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Internal Economic Situation

Volume 463: debated on Wednesday 6 April 1949

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I now turn for a few moments to our internal economic situation. Despite a small decline in our working population, the further reduction in numbers on release leave and in the Armed Forces brought about an increase in the industrial population during 1948, of 300,000 more workers, nearly all men.

We expanded our production in all the critical sectors of our economy, though we did not reach our manpower targets in full. One of the reasons for the large increase in production was undoubtedly the general improvement in stocks of both materials and components. Though we may fairly hope that production will continue without any interruption through 1949, there are still a few critical sectors, such as coal, iron and steel, textiles, and agriculture, and these are dealt with in some detail in the Survey. We certainly cannot afford to relax our efforts in these, or any other, sectors of our economy during the coming year.

In 1947, the Committee will remember, we published a separate White Paper on investment for 1948; but this year the main features of the Investment Programme have been dealt with in an Appendix to the Economic Survey, which is really a more convenient method, as it brings all the essential figures together in one document. A considerable discrepancy is disclosed between the investment forecast for 1948 and our present estimate of the investment that actually took place. This needs a little explanation. The planning of investment is, of course, a most essential part of our general planning mechanism; but it is a new field, in which it is difficult to obtain exact or comprehensive statistics.

In the Survey for 1948 there was an under-estimate of certain types of investment, particularly in the fields of construction and installation. This underestimate accounts for about £205 million of the difference between the figure of £1,420 million for gross fixed investment given in the estimate and the present figure—at similar prices—of £1,850 million for the investment actually achieved. The balance was due to our deciding, once Marshall aid had become an accomplished fact, that we could allow more building, both of factories and houses, than we had expected, and also to the better supplies of steel, which enabled us to manufacture, and retain for capital investment, a greater volume of plant, machinery and vehicles than we had ever anticipated. The difference between the £1,850 million I have mentioned and the figure of about £2,000 million given in the current Economic Survey is accounted for by the rise in prices.

It is also estimated that total investment, as distinct from gross fixed investment, rose during the year, because of an increase in working stocks, which was a natural result of the rising production. This increase in total investment, above what we had estimated, should be regarded as a real achievement, since it took place without any further inflation, as I shall show in a moment, and was accompanied by a large increase in exports and the maintenance of our living standards. This unexpected contribution from an increase in production, greater than we had reckoned upon, is a most valuable addition to our future industrial strength and to the welfare of our people It is most satisfactory that we were, in fact, able to channel this extra effort into much needed investment and social improvements.

There is one important detail of our fixed investment that I must mention. Our forecast of last year as to electric generators has, unfortunately, turned out much too optimistic, partly as a result of previous lack of co-ordination in programming supplies, a defect which has now been overcome. The utmost efforts are being made to push forward with the construction of the power stations, but the best that can be done will inevitably leave us with a considerable shortage of generating power at peak load for some years to come. This will entail the maximum of economy in the use of electric power at times of peak load.

The investment plans for 1949 emphasise the need for further industrial expansion and modernisation, and for the necessary capital expenditure upon the programme of agricultural development. Investment in the social services as a whole should be very little less than last year, with a slight decline in the total cost of housing activities, partly due to the more rapid completion of permanent houses and partly to the successful completion of the temporary housing programme, and with an almost corresponding increase in capital investment on education, health services and water supply.

In total, fixed investment in 1949 is expected to show a small advance over 1948. This cannot be large, since the building and engineering industries are already fully employed, and the export programmes for 1949 call for some increase of engineering goods over the rates achieved in the last quarter of 1948. On the other hand, the additional investment in goods in process and stocks will certainly not be as large as last year, so that the total call on national resources for investment is likely to be about the same in 1949 as in 1948, with a tendency, if there is any change, to be rather less.

Our general investment policy must, of course, find its full reflection on the financial side; so I propose formally to invite the attention of the Capital Issues Committee to the principles set out in the Economic Survey, so that they may judge any proposals to raise money for new capital purposes according to these criteria.

The Survey brings out strongly the need for higher productivity in every industry and occupation. We cannot expect any further increase in our labour force. We must, therefore, find the extra resources to carry through all our manifold obligations and to lighten our own burdens from the higher productivity of our available man-power. In this respect 1948 was certainly a most encouraging year, but it was undoubtedly influenced in no small part, as I have said, by the better supplies which became available of both raw materials and components, and by the generally smoother flow of production which resulted.

We have estimated a further 2½ per cent. increase for 1949. This is a minimum, which must be attained, and I hope, may be exceeded. We have done our utmost, as a Government, to encourage both sides of industry to drive forward for greater productivity, and we have been greatly encouraged by what has been done by the leading organisations of both employers and workers. It is now for the individuals, management and workers, to follow the lead given them by their.own organisations, and to carry through with the work in their own units.