SOLEMN WARNING

Otago Daily Times, Issue 26693, 12 February 1948, Page 7

SOLEMN WARNING

Britain’s Adverse Balances GAP REACHES MENACING PROPORTIONS Revelations in White Paper New Zealand Press Association—Copyright Rec. 9 p.m. LONDON, Feb. 11. Editorials in all morning newspapers emphasise the gravity of the position revealed in the White Paper on Britain’s balance of payments. Typical comments are the Daily Mail: “It shows that Britain is facing bankruptcy in 1948. It is a most solemn warning to the nation that we are in a bad way.” The Daily Telegraph says: “ Our reserves will last another six months. American aid may then come to the rescue for a few years but after that, and during that time, we must tap our real reserves, namely the enterprise, resilience, good sense and skill of our people. Otherwise calamity stares us in the face.” The Daily Express says: “The White Paper’s grim figures are acall to duty; to toil, and to self-discipline on the part of every citizen. They also -exact from the Government an immediate obligation to reexamine its policies and to make changes.” “ The nation must recapture the spirit of steely resolution, of allout effort, by which it saved itself and human freedom in the grimmest phases of war. Nothing less will suffice,” says the Daily Herald. The Finacial Times says: “ Sir Stafford Cripps is anxious that the 1947 lesson should be learned by the public but the public will want to know whether the Government is itself aware of the vast forces with which "the country and sterling area as a whole now has to contend. One thing is certain namely, a repetition of 1947 would simply mean economic bankruptcy.”

In a statement to a press conference, following the issuing of the White Paper on Britain’s economic position, the Chancellor of the Exchequer, Sir Stafford Cripps. said the ggp in 1947 between overseas expenditure and what Britain was currently earning to meet that expenditure had reached menacing proportions. The gap must be closed by Britain’s own effort, supported by Marshall Plan aid. If Britain failed the gap would close itself through the drying up of the essential supplies of food and raw materials for which the country would have no means of paying. “ Britain, in 1948, must either export or earn enough, to pay for food and raw materials or do without,” said Sir Stafford. Price was becoming an increasingly decisive factor in sales, and if rising prices kept Britain out of the markets, then her food supplies and industrial employment would be jeopardised. Britain’s adverse balance of payments in 1947 was £675,000,000, compared with £380,000,000 in 1946, said the White Paper which the Chancellor issued yesterday afternoon. The net drain of United Kingdom gold and dollar reserves in 1947 was £1.023,000,000. This drain on gold and dollar reserves was made up by a decrease of £151,000,000 in gold and dollar holdings; £707,000,000 drawings on United States credit; £ 105,000,000 drawings on Canadian credit; and £60,000,000 from the International Monetary Fund. Provisional figures revealed that Britain’s total payments for 1947 amounted to £2,105,000,000 against receipts for £1.430,000,000. The worsening of the balance of payments in 1947 was primarily in Britain's relations with the western hemisphere. Britain had a current account surplus with the sterling area of £80,000,000, but a deficit with the western hemisphere of £680,000,000. The deficit with the rest of the world totalled £75,000,000. At the end of 1947 Britain’s reserve holdings totalled £512,000,000. The White Paper shows that external assets, particularly in the sterling areas, increased by £206,000,000 in 1947. The Chancellor told the. press conference that the decline in Britain's investment income had been made more onerous through haying met interest charges in war-time borrowing of over £3,500,000,000, combined, particularly in 1947, with heavy transfers of profits by foreign firms operating in Great Britain. ‘‘The strain on our resources is even greater than these figures suggest,” Sir Stafford said. Britain’s net income from investments in 1947 was £51.000,000, which was a decline of £24.000 000 compared with 1946, and a decline of £124,000,000 compared with 1938. Other receipts of invisible exports showed a debit of £20,000,000 in 1947, compared frith a credit of £70,000.000 in 1946. Sir Stafford said abnormal woild conditions made Britain’s task of remedying her external position particularly difficult, but there was no alternative and a supreme effort must be made in 1948. As evidence of the way prices in 1947 had moved against Britain, the Chancellor said that while the volume of exports’ had increased by 10 per cent, and the volume of imports by little more, the increase in value of exports was half the increased cost of imports. “The pressure of the world’s demand for food and raw materials created this position, and since Britain’s dependence on imported food and raw materials is so great we must face the fact that a greater effort is needed to obtain the same amount of essential supplies,” he said.

Discussing 1948 prospects for invisible trade, Sir Stafford said the net shipping earnings should improve on their £17,000,000 in 1947, but no improvement on the investment position could be expected. The heavy drain for relief of Germany should be reduced to about one-tenth of the 1947 figure, but making allowances for everything, Britain would still be some distance from striking a balance on her invisible account. The Chancellor said the United Kingdom’s deficit with the dollar area in 1947 was £626,000,000, compared with £340,000,000 in 1946. the rest of the sterling area deficit was £266,000,000, compared with £38,000,000 in 1946. The net drain on reserves was - £1,023,000.000, compared with £266,000,000 in 1946. Answering questions, Sir Stafford said Britain obviously still wanted time in which to accomplish her eventual solution, and that time could be got only from such help as the Marshall Plan. It would be overoptimistic to expect that merely by increasing exports Britain could overcome her difficulties. Reuter’s political correspondent says the annual survey of the whole United Kingdom economic field will be published within the next three weeks.

It is regarded as significant that Sir Stafford decided not to wait for the inclusion of the balance of payments figures in the general survey, but to tell the blunt facts now. ’ At the present rate of drain on gold and dollar reserves—about £50,000,000 a month—Britain and the sterling area will, by about the middle of June, reach a positioh where they can no longer meet external engagements, says The Times in a leading article on the White Paper. The drain on reserves and the trade deficit are running higher than the Government expected a few months ago. The fine margin safety then estimated has disappeared. says The Times. The question arises whether Marshall aid will suffice without a bigger improvement in the adverse balance than can yet be foreseen. The figures in the White Paper tell a sorry tale, the gravity of which should be unmistakable. The country during 1947 was told it was living on credit. It has now reached the second and worse stage of living on its last reserves. Their duration must be reckoned in months, even with Marshall aid, unless a great change occurs.