WHITE PAPERS ECONOMIC SURVEY A REVEALING DOCUMENT

Press, Volume XCI, Issue 27637, 19 April 1955, Page 12

WHITE PAPERS ECONOMIC SURVEY A REVEALING DOCUMENT

[Bv

LYNCEUS,

of the "Economist”!

{From the Economist Intelligence Unit]

London, April s.—This is the season of flood in the publication of British Government White Papers. Figures on tlie national income, the balance of payments, the results of the financial year, production and investment, are cascading on us, though this year the strike which has paralysed the national newspapers is withholding them from the wide general public which they usually have. The most important of these publications is the Economic Survey, the document in which the Government assembles once a year all the data bearing on the economic situation and gives its view on the prospect. The nature of this document has changed considerably since it first made its appearance in the immediate post-war period. At first it bore the character of a plan; it flowed in direct succession from the planning of the rigidly-con-trolled economy of a state of total war. It set specific targets to be attained in this and that industry as well as targets of consumption to be reached by the people of Britain. It was soon found that even in the controlled economy of the immediate postwar year, reality paid little heed to the targets of the Economic Survey; and little by little that document became less a plan than a general evaluation of the position. The shift has, of course, been accelerated since the Conservatives came to power. The survey has, however, lost none of its importance from this change of character. Normally, it appears a short while before the Budget. It sets the general economic framework into which not only the Budget picture, but also the whole economic policy of the Government has to be set. It usually provides a hint of what kind of Budget we shall get.

This latest Economic Survey is in some respects the most interesting, and certainly the most varied, of the series of these reports. What makes it chiefly interesting is the contrast that it offers between the really cheerful and buoyant situation at home and the signs of strain and difficulty in the British balance of payments, which became apparent towards the end of last year, which became worse in the early part of this year, and which has called for fairly severe remedial measures.

An Outstanding Year As to the buoyancy and the appearance of prosperity in the situation at home, there can be absolutely no doubt. For Britain, 1954 was an exceptionally successful year. The basic element in that success was the substantial rise in production. For most industries it averaged 6$ per cent. But it was not only total production which went up. Equally significant was the improvement in productivity, in the amount of work done a man in a year. For the whole of British industry this productivity appears to have risen by about 4 per cent., a figure which few other countries in the world can have matched last year. In Britain, however, this rising production was certainly matched, and perhaps more than matched, by the current increase in purchasing power. Personal incomes last year rose by nearly £1,000,000,000 to £14.408.000,000; and the lion’s share of this increase went to wages and salaries, which increased by 7 J per cent. This was a substantial rise, even allowing for the fact that taxation reduced these gross figures by a considerable amount. But the important point to note is that in 1954, as compared with 1953, personal sayings failed to increase. They were still quite high, but no greater last year than in the previous year. It follows, therefore, that the whole of the additional net income was spent. It

went into consumption mainly of food and household goods and such thina as private motoring. In fact, the expenditure on cars and private motoring last year was about 20 per cent greater than in the previous year a lot of additional money went into more and better food than ever before. The average Briton’s intake last vear was 3120 calories a day, a record figure And what is more important is that quality improved in contrast with quantity. Britain ate more meat, fats sugar and a good deal less potatoes and bread. If a sign of increased standard of living is needed, it will surely be found in this change of diet. Increased Investment

But apart from higher consumption investment also increased. Personal savings may have remained unchanged but other sources of savings, those from company profits for example flowed more abundantly into invest rnent, which last year went up by about 5 per cent. Most of this went into new plant, factories and machinery for British industry. There is little to grumble about concerning the rate at which British industry has recently been re-equipping and modernising itself.

So far, so good; indeed, so far too good, because there is strong reason to believe that the buoyancy of this domestic market has. in recent months, become excessive. The demand, both for consumption goods and for capital goods at home, has been such that the domestic market has begun to take in too much by way of imports and has also consumed some of the resources that should have gone to the export market. The evidence of this deteriora. tion in the balance of payments is luridly shown in the Economic Sur vey. If we ignore, as we should the aid received from the United States we find that in the first half of last year there was a surplus of £148,000,000, while in the second half oi the year this had become » deficit of £38,000,000. Even more drastic was the worsening in the balance of payments of the whol. sterling area with the rest of th; world, where a surplus of £l7i 000 nm in the first half of the year was tuS into a deficit of £164.000,000 in thi second half. We imported too much In addition, we found that we had to pay rather more on average for our imports, whereas the prices of our ex' ports remained virtually steady . steadiness which was largely due to the fact that our exports have had to meet mcreased competition from Gen many, Japan and other countries There is really no inherent contradiction between this picture of a buoyant economy at home and the strain on the balance of payment. Th^ y l ar^, the rever se sides of the same medal. The steps that have been taken to deal with the situation, the increase m bank rate and the restriction of credit should be successful, provided (and this is an all-important condition) the good they do is not undone by excessive wage increases and other inflationary developments. These remedial measures, however are not to be taken as a sign that Britain is back-pedalling in its econnmir policy. On the contrary, the final sections of the Economic Survey strike a highly expansionist, confident and almost exuberant note. One can almost draw a line through the survey: where the peroration begins, the civil servants leave off and the politicians take ?u e r this P erora *ion it is stressed tnat the way to overcome our particular difficulties is by more production and by maintaining full employment. These closing paragraphs appear to be a harbinger of an incentive P ud * et ° n April 19. They may also be the first shot by the Conservative Party in the electoral battle which seems to be approaching so fast