Britain To Slash Dollar imports By £100,000,000

Northern Advocate, 15 July 1949, Page 5

Britain To Slash Dollar imports By £100,000,000

LONDON, Thu uO a.m.). —■Britain will cut her dollar imports in 1949/50 by £100,000,000 rling because of the dollar gap. The Chancellor of the Exchequer (Sir Stafford Cripps) enounced this in the House of Commons today, and gave details of the cuts, when opening a vvo-way debate on Britain’s economic situation. Sir Stafford Cripps said he had worked on the assumption that Britain would not be able to afford more than 75 per cent of her 1948 dollar imports. The Chancellor said that the combined effects of the standstill agreement on dollar purchases and the reduced import programme should eventually produce “a marked reduction in the strain on Britain’s reserves”. . .

He hoped the finance conference of Commonwealth Ministers would result in some similar immediate action by the rest of the sterling area. The only two specific cuts announced by Sir Stafford were tobacco from $110,000,000 to $90,000,000 and sugar by $14,000,000 to June 30, 1950. Cuts would be necessary, he said, in imports of all important materials, but the effect of the cuts would vary from material to material. The principal materials affected would be timber, paper and pulp, nonferrous metals, steel and cotton. Sir Stafford said he had not, at this stage, decided on additional restrictions on petrol consumption. Petrol was a difficult problem, with wide international implications, but he reminded the House that oil and petroleum produce had a very large element of dollar expenditure. It would be impossible to import all the cotton from dollar areas hoped for, but as much would be imported as last year. The dollar cuts meant reducing the sugar ration from 10 to eight ounces a week. Sweets would go back on ration.

Britain in 1948. In physical production Britain had much more than recovered. The production of 1938 had been surpassed by one-quarter, productivity was up 10 per cent, and exports were still reaching record levels, which critics of a year earlier had claimed to be impossible. Until the eariler part of this year exports were making good progress in at least some of the hard-currency markets. Britain was still facing the full force of post-war competition and it was of vital importance that export prices should be able to meet the challenge of this keener competition for markets which had developed in the past few months, with the general shift from a sellers’ to a buyers’ market.

Evil Necessity'

Dealing with raw materials, Sir Stafford said there should be enough raw materials to sustain the present overall level of production. Turning to the immediate situation, Sir Stafford reiterated that there was no suggestion that sterling should be devalued. Announcing the dollar cuts, which he described as “a thoroughly evil necessity,” the Chancellor made these points: SUGAR—The reduction would save 150,000 tons, costing about $14,000,00 between now and the end bf the year. SWEETS —The ret uni to a ration of four ounces a week would save another 30,000 tops of sugar. TOBACCO—A $20,000,000 reduction still meant that Britain would spend substantially more dollars on tobacco than last year. The reduction in supplies to the public would probably not be more than 5 per cent. PETROL —Though he had not asked for any new restrictions on oil users, economy was essential. TIMBER Dollar imports would have to be f cut substantially, but the Government hoped to buy more timber from non-dollar areas. PAPER—Dollar imports of paper and pulp would be cut substantially, possibly by as much as one-third. Here again it was hoped to buy more from non-dollar sources.

Ironical Cheers

NON-FERROUS METALS— There would be a cut of some 25 per cent in dollar expenditure, but. because of changes in the sources of supply and alterations in price, consumption would be kept at about the existing level. The Conservatives cheered ironically when the Chancellor said it was more than ever necessary, with the cut in steel imports, to maintain the present high level of domestic steel production, “We hope," Sir Stafford continued, “that the spur of hope of nationalisation will continue to give the good results it has during the past 12 months.” Mr Churchill: You don’t believe one word of that. Sir Stafford said the interest of all sterling-area countries was the same —to preserve the stability of sterling and the strength of its reserves, “We must all sell all we can for dollars, even if it means some of the rest, including the United Kingdom, having less as a consequence,” he continued. "We must cut down our dollar expenditure. “These matters I am now discussing with my colleagues from the other Commonwealth countries.”

