R ;i'r, . >; R  EQT   I IC T E D
R e p o r t  N o. EA- 1 17
This report was prepared for use within the Bank. It may not be published
nor may it be quoted as representing the Bank's views. The Bank accepts no
responsibility for the accuracy or completeness of the contents of the report.
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
ECONOMIC POSITION AND PROSPECTS
OF THE
UNITED KINGDOM
February ZO, 1961
Department of Operations
Europe, Africa and Australasia



CURRENCY EQUIVALENTS
Ii     = U.S. $2.80
U.S. $1 = L.357



TABLE OF CONiTENTS
Page No.
BASIC DATA
CHARTS
SUMMARY AND CONCLUSIONS   ...........................   i
I. INTRODUCTION .....*.* ***...........*.   *  *       .    1
II, DEVELOPMENTS SINCE 1955 *........................        1
III. PRODUCTION, EYPLOYiENT AND INVESTMENT .,...........   5
IV. WAGES AND INDUSTRIAL RELATIONS ........................... O11
V. PUBLIC FINANCE AND MONETARY POLICY  ..............  15
VI. EXTERNAL TRADE AND PAYMENTS ......................  21
Export Trade ..........         ... ..           .  24
Sterling Area . .* ...** *.....*............ .  27
Economic Relations with Western Europe   ....   28
STAT IST ICAL APPENDIK



TABLE OF CONTENTS
Page No.
BASIC DATA
CHARTS
SU IiARY AND CONCLUSIONS .................. .   . .....**
I. INTRODUCTION .......    1.
II. DEVELOPMENTS SINCE 1955 *....................        1
III. PRODUCTION, ENlPLOYvENT AND INVESTMENT ...........   5
IV. WAGES AND INDUSTRIAL RELATIONS ...O............... 11
V. PUBLIC FINANCE AND MONETARY POLICY  .*.e..e***..9  15
VI. EXTERNAL TRADE AND PAYMENTS ,....,.................  21
Export Trade .. ........ ................. . ... , 24
Sterling Area  . ..*.*.*...*.,    .. * . .. 27
Economic Relations with W4estern Europe ......  28
STAT ISTICAL APPENDIX



BASIC DATA
United Kingdom
Area:   94,000 square miles
Ponulation: 52 million
Gross National Product (1959): i20.9 billion (<S58.5 billion)
Per Capita        £403           (U1,126)
Domestic Exports as Percentape of Gross National Product. 1959: 16%
Foreign Trade, 1959 (Percent of total)
Commoditv Composition
Exports       Imports
Food, drink and tobacco                               6            38
Basic materials                                       4            23
Mineral fuels and lubricants                          3            12
Manufactures:
Fiachinery & e:Lectrical goods    24)
Road vehicles & parts            12)
Other metals & engineering         )
products                       22)              85             26
Chemicals                         9)
Textiles                          7)
Other manufactures               11)
Other                                                 2             1
100           100
Geo7ranhic Distribution
Exports        Imports
Sterling area                                        40            36
Western Europe                                       28             28
Nortn America                                        17            17
Other                                                15            19
100           100
Reserves of Gold and Convertible CurrenciesP 31 Dec  1960:  '',3,231 million.
External Public Debt. 31 December 196a   45,737 million.



LIST OF CHARTS
1 External Deb-t and Debt Service as Percent of
Current Foreign Exchange Earnings
2. Indices of Output
3. Gross Fixed Investment; Financing Investment
4. Unemployment
5. M'loney Supply, Wage Rates and Cost of Living
6,  Volume of Trade; Terms of Trade
7. Balance of Payments
8. Exports of Manufactures; External Reserves
9. Regional Balance of Payments on Current Accowut
10. Sterling Balances



UNITED KINGDOM
EXTERNAL PUBLIC DEBT*
(MILLIONS OF U.S. DOLLAR EQUIVALENTS)
600                  1                                                            600
PAYMENTS EACH YEAR
500                                                                               500
TOTAL
400                                                                               400
300                             I'300
200                                                                               200
< AMORTIZATION
I 00/                                                                .° .., ... ,.._.______ .................. .,, 1 0 
I '| t!  ',.......... ,  ,INTEREST       
I 00
O~
8,000                                                                              8,OOC
AMOUNT OUTSTANDING JANUARY I OF EACH YEAR
6,000                                                                               6,OOC
4,000                                                                               4,OOC
2,000                                                                               2,00C
0                                                                              0Io  I  I  I    I
1950           1955            1960            1965            1970        1974
DEBT SERVICE AS PERCENT OF CURRENT FOREIGN
EXCHANGE EARNINGS
20%                                                                                20%
DOLLAR INTEREST AND AMORTIZATION AS
,APERCENT OF CURRENT DOLLAR EARNINGS
1 5%                                            (U.S.AND CAN.)                    1 5%
10%                           /10%
-4      ~~5%                                                                             -5%
_--_, _ -    / ,.<I TOTAL INTEREST AND AMORTIZATION AS
- _ _ _        - _ _ _       - PERCENT OF TOTAL CURRENT EARNINGS
0                    I                                                         0
1950           1955          f1960             1965           1970         1974
(Prov.)
* Excludes $250rmillion Export-Import Bank credit 41/2%,1956-1965, not yet utilized.
I /4/61
1745                                                         IBRD-Economic Staff



