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Sterling Area (Gold And Dollar Reserves)

Volume 498: debated on Friday 4 April 1952

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With permission, Mr. Speaker, I should like to make a statement on the gold and dollar position during the past quarter.

As I announced in my Budget speech, the gold and dollar deficit of the sterling area amounted to 299 million dollars in January and 266 million dollars in February. In March it was 71 million dollars, making a total for the first quarter of 636 million dollars. This compares with a deficit of 940 million dollars in the fourth quarter of 1951, which included payment of the 176 million dollars in service of the United States and Canadian lines of credit.

Receipts under the European Recovery Programme were 1 million dollars during the first quarter. The gold and dollar reserves, therefore, fell by 635 million dollars, and at the 31st March stood at 1,700 million dollars. This has resulted in a further accumulation of sterling in the Exchange Equalisation Account and a sum of £300 million will be returned to the Exchequer in the near future. In opening my Budget, I stated that we could confidently rely upon a considerable reduction in the rate of loss during the following weeks. As the House will see from the figures I have quoted, the loss in March was greatly reduced.

In considering the figure of 71 million dollars for the deficit in March, the first thing that must be noted is that our E.P.U. settlement was 50 million dollars as against 94 million dollars in February. Secondly, there has been a concentration of special receipts and earnings in March of approximately 75 million dollars. These transactions include the special sale to us of gold by South Africa amounting to 28 million dollars. This is a contribution from South Africa towards meeting our present difficulties, and I express our warm thanks to the South African Government and Mr. Havenga in particular for the generosity and understanding which have led them to take this most helpful action.

Then we have received 10 million dollars from the United States under the agreement covering reimbursement to us of gold losses which we incur from the use of existing sterling balances by other members of the European Payments Union. Finally we received about 35 million dollars from special sales of rubber, tin and lead to the United States under our recent commodity agreements. A considerable part of all these receipts is, therefore, non-recurring in character.

It can be stated that our receipts, especially in the latter part of the month, benefited from a revival of confidence in sterling which has also manifested itself in the strengthening of the rates at which sterling is quoted in foreign exchange markets. Indeed towards the end of the month our reserves actually rose. But the fact remains that it is our current trade and payments position which is in the long run decisive. Rather than relaxing, we must redouble our efforts.

The White Paper on the Balance of Payments for the second half of 1951 will be presented before the House rises today, and copies will be available tomorrow morning.

11.8 a.m.

While the reduction in the deficit in March is, of course, very welcome so far as it goes, and while we must all hope that it is the prelude to a surplus in the next quarter, it is obvious, I think, from the Chancellor's statement, that the position is still serious and bound to give rise to anxiety.

I should, therefore, like to ask the right hon. Gentleman one or two questions. First, does he think that we have begun to get the benefit of the cuts in our own dollar imports which have been imposed—are these reflected in the figures he has given us? Second, how far have such cuts been made by the other countries in the sterling area, and shall we get, in the fairly near future, some benefit from action taken by them? Third, will he give an assurance that in discussions about the European Payments Union he will resist any proposals to convert that institution into something in the nature of the Gold Standard, which seems to be suggested in some quarters?

In view of the fact that there appears to be considerable losses through the so-called cheap sterling transactions, will the right hon. Gentleman consider tightening the exchange control machine in order to tackle that very difficult problem? Lastly, would the right hon. Gentleman tell us whether there is to be an Economic Survey, and if and when it is to be published?

In answer to the right hon. Gentleman, it is impossible to give the actual date when the benefits from the cuts may be seen, but there is no doubt that the effect of the very considerable cuts is now being felt and should be felt as the weeks and months go on. Cuts by other countries and the fact that the sterling area has to some extent reduced its imports from the non-sterling area, is already having an effect. We have evidence that this action is being taken by several countries concerned. I am sure that the right hon. Gentleman would not expect me to answer for the other countries. I can only indicate the trend.

With regard to the European Payments Union, I feel sure the sinister implication of the question by the right hon. Gentleman need not be inferred. I have just returned from a conference of O.E.E.C. in Paris, and, apart from the public statement made by myself and other finance Ministers, I am not aware of any development in that respect, beyond the desire to strengthen the convertible assets of the European Payments Union, and if necessary to call upon its members to play an even greater part in its operation.

On the question of losses through what might be described as the black market in sterling, certain steps have already been taken, as the right hon. Gentleman knows, to tighten up the exchange machine. We have considered the suggestion he has made, but up till now we do not think it would be quite as valid and important as he himself has thought. But I give continual attention to these matters, and if any suggestions can be made I shall be only too glad to consider them.

Lastly, with regard to the Economic Survey, I am hoping it will be published soon after our return from the Easter Recess. The right hon. Gentleman and his hon. Friends may comfort themselves in any case, because it looks as if the Economic Survey will be no later than the Budget would originally have been, and to that extent will be available at about the usual date.

Hon. Members on all sides of the House have had to submit to unpleasant decisions. The country as a whole has had to make sacrifices in the internal field and otherwise. I hope that hon. Members and the country in general will feel that the sacrifices have, at any rate, had some result.

I agree with the right hon. Gentleman that the position remains serious, and a great mistake would be made were it thought that we had reached safe ground. A great deal more extra effort will be needed. Let us all make that effort together and have regard to the public interest to the best of our ability.

May I ask the right hon. Gentleman if he thinks there is likely to be for a very long time to come a strong case for taking advantage of the waiver of interest clause in respect of the American and Canadian Loans?

The time for that is not yet, but the observation of the hon. Member will not escape the consideration of Her Majesty's Government.

With reference to the closing remarks of the right hon. Gentleman, may I ask whether he realises that we on this side of the House are perfectly prepared for any necessary sacrifices, providing they are fairly shared, but in our opinion what the right hon. Gentleman and his friends have done is to impose them unfairly on the poorest part of the population?