S ECONOMY BLUE BOOK REVEALS SOME USEFUL FACTS

Press, Volume XC, Issue 27466, 28 September 1954, Page 12

BRITAIN’S ECONOMY BLUE BOOK REVEALS SOME USEFUL FACTS

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"LYNCEUS"

W the “Economist" J

(From the "Econami Once a year the British Government’s Blue Book on National Income and Expenditure sheds a searing light on some of the deepest recesses of the British economy. It comes in a flash and. like most flashes, it is all too often apt to be followed by a period of blindness. This document is the most detailed diagnosis of the British economy published by the Government’s statisticians. Largely because it is so detailed and throws such a bewildering mass of information at the public, it tends to receive scant attention on the date of its release and even scantier study thereafter. And yet, within the blue covers of this document is to be found much of the material with which to assess the economic and social structure of Britain and to make reasonable forecasts for the future of the British economy. The latest publication brings the figures up to the end of 1953. For that year it can paint a picture of astonishing buoyancy and expansion. All the evidence that has been available since the end of 1953 suggests that the optimistic tale which emerges from its 88 pages and 49 tables has been not merely continued, but even enhanced in the course of 1954. The broad outlines of the picture for 1953 are closely dominated by the fact that total production last year was some 4} per cent, higher than in 1952. On the basis of this increased production more was consumed at home, more was saved and invested and, to complete this tale of achievement, Great Britain secured a surplus of £225,000,000 in its balance of payments with the rest of the world. It is this last achievement which puts the seal of real success on the other aspects of the situation. It shows that the double attainment of higher consumption and capital investment was not obtained on the charity or credit of other nations. Equally important, it shows that it was not attended by an inflation of the currency. The higher standard of living that was enjoyed by the British people last year and the larger measure of resources that was canalised to productive investment, was not an attempt to extract more than a pint from a pint pot and was not, therefore, compensated by a further undermining of the value of money and a veiled impoverishment for all those holding claims to sterling. Production Else The gross national production last year rose from £13,738,000,000 to £14,796,000,000. Price changes were comparatively negligible, and this increase in monetary terms is a fair measure of the true rise in the national income. If we take 1948 as being equal to 100, we find the index of gross domestic production to be 110.4 for 1952 and 115 for 1953. When we turn to the sources of personal income, we find that the main expansion in the national income has taken place in wages. The total amount paid out in wages in 1952 was £5,430,000,000. In 1953 this had grown to £5,770,000,000. Over the same period the salary bill in Great Britain had risen from £2,760.000,000 to £2,900,000,000. These two items should be compared with the growth cf income from rent, dividends and interest, which went up between 1952 and 1953 from £1,395,000,000 to £1,491,000,000. These relative figures reveal the hollowness of some of the complaints that have recently been made about the growth in dividends and profits. They also show to all who are interested in this fact that the real bulk of purchasing power in Britain is now controlled by the wageearners. They dominate retail trade.

These indications that the trend towards a steadily increasing equalisation of income has been continued in Britain would not at first sight prepare

st" Intelligence Unit] one for an increase In the volume of savings. Nonetheless, such an increase is confirmed by the latest Blue Book, which shows that last year total savings in this country amounted to £870,000,000, an increase of £164.000,000 compared with 1952 and of over £600.000,000 compared with 1951. A larger proportion of personal incomes is being saved; and this can no doubt be regarded as part of the fruits of the increased confidence in sterling and greater stability of prices that have developed over the last two years. Doubts for the Future The point at which the revelations of the Blue Book begin to suggest a few doubts for the future is in their indication of the manner in which the capital formation in Britain was distributed last year. The gross capital formation amounted to £2,333,000,000. Of this only £550,000.000 went to the reequipment and development of manufacturing industry. The rest was largely devoted to public utilities and new housing. The total amount invested in new housing last year, at £631,000,000. considerably exceeded the investment in manufacturing industry. If account is taken of what might be called "welfare state” investment, namely, health services, education and the various public utilities that go band in hand with a housing boom, a picture emerges in which -the investment programme appears decidedly distorted for an economy which so largely depends on foreign trade and its ability to compete overseas. The general picture painted by the National Income Blue Book, and abundantly confirmed by economic developments in the present year, is one in which the clash between the buoyant domestic economy, with its full employment and rising standard of living on the one hand, and external solvency on the other, has not been altogether removed. It is true that so far the balance of payments for 1954 appears balanced and with a fair margin to spare. But it would be unwise to disregard the extent to which a perhaps temporary improvement in the terms of trade has created this surplus. Comparing the current figures with the average for 1950-51, it can be said that while we have increased our industrial production by 11 to 12 per cent, and the level of imports by 7 per cent., the volume of our exports has gone up by only 3 per cent Thia is a happy dispensation of the terms of trade which may not prove lasting. A time may come when far keener attention will have to be given to preventing the over-full employment which Britain now enjoys from militating against exports. This impact of full employment on export trade can be twofold. The first is that higher demand at home will compete directly with exports. The second is an indirect effect, namely, that if easy markets at home cause wages and profits to rise faster than productivity and in this way force up the price level, then exports may well fall in the highly competitive foreign markets of today This incompatibility can be smoothed over, provided output a man increases. And this focuses attention once again on the problem of canalising to productive industry a larger proportion of the savings generated in Britain. This is probably the first priority for Britain today. It is a problem of which the authorities are very much aware. The Chancellor of the Exchequer recently said: “In conditions of full employment there is no need to be afraid of investing too much or of producing too much. Nor is there any need to fear that modernisation and increasing efficiency will create unemployment. We must take the lone view and plan for expansion. Why should we not aim to double our standard of living in the next 20 years and still have our money as valuable then as now?” Though the Chancellor aims high, there is nothing in the National Income Blue Book or in th* developments that have occurred this ‘O suggest that it is a goal which cannot be attained. .•