UNITED KINGDOM
INDICES OF OUTPUT (AT 1954 FACTOR COST)
(1948 - OO)
200        R'III200
YEAR LY
180                                                                                             O80
GAS,ELECTRICITY, AND WATER           /
160                                                                                             160
V~~~ MNUFACTURING              el
140                                                                                             140
_<  e/  oV /  tGR05S DOMESTIC OUTPUT 
i120                                              /,  /_.........^.*.....1920
,20  <4                                             qt00  TRANSPORTATION AND
H ,,,............................ -- AGRICULTURE    COMMUNICATIONS
/.----_ ; . ~~~~~~~MINING AND\
I O1 _. _ *-*-*-* _                                     QUARRYINI IG                            1 l00
80 + 0 ~~~PUBLIC ADMN ISTRATION AND DEFENSE  .;
8 0                                                                                            8 0
60                                                                                            60
1948           1950           1952           1954           1956           1958           1960
1/4/61
1746                                                                       IBRD -Economic Staff



UNITED KINGDOM
GROSS FIXED INVESTMENT
(MILLIONS OFe AT 1954 PRICES)
1200              I             I     IIII10
YEARLY
PLANT AND MACHINERY
1000 C-00
800            /       _   _                           tt                            0800
/  _ "    OTHER NEW BUILDINGS AND WORKS
600                                          .,0 -'_600
~.0
// .. -- ,.¢ .               NEW DWELLINGS
400  .. ............................                                                  400
.    ~~VEHICLES,SHIPS AND AIRCRAFT
200                                                                                   200
0                    I                                                             0
1948         1950         1952          1954         1956          1958         1960
(6 months at
FINANCING OF INVESTMENT                                                      annual rate)
(BILLIONS OF £ AT CURRENT PRICES)
5YEARLY 
S{      I       _  _ _ _ _   _ _ _  _  _                 l_ _l_ _5
TOTAL GROSS INVESTMENT
41                                                                                  _ 4
O                        E3
2
1948         1950         1952          1954         1956          1958          1960
1/4/61                                                              IBRD-Economic Staff



UNITED KINGDOM
UNEMPLOYMENT AS PERCENT OF INSURED WORKERS
(PERCENT)
2.5                                                                                   2           .5
YEARLY
2.0                                                                                   2.0
1.5                                                                                   1.5
1.0                                  III                                              .
1948  1949  1950  1951  1952  1953   1954  1955  1956  1957  1958  1959   1960
(9 Mo. Av.)
UNEMPLOYMENT AND VACANCIES
(THOUSANDS OF PERSONS)
600  YEARY                                                                             600
500                                   UNEMPLOYMENT (Monthly averages)                  500
400                                                                                    400
(9 Mo. Av.)
N.                                     ~~~~~~~~~~~~(Sept.) /
300
300   <\\   i             //t>~~~~~~~~X                 </ ,            300
0VACANCIES (End of year)                          200
100               _                                                                    100
0                                                                                  lo
1948  1949  1950  1951   1952  1953  1954  1955   1956  1957  1958  1959  1960
1/4/61
1748                                                               lBRD- Economic Staff



UNITED KINGDOM
MONEY SUPPLY, COST OF LIVING, AND EARNINGS OF OPERATIVES
(INDEX, 1948=100)
220  JUNE OF EAC'H YEAR
200                                                                        /    200
EARNINGS OF OPERATIVES        .01
(APRIL OF EACH YEAR)
180                                                                             180
1 60                                                                            160
140                                                                             140
.l                 "-,.,COST OF LIVING
120                                                                             120
100/ ..  *--------MONEY SUPPLY
100                                                                             100
890      ,            ,                                                        80
48   '49   '50   '51   '52   '53   *54   '55   '56   '57   '58   '59   '60
1/4/61
1749                                                           IBRD-Economic Staff



UNITED KINGDOM
VOLUME OF TRADE (1950 WEIGHTS)
(INDEX, 1954I100)
125           I ,  I    i    I        I    I    I    I        I    I    I    1    125
YEARLY
woo~~~~~~~~~~~~XOT    'O.'lo
l,IMPORTS
75                                                                                75
50                                                                                50
25                                 I       I    I   I              I         I    25
'38 '39 '45                  '50                      '55                     '60
TERMS OF TRADE*
( INDEX, 1954=100)
1 50 N T     l 9  I  I  I    I         I    I   I    I           I    I    I    1  150
YEARLY
125                                                                                125
100  -                                                                             IOC
75            t   I         I ,                 I             I         I         75
'38'39 '45                    '50                     '55                     '60
(June)
Export price index over import price index
1/4/61                                                            IBRD-Economic Stoff
1751



UNITED KINGDOM
BALANCE OF PAYMENTS ON CURRENT ACCOUNT
(BILLIONS OFt)
EXPORTS AND
0  REEXPORTS I              2             3             4              5
LONG-TERM CAPITAL*
RECEIPTS
PAYMENTS
IMPORTS      NET INVISIBLES
1948 RECEIPTS
PAYMENTS
RECEIPTS
1950
PAYMENTS
RECEIPTS
1951
PAYMENTS
1952 RECEIPTS
PAYMENTS
1953 RECEIPTS
PAYMENTS
RECEIPTS
1954
PAYMENTS
RECEIPTS
1955
PAYMENTS
1956 RECEIPTS
PAYMENTS
1957 RECEIPTS
PAYMENTS
1958 RECEIPTS
PAY ME NTS
RECEIPTS
199PAYMENTS
RECEIPTS
1960
PAYMENTS
*Government long-term capital only for years 1946-1951, all long-term capital thereafter.
IBRD -Economic Staff
1/4/61
1 74 9A



UNITED KINGDOM
EXPORTS OF MANUFACTURES (INCLUDES SITC GROUPS 6,7 AND 8)
BY MAIN MANUFACTURiNG COUNTRIES
(BILLIONS OF U.S. DOLLARS)
I 5                                                                                 15
15YEARLY                l'1',1
UNITED STATES 
10                                                                                  1 0
5   z          g ~~~UNITED KINGDOMW  T_..___ 
5                                                     WET5
......  *- ------ . '1--GERMANY     
_.s,_ :_. _ ..........._._. _._._._..............._. 
.. FRANCE
1950   1951    1952    1953    1954    1955    1956   1957    1958    1959    1960
(6 months al
EXTERNAL RESERVES                                                           annual rate)
(BILLIONS OF U.S. DOLLARS)
5  )  - C'        '  ' ' '  '    '   '    '    '   '    '    '    '   'l           5
END OF    END OF HALF-YEAR
YEAR
4                                                                                  4 4
2                                                                                  2
'37    '38   11    I     11    I     11  t    11    11   I   II    I     it  I     11    I     11  11 1  11    I     11      11     i     11   I 11
'45 '46  '47  '48  '49  '50  '51 '52  '53  '54  '55  '56 '57  '58  '59  '60
GOLD AND DOLLAR RESERVES                    GOLD AND
CONVERTIBLE
CURRENCY
RESERVES
1  /4/61
1752                                                              18RD - Economic Staff



UNITED KINGDOM
REGIONAL BALANCE OF PAYMENTS ON CURRENT ACCOUNT
(MILLIONS OF£)
+600                                                                    +600
YEARLY
+400                                                                    +400
+200                           F7-                                       +200
0                                                                    0
TtC-.ALL OTHER
-200                                                     I              -200
-400                                                                     -400
-600                                                                     -600
-800                                                                    -800
'48 '49 '50 '51 '52 '53 '54 '55 '56 '57 '58 '59 '60
(Prelim.)
1/4/61
1750                                                    IBRD-Economic Staff