Recent Trends

Examining the position at the end of the second Quarter of this year, Sir Stafford said the figures for the first quarter of 10-1.0 had repeated the experience of the latter part of .1948, in that Britain had attained an overall balance of trade and the dollar deficiency had been reduced to proportions which were manageable with the help of the European Recovery Programme and the Canadian loan. Although there were signs of a fall in demand and in the level of activity, Britain was still experiencing a continuance,of tiie recovery trends which gave satisfaction to our friends and

Deep - Seated

The turnover from a sellers’ to a buyers’ market was a vitally important and somewhat rapid development in world economic affairs, and it had inevitably had its effect on Britain’s sterling economy, tending to slow down and, indeed, temporarily to reverse the progress she had been making towards a dollar balance. The difficulty of a balance between the dollar and sterling areas started to show itself before the First World War, and, apart from its wartime acceleration, was a deep-seated tendency with which, in any case, Britain would have had (o deal at some time Sir Stafford Crinps said the worsening of Britain's dollar position was not due' to uncalculated overspending. Even more important than the fall in exports to dollar markets had been the worsening of the position in the general dollar invisible account. As a result of all developments, the United Kingdom deficit with the dollar area, on present calculations, had come out at £160,000,000 or £30,000,000 worse than was forecast. Gold and dollar payments to nondollar countries were lower than estimated. It was hoped that the new intraEuropean payment scheme would ease Britain’s position In this respect. The decline in colonial earnings was much greater than expected. The larger part of the increase in fhe gold and dollar deficit in the first half of this year resulted from smaller receipts from the dollar a'rea.

Big Deficit

The sterling area was currently running a deficit with the dollar area at the rate of £600,000.000 a year or one and a half times the total of its gold reserves. Sir Stafford Cripps was cheered when he said: “No one doubts that that condition of affairs must be altered.” Outside North America, Britain’s exports were still running at a high level, and in June reached 145 per cent of the average monthly figure for 1936. The comparatively small decline in dollar earnings would not have been serious had there been ample reserves, nor would there have been the same need for the most urgent action. Sir Stafford Cripps said that, in view of the state of the reserves, immediate steps must be taken to arrest their decline. "We have to make a very large contribution . to world recovery, running into many hundreds of millions sterling, and we have incurred huge dollar loans and liabilities, which have been used to maintain the strength and stability of the sterling area us a whole,” he said.

Good Start

Sir Stafford said that search tor a long-term solution had started auspiciously with the United States and Canadian representatives. The search W3S for a stable relationship between sterling and dollar areas, without losing the maximum degree of Exchange of commodities and, at the same time, preserving to each country concerned the right to decide its own internal economic balance. Britain was anxious to make its contribution to such a solution, but it must be sought on the basis of continuing full employment in each country.

A really important result of the discussions with the United States Secretary of the Treasury <Mr Snyder) and the Canadian Finance Minister (Mr Abbott) was that all agreed that the problems could not be solved by any easy improvisation by any one country alone, and that it was imperative lo try to find a fundamental solution. Further high-level discussions in Washington early in September, already did not affect in any way Britain’s altitude to the Organisation of European Economic Cooperation.

It was hoped the recent discussions, and further discussion, would strengthen Britain's ability to carry out this cooperation.

Worse Coming

Mr Oliver Lyttelton (Con.) said the tendency of the Chancellor's, remarks was to make people believe that their sufferings as a result of the cuts were negligible. The people must be told that these cuts arc only the precursors of very much worse cuts to conic. The Chancellor had not made it clear that the dollar deficit meant less to eat and unemployment. Mr Clement Davies (the Liberal leaden, urged the freezing of war debts "which we incurred when bleeding ourselves white for every nation in the world." Mr Richard Stokes (Labour) said Britain should not default,, but he would ask India, Irak ond Egypt to cal, it a day for saving the Indians from the Japanese, Irak from Communism, and Egypt from Rommel. The President of the Board of Trade (Mr Harold Wilson) saicj the Government would not hesitate to discriminate openly in favour of firms that could increase their exports to dollar areas.