UNITED KINGDOM
STERLING BALANCES
(BILLIONS OF £)
4.5                                                                                           4.5
END OF YEAR
4.0                                                                                           4.0
WESTERN
HEMISPHERE
3.53
NON-STERLING
3.0                                                                                           3.0
2.5                                                                                           2.5
2.0                                                                                           2.0
INDEPENDENT
STERLING AREA15
1.5                                                                                            .
1.0                                                                                           1.0
.5                                                                                          .5
0
'37 '38  '39    '45 '46  '47  '48  '49  '50  '5I '52 '53 '54  '55  '56 '57 '58 '59 '60
*       ~~~(June)
*Ghana Malaya,and Singapore transferred from Colonies to Independent Sterling Area.
1/4/61                                                                     IBRD-Economic Staff
1753



SUMMARY AID CONCLUSIONS
1.     Production in the United Kingdom over the last decade has been
expanding at constant prices at about 2% per annum in conditions of full
employment. Industrial production has, however, expanded more slowly
than in other industrial countries of Western Europe.  The population
is increasing very slowly and, although during the next few years the
numbers joining the working force wrill increase as a result of the higher
birth rate after the war, labor supply is likely to continue to limit the
growth of output.
2. e   In these circumstances the rate of growth of output depends pri-
marily on the increased productivity of labor; on the effort exerted by
the worker, on the performance of management and organization, on the rate
and quality of investment. With the stabilization of defense expenditure
since 1956, investment, particularly in the private sector, has run
at higher levels.    Fixed investment has risen to nearly 17% of gross
domestic product. Currently, public investment accounts for two-fifths
of the total. Much of it consists of social investment which is not
directly productive and doubt has recently been cast on the return from
some major projects in industries in the public sector.
3.     The average rate of unemployment during the past decade has been very
low, mostly between 1% and 2%. The shortage of labor has not been conducive
to ei'ficiency and has encouraged a persistent rise in wage rates although rea'
earnings may not have risen more rapidly than output. How to maintain full
ercployment without inflation, however, remains an unresolved problem. Dur-
ing -he past decade the United Kingdom has come to rely more and more on
monetary measures to adjust the level of demand to productive capacity.
4.     The economy remains greatly dependent on international trade.  In
the years following the war the difficulty was to produce sufficient goods
for export. In recent years the problem has been to sustain the growth of
British exports in the face of increasing competition from other industrial
countries and little expansion in world trade, and since 1956 the rise in
export earnings has been small. Miany industries producing the more compli-
cated form of products and newer industries employing a high ratio of capi-
tal to labor have successfully developed their export trade, but some tra-
ditional export industries (coal and cotton textiles) have declined.
5.     Since the war the United Kingdom's external reserves have been small
in relation to the size of its external transactions and the short-term
deterioration in its external payments position produced successive balance
of payments crises. Whereas the earlier crises were met primarily by an
intensification of import restriction by the United Kingdom and other
Sterling Area countries, more indirect measures have been applied since
1952 when a move towards freer trade and payments was initiated. At the
end of 1958 sterling became de facto convertible for current transactions
and with the exception of a small number of restrictions for protective
purposes, imports are now entirely free from quantitative limitations and
no resort has been made to protective duties to replace import restrictions.



- ii -
6.     The convertibility of sterling and other principal Western European
currencies, together with the cleterioration in the external payments position
of the United States, has transformed w^hat used to be a dollar problem into
one of overall performance of the United Kingdom and the Sterling Area in
external transactions.  In conditions of convertibility sterling may be more
vulnerable to adverse de-velopments in external payments. On the other
hand all the external support provided at the time of the last (Suez) crisis
has been repaid and, in addition to the United Kingdom's own reserves, support
from the enlarged resources of the I.M.F. is now available to meet any future
short-term deterioration. More impcrtant, perhaps, is the ability the United
Kingdom has demonstrated during the last eight years to meet payments diffi-
culties by measures designed to curb demand at home rather than by direct
regulation of imports.
7.     Reserves of gold and convertible currencies, although they have been
built up in recent years, are no higher than they wqere at the end of 1950
and represent about 3-4 months expenditure on imports.  During 1960 external
reserves have been increasing, largely it seems due to movements of capital
to London in response to higher interest rates.  Performance of current
external payments has been deteriorating as exports have ceased to increase.
Markets in primary producing countries have for some years been weakened by
the decline in cormmodity prices and the recession in North America (to,gether
with the expansion of production of European-type cars) and the falling rate
of growth in Europe have affected the demand for British exports.  Expenditure
on imports has been relieved by the fall in import prices but in the last two
years has risen ahead of exports.
8.     It is difficult to see the direction the economy is going to take in
the immediate future.  Earlier last year interest rates were raised and other
measures were taken to reduce the volume of credit, but there is now pressure
for easier monetary conditions in the light of a tendency to falling demand
and increasing under-employment in some industries producing consumer durable
goods for home and export markets.
9.     The total amount of Bank loans guaranteed by the United Kingdom is
relatively small, The principal outstanding on existing loans represents
less than 1.5% of gross annual receipts from current external transactions.
The annual service payments on the external pub'lic debt similarly amount to
about 2% of gross annual receipts from current external transactions.



I.  INTR7CETION
1.     This report has been prepared in the light of the obligations which
the United Kingdom incurs as a guarantor of Bank loans to British depend-
ent overseas territories, The total amount of slach loans made se far ($193
million) is small in relation to the external transactions of the United
Kingdom. The principal outstvanding on these loans represents less than
1.5% of the U.K.Is gross annual receipts from current, external transacticns.
2.     The to'al of the external public debt of the United Kingdom outstand-
ing at the end of 1'960 was 45,03y11 million. Annual service payments cn this
debt amount to about 2% of gross annual receipts frcm current external trans-
actions, Details of the external publ-ic debt and debt service obligations
are provided in Tables I and 2 in the Appendix,
3.    Previous economic reports were prepared over the years 1953 tv 1956.
These reports tended to be ccncerned with recent economic developments. par-
ticularly in respsct of external transactions.  They were set against a
background of a partly controlled economy particularly in respect of exter-
nal trade. The reports, however, noted an increasing tendency for govern-
ment to withdraw frorn the direct regulation of economic life3  In the five
years which have elapsed since the last report was written, many changes
have come about. The do facto conver4ibility of non-resident sterling (and
otLhez_ Western E-uropean currenuies) from the end of 1958 and the dismantling
of i.nport restrictions iri,posed for balance of payvmen-ts purposes have largely
unfettered Britain's overseas trade froim controls related to the currency
ar;. invelved,  Zirmilarly the internal economy is mostly frea from direct
gore-.: t.mental control,
4.     In these circumotances it was felt that a rather different type of
report from those pre-viously prepared shculd be submit-ted0  The three pre-
vicus reports wore prepareL at times when the short-term balarnce of pay-
ments prospects of the country required special attention. They gave an
account of recent economic exper;5erice and an assessment of short-term pros-
pects. In the present report consideration is given to recent experience,
but mluch of the report is concerned with developments over the past decade.
In looking at the prospects for the eccnomy, attention is devoted more Vo
longer-term probLens than to short-term prospects.
II. DEJ?OP^nT'.NTS SINGP, '9-5
5.     At their mneeting at the end of 1952, Commonweal.th Prime Ministers
decided on a gradual collective approach to the convertibility of sterling
and the freeing of external trade and paym.ents. Frooa 1947 until then, post-
war practice had been for successive difficulties which were experienced in
external payments to be met by the UK¢, and countries of the sterling area
reducing their imports from the outside world. The 1952 decision consti-
tuted a major change of policy and henceforth the intention was gradually
to dismantle controls over external trade and payments as progress was made
towards a situation in which sterling no longer required artificial support.
6,    From the mid-1950ts the U.K. lhas tended to resort increasingly to
monetary measures to correct disequil-brium in the balance i^f payments.



- 2 -
The balance of payments crisis of 1956 was approached in this way. In 1955
the U.K. ran a current account deficit of £92 million as compared with a
minimum current account surplus of £139 million during every other year of
the 1950's except 1951 when an adverse balance of E4W9 million was recorded.
Short-term support for sterling was obtained from the Fund and the Export-
Import Bank and in contrast to behavior in 1951, considerable resort was
made to monetary measures. Bank rate was raised from 3% to 4-1/2%o in February
1955 and to 5-1/2% in February 1956.  The commercial banks were requested by
the Chancellor of the Exchequer to reduce their lending, and advances to the
private sector declined by 6% in the year ending July 1956. Restrictions on
hire purchase transactions were imposed in February 1955 and progressively
tightened during the next 12 months. Small savers were offered more attractivc
terms and the opportunity to invest in prize bonds. Taxes were raised in suc-
cessive budgets in October 1955 and April 19568 In 1956 a current surplus of
£192 million on external transactions was achieved and external reserves which
had fallen by $642 million in 1955 began to rise.
7.     Thereafter external reserves rose progressively to $3 billion at the
end of 1958. They fell in 1959 by over $300 million but the U.K. made special
payments by way of its additional subscription to the Fund and advance repay-
ment of the Export-Import Bank credit of $250 mill'ion. External reserves rose
in 1960 to $3,2 billion at the end of the year.
8.     In 1957 uncertainty developed in relation to the future of sterling, d,
partly to ineffective exchange control and speculative pressure in the light c
a pa:rtial devaluation of the French franc.  Monetary measures were again re-
sorted to and the Bank rate was raised in September to 7%, the highest for 37
years, concurrently with a reduction in the German discount rate. Mew^J request
were issued to the commercial banks and a ceiling imposed on public investnent.
The drastic character of these measures impressed foreign financial circles an
soon put an end to bearish speculation on the future of sterling.
9.     Once confidence had been restored, the UeK. began to ease monetary con-
ditions.  Over the last two years, bank credit has exDanded remarkably.  From
a low level early in 1958 bank advances rose by 60% during the next two years.
The increase in bank advances was accompanied by falling interest rates.  Bank
rate was reduced in successive stages in 1958 to 4% and remained at this level
until January of this year when it was raised again to 5%. The increase in
bank advances was not only very large in itself but much greater than any pre-
vious increase since the devaluation of sterling in 1949.  The freeing of bank
credit was accompanied by the removal of other governmental controls on the
money market. The role of the Capital Issues Committee which since the war ha:.
regulated capital issues was progressively reduced.  Restric-tions on hire
purchase transactions were removed in September/October 1958.
10.    Bank advances to agriculture, engineering and steel, shipping and
shipbuilding expanded at more than the average rate but a feature of the
last two years has been the great expansion of credit to retail trade,



- 3 -
to hire purchase finance companies,to persons and professions and to stock-
brokers.  Advances to hire purchase finance companies, which amownted to only
£30 million in February 1958, had risen to £126 million two years later.
Advances to stockbrokers rose from £9 to 224 -million.  Advances to the retail
trade and to persons and professions both doubled, rising from £167 to £338
million and from t320 to £638 million respectively. Advances to other finan-
cial undertakings rose from £172 to £301 million (see table 16 in Appendix).
11.    The commercial banks financed the expansion of advances largely by
selling investments, principally in government securities. The investment
portfolios of the London clearing banks were reduced from £2.1 billion in
March 1958 to £1.5 billion in March of this year.  The expansion of advances,
however, led to some reduction in liquidity and the percentage of liquid assets
to gross deposits of the London clearing banks,, which was 33.9% in March 1958,
fell to 31.5% in March 1960 (see table 15 in Appendix).
12.    From 1955 to 1958 the volume of industrial production showed little
change.  In 1959, however, industrial prodLction rose by nearly 7%. Unemploy-
ment rose until early 1959, 'but at its maximum was still below the 3% figure
which at the end of the war had been regarded as a mark of full employment.
In the first half of 1959, unempJoyment fell rapidly from 2.8% to below 2% in
July and the numbers of unfilled vacancies rose. lfith the demand for labor
rising and labor resources almost completely taken up, some strain developed
in the economy.
13c   Externally the situation was becoming unfavorable.  Over the period
1956 to 1959 exports showed little tendency to rise, but the volume of imports
continued to expand.  lJith the fall in the prices of foodstuffs and imported
raw materials, the terms of trade improved by 10% and imports in 1959 were on'
4% greater in value than 1956.  Imports had, however, fallen in value in 1958,
providing for the first time since the war a favorable balance of visible tradoE
Imports in 1959 rose much more rapidly than exports.  Invisible earnings were,
however, sufficiently large to yield a surplus on current transactions of
£139 million. This was, however, t200 million less than the figure achieved
in 1958 and the trend was unfavorable.
14.    From the beginning of 1960 the U.K. Government has been taking steps to
correct the situation particularly by restraining internal demand. The increase
in bank rate mentioned above was the first of many monetary measures. Bank
rate itself was raised again to 6% in June (and reduced to 5.5% in October and
5% in December), Control of hire purchase of consumer goods was reimposed and
for the first time the commercial banks made special deposits with the Bank of
England which are not included in their liquid assets. In addition, the
government annoumced that public investment would not be expanded during the
next fiscal year. In recent months the government has become increasingly
concerned with the disappointing performance of merchandise exports and has
been encouraging greater interest in the promotion of British goods overseas.



- 4 -
15.   Although internal cornditions and  exte:^nal trading experience have
beccme unfavorable, external reserves have tended to rise. This situation
is a reflection of  the changed external payments situation of the United
States in relatIon to the industrial count;ies of Western Europe since the
clcsing of the dollar gap, Experience in the first 12 years after the war
should, however, be a sufficient reminder of the rapidity with which exter-
nal confidence in sterling can change, and the attraction of funds to London
this year with encouragerment of rising interest rates whlen money rates were
falling in New York has not diverted the UeKo Government from measures to
correct the unsatisfactory external payments situatianQ
16.   There has already been a slackening of home demrand for durable con-
sumerst goods, but with the racent decline in the growth of world trade,
the result so far has been a reduction in activity in some industries (par-
ticularly the motor industry) rather than the diversion of output from home
to overseas rimarkeus,  Indeed the Govermnent is being pressed to ease restric-
tions on hire purchase to encoaocage the revival of demand at home and re-
lieve increasing under-employmonrt in the mot,er industry..  The United King-
dom is again confronted with the familiar problem of achieving both equili-
brium of ext,ernal payments and full employm.ent at hcme.



- 5 -
III.  PRODUCTIONs, BPLOY1TENT AtD INVESTENT
17.    Total output has risen in value in every year since the war.  In the
1950's the gross national product rose by 6.5% per annum. HIost of this in-
crease was. however, due to price increases and, at constant prices, the gross
national product rose on the average by some 2% per annum, Since the last
census was taken in 1951 the population is estimated to have growTn by less
than one-half of one percent per annum so that in real terms gross national
product per capita has risen by about 1.5% per annum,
18,    Although experience has varied from year to year, consumers expenditure
has averaged about two-thirds of gross national product and the current ex-
penditure of government authorities on goods and services about one-fifth.
Total gross national savings have risen throughout the past decade, except in
1955, both absolutely and in comparison with the growth in gross national pro-
duct, and now amount to about 20% of gross national product.
19.    Appendix Table 3 shows the contribution made by each group of activity
to the gross national product. YManufacturing is by far the most important,
providing more than one-third of the gross national product. Both agricultural
activities ,and mining are small in relation to manufacturing. Government
services 1/, including defense, health and education, now represent about
one-tenth of gross national product.
20;   At constant Drices the gross domestic product has risen by 33%7 since
194Br The chart shows the variation in the output of the principal groups in
relation to total output and to one another. The fall in public administration
and defense since 1953 follows the progressive removal of many direct govern-
ment controls and the declining importance of military expenditure. The output
of mining has declined in recent years due to a reduction in the production of
coal. The expansion of agricultural output has moved closely in line with
that of total output. The changes in the manufacturing output call for most
attention. Over the whole period the outDut of manufacturing industry has
risen by 48%. The rise was particularly rapid from 1952-55 when output rose
by nearly 7% per annum.  After a period of stagnation until 1959, output rose
again by nearly 7%.
21.    Although the output of manufacturing industry at constant prices has
risen by nearly 50% from 1948 to 1959, not all manufacturing industries have
expanded at the same rate,  A greater increase has been achieved by oil re-
fining, general chemicals, coke ovens, engineering and electrical goods, vehi-
cles and paper printing and publishing. The increase in this group of indus-
tries ranges from 66% in the case of chemicals, to 116% for vehicles and 172%
for coke ovens and oil refineries.
22.    The output of otlher manufacturing industries has increased much more
slowly. The production of textiles was still slightly above the 1948 figure
in 1959 but had fallen throughout the 1950's. The output of drink and tobacco
has risen by only 17% during the whole period and the rise has been confined
entirely to the last five years. In some other industries, on the other hand,
production expanded rapidly until about 1956, but thereafter, in the period
covered,output has been static or has declined. Such industries are ferrous metals,
shlpbuilding and marine engineering, and bricks and cement (see Appendix
Table 6).
1/ Excluding nationalized industries,



- 6 -
23.    Ever since the war an extremely high level of employment has been
maintained.  This is in great contrast to the situation which existed
before the war when a large percentage of the labor force was permanently
unemployed even in boom years. The lowest figure for unemployment in the
1930's, about one and a quarter million, was reached in 1937 when the
average number of people unemployed was 10.5% of the number of employees.
24.    During the war consideration was given to postwar aims and W. H.
Beveridge in his "Full Employment in a Free society" spoke in terms of
full employment at a 3% rate of unemployment to allow necessary mobility
of labor. The 3% figure came to be the target of postwar Britain, and in
fact it has rarely been exceeded during the fifteen years since the end of
the war. In the 1950's the annual average rate of unemployment was mostly
between 1% and 2%, though in 1958 and 1959 it was slightly higher. The
annual average number of unemployed in Great Britain has ranged from 230,000
to 475,000. In the first half of 1959 the number of unemployed at one time
exceeded 600,000, but by the middle of 1960 the total was again down to the
300,000 mark.
25.    These lower figures of unemployment refer to a working population which
at the end of 1959 was nearly one-quarter larger than before the war. Since
the end of the war, however, the working population of the United Kingdom has
increased very slowly and at 24.6 million in 1958 was less than one million
greater than in 1951 when the last population census was taken.
26,    Although the fact that the population of the U.K. has continued to
rise has confounded prewar prophecies, no spectacular increase in the work-
ing population can be expected. An accretion to the working population
should, however, occur in the next few years when the first consequences of
the higher postwar birth rate are felt. The number of children under the
age of 15 in 1959 was 12.1 million as compared with 10.3 million in 1939.
The number of live births is again increasing, but only slowly (see Appendix
Table 7).
27.    Unemployment has not been uniform throughout the country and has also
varied from industry to industry. Some areas, notably NRoihem Ireland,Scotlandp
ITales and N.E. England, have experienced continuous unemployment much higher
than the national average and action has been taken to encourage manufac-
turers to establish plants in these areas. Some parts of the country have
been affected by the decline of highly localized industries, for example,
coal mining in South WTales. Appendix Tables 8 and 9 show chanaes in employ-
ment by industrial groups.
28.    Industries showing an exceptionally high rate of expansion not only
include industries in which the U.K. has long experience and a supply of
specialized labor, but also new industries. With a static labor force,
industries making a limited call on labor relative to capital may offer
the greatest hope for the growth of production.
29.    Oil refining has shown the most spectacular growth among the newer
industries. Since 1956 oil has been substituted for coal at the average
rate of 4.5 million tons (of coal) per annum, and official forecasts envis-
age a total energy demand of 300 million tons per annum (expressed in terms



- 7 -
of coal eauivalent) in the middle 1960's as compared with 246 million tons
in 1959._1
30.    A comparison with the rise of industrial production in some of the
other leading countries of Western Europe reveals a less satisfactory situ-
ation.
Industrial Production
Yianufacturing
Federal German
United         Republic            France          Italy
1953=100         Kingdom    (excl. W. Berlin)
1948                 82             36                 77              61
1957               115             149                148             137
1958               114             154                154             143
1959               121             165                162             159
1960
April           131             182                181             181
May              137            188                187             191
Jilmne          131             189                184             183
Scarce:  United Nations Monthly Bulletin of Statistics.
The great rise in production in Western Germany from 1948 to 1958 reflects
in part the later reestablishment of German industry after the war. Com-
parisons of this kind are also affected by statistical differences, but the
figures indicate that since 1953 the eyxpansion of production in France,
Germany and Italy has been much greater than in Britain.
31.    Since the early 1950's the U.K. has been progressively freeing its
economy from physical controls. Import control is now confined to measures
to assist agriculture and the jute industry. Imports of cotton textiles
from eastern countries are also limited by agreement as the cotton industry,
with government assistance, removes redundant plant and reequips itself on
a smaller sca'le with modern machinery. Generally the removal of import con-
trol has not been accompanied by increases in import duties.
32.    In conditions of full or over-full employment, with the working popu-
lation increasing almost imperceptibly, increases in production since the war
have depended primarily on the better use of labor and the greater and better
application of capital. The U.K.'s target has been a 3% increase in industri-
production per annum. This rate of increase was broadly achieved up to 1955.
Since then, however, the average annual rate of increase has been less than 2'
and with unemployment now at a very low level, it will be difficult to attain
a 3% rate over a term of years. Indeed one of the problems of the U.K. seems
to be that of achieving a sufficient expansion of production at present levels
of consumption. An important factor in this respect is the performance of
investment.
l/  Kational Institute Economic Review, September 1960.



- 8 -
33.    Total fixed investment since 1948 has varied between 13% and 17% of
gross domestic product at market prices. Investment has been rising without
interruption throughout the period in absolute terms and, for much of the
time, in relation to gross domestic product.
Investment
(At current prices)
£ Billion
Gross Domestic      Total       Total Gross Fixed Canital Formation
Product at       Gross               Public  Private  Column  3
Year    Rarket Prices    Investment    Total  Sector  Sector              1
1              2            3      4        5          %
1949        11.6             1.9          1.6     .8       .8        13.8
1950        12.0             2M0          1.7     .8       .9        14.1
1951        13.4             2.1          1.9    1.0       .9        14.2
1952        14.7             2.4          2.1    1.2     1.0         15.3
1953        15.7             2.7          2.4    1.3     1.1         16.3
1954        16.7             2.8          2.7    1.3     1.3         16.2
1955        17.9             3.1          2.8    1.3      1.5        15.6
1956        19.4             3.6          3.1    1.4      1.8        16.0
1957        20.5             3.9          3.4    1.5      1.9        16.6
1958        21.4             4.0          3.5    1.5     2.1         16.4
19:9        22.1             3.9          3.7    1.6     2.1         16.7
Source: National Income and Expenditure 1960 - Central Statistical Office.
34.    Since the war, the tendency has been for investment in the public
sector to remain at a high level. For several years, gross fixed capital
formation in the public sector was greater than in the private sector.
The emphasis immediately following the war was on the transfer of basic
industries from private to government ownership. Coal, gas, electricity
and transport (and iron and steel for a time) were nationalized and became
the subject of large investment programs. An investment program of £635
million was planned for coal mining for fifteen years starting 1950 (now
£511 million over the years 1960-65). Yore recently, a £1,200 million
railway modernization program commencing in 1955 and an electricity invest-
ment program of £1,250 million over the years 1956 to 1962 (now £3,350 mil-
lion, 1956-1966) were adopted. Nationalized industries are required to earn
sufficient revenue to enable them at least to break even taking one year witl
another. Some have incurred persistent losses (notably the British Transport
Commission)which have also had to be financed largely by borrowing.   Yajor
legislation was also introduced to expand the social services, and fixed
investment by government on education has expanded more rapidly than total
fixed capital formation. Fixed investment in housing rose by nearly 100%
between 1949 and 1954 but no further increase was recorded until 1959.
35.    Investment in manufacturing is the main element in investment in the
private sector. As a whole it has kept pace with the growth in total fixed
investment but has lagged behind the expansion in the private sector during
the postwar period. In most years, investment in manufacturing has accounted



-9-
for more than 25% of total fixed investment but its part in fixed private
investment has fallen from about 50% up to 1953 to around 40% in the last
two years. Investment in some manufacturing industries, particularly
chemicals, iron and steel, vehicles and aircraft, and the engineering,
electrical goods and shipbuilding group rose rapidly from year to year
during most of the past decade, but even in these industries the growth
in investment was not uninterrupted.  Appendix Table 4 shows the distribu-
tion of gross fixed capital formation between industries.
36.    Investment in the public sector may not always have been directed to
the most advantageous use of capital and recently, for instance, there has
been much discussion of the economic justification of part of the railway
investment program. This problem is not, however, confined to the public
sector. Although investment in the private sector since 1955 has exceeded
investment in the public sector, the capital/output ratio has risen. It
has been suggested that this may have been due to a greater proportion of
investment being made in service activities which have a particularly high
capital/output ratio. With improved standards of living the demand for such
activities has increased, producing a greater than average increase in
investment.
37.    A recent report!/ described the yield from investment as "disappoint-
ingly low" and stated that present trends in output and productivity would
" leavTe Britain with a lower standard of living than several other European
countries within a few years". The following table compares the share of
investment in output and the rate of growth of output of the leading indus-
tria countries.
Gross Fixed Capital       Percentage Annual Irncrease
Formation as a           in Gross Domestic Product
Percentage of Gross         at Constant Prices
National Product at
Cu2rrent Prices
1923-29    1950-58           1923-29      1950-58
United Kingdom               9.8        14.0              2.9         2.2
United States               15.0*       14.2*             3.3         3.3
France                       9.8        17.2              2.3         4.3
Federal German Republic    17.8         20.8              2.8         7.4
Japan                       17.4        21.7              5.1         7.9
* Gross private domestic fixed capital formation.
Source:  World Economic Survey, 1959 - United Nations.
/ Political and Economic Planning, "Growth in the British Economy".



-10 -
The table indicates that while, relative to output, investment in the U.K.
has been running at a much higher level than ih the 1920's, investment has
assumed a smaller share in output than in the other industrial countries
listed. The rate of 7,rowth of output in the 1950's is also seen not only
to be lower than in the 1920's, but also by far the lowest of all the indus-
trial countries included in the table.



- 11 -
IV. WACES Ab' INDCSTRIAL RELATIONS
38.    There has been much discussion of industrial relations in Britain
through the postwar years. Immediately after the war the principal need was
to bring about a smooth transition from wartime to peacetime forms of pro-
duction.  Very soon, however, two major problems emer-ed, neither of which
was iound to be readily susceptible to solution.  Firstly, how, in conditions
of full employment, which all political parties Were pledged to maintain,
increases in the earnirgs of labor could be confined wJithin the limits set by
growvrth in output and how a greater ard increasing productivity of labor could
be attained.  Secondly, how to secure forms of organization of labor and manage-
ment and of relations between them more appropriate to the postwar economic
situation than to prewar conditions of persistent excess of supply of labor.
39.    It was appreciated that in the changed situation of the U.K. in respect
of international payments a higher levTel of export earnings was required.
Plant and equipment had, howrever, been run dowvn during the war and increasing
output and improved productivity of labor depended greatly on a sufficiently
high lev el of investment or abstinence from consumption. The position was
furthner complicated b- the nationelization of certain industries, particularly
of coal m.ining which had a long history of labor troubles and low earnings.
40.    In the first postwar years the tendency was to attempt to do too much
at once.  Although after the privations of the war British industry was
neither in a physical state nor the m-ood to expand output rapidly, irorkers
expected improved conditions.  The result was a tendency to inflation which
in itself adversely affected the external payments situat-ion.  The U.K. C-or-
ernment endeavored to restrain the growth of wage rates, to discourage absen-
teeism and to encourage a greater effort while at work.
41.    After 1950, however, average weel-y earnings rose rapidly.  From 1954
average real earnings also began to rise and, although comparison is hazardous,
and is made even more difficult by the introduction of a new index of consumer
prices, real earnings on average may have continued to rise for the remainder
of the period.  Column 5 in the table below irdicates that the rise in real
earnings since 1948 may have been of similar proportions to the increase in
produc'tivity.



- 12 -
Earnings and Producti%ritv
Col. 1   Col. 2        Col. 3      _ cl. 4                Col  5 _
Average Weekly   Index of Retail  Crude Index of   Index of Gross
Earnings of All  Prices, Monthly  Average Weekly   Domestic Product at
Operatives lJ    Averages 2       Real Earnings of 1954 Factor Cost Per
All Operatives   Capita of Total in
s.d.     Index                                      Civil Employment Y
Col. 2 %
Col. 3
1938     53/3       45          58
1948    117/4      100         100              100                   100
1950    124/1      106        106               100                   106
1952    147/3      126        126               100                   108
1954    1G6/6      142         132              109                   114
1956    197/9      168         144              117                   117
1955    214/2      183         154              118                   119
i959    222/6      190        155               123                   127
lJ19845 figure is for October, the remainder for April.
? New index from 1956
J End of June
Source:  Annual Abstract of Statistics and National Income and Expenditure,
Central Statistical Office.
42     With some exceptions the percentage increase in the average weekly earn-
ings in individual industries from 1950 to 1959 conformed closely to the over-
all rate of increase (see Table 12 in Appendix).  Only textiles and clothing
show a rate of increase of more tvhan 10% less than the average, and earnings
in those industries in 1959 were less than those in most others.  Docks, coal
mining, railways and agriculture are not included in the calculation of the
aggregate position.  The levels of earnings of dock labor and coal miners are
higher than those of workers in most other industries.  Earnings in British
railways are relatively low but have recently increased following wage awards.
Agricultural wages have risen at not much less than the average rate of increase
a^nd remain well below those in industry,
43.   The rise in earnings is in part t-he result of the working out of natural
economic forces.  The vehicle industry, which had the highest average e.rnings
ir 1959, was expanding rapidly and seeking to attract new workers during most
of the 1950s.  In contracting industries such as coal mining, non-economic
forces have promoted a rapid rise in wage rates.  Wage rates are generally the
subject of frequent bargaining by trades unions and in the nationalized in-
dustries organized labor tends to be strong.  With output rising slow,ly the
outcome of wage negotiations is generally a matter for concern.  Usually, how-
ever, there has been a tendency for wage increments to be smaller than fore-
seen at the time.  Increments, howyever, seem often to be negotiated irrespec-
tive of the prevailing economic climate and agreements to one group of workers
tend to have repercussions throughout industry.



- 13 -
44.    Most zJage negotiations have been conc7luded without strike action, but
the number of working days lost through strikes has sho-m a rising trend in
postwar years.  Appendix Table 11 gives a summary of the incidence of strikes.
There has been no nation-wide stoppage of work during the postwar per2od but
a strike of most railway locomotive crews in 1955 and dock strikes, for ex-
ample, in 1958 and again in 1960 have for a time hampered external trade.
45.    The number of hours worked in manufacturing industries has fluctuated
within narrow limits durinng the past decade. In Arril of each year from
1950-1960 the average number of hours worked w-reekly by adult male workers
varied between 46.9 and 48.6.  Working hours rose to a maximum of 48.6 in
April 1955, since when they have fallen year by year to 47.4 this year.
46.    The number of hours worked per week depends, amongst other factcrs,
on the extent to which employees decide to stay away frorm work.  In postwar
conditions of a general shortage of labor, more favorable wage rates and a
greater resort to more hig6hly paid overtime working, absenteeism has added
to the difliculties of British industry.  Informationi is most readily avail-
alble for the coal mining industry.  Absenteeism has been high throughout the
postwar period and since 1954 the percentage of absences in relation to the
possible number of appearances duiring the normaal five-day wreek (i.e., exclud-
i ng Saturday working which has been regarded as overtime) of workers at the
coal face has risen steadily year by year to an average of nearly 17% in
1959 and the average number of shifts worked per wage-earner has fallen to
below four per wreek.
47.   Nlearly 10 million workers, or less than half of the total nu=mber of
employees in the Urnited Kingdom, are members oa registered trades unions,
blut the importance of trades unions is much greater than their numerical
strength wolild indicate. Negotiations in respect of conditions of work in
most industries are conducted directly with trades union representatives
and employment is often dependent on union membership. Since the war the
number of unions has been declining and the larger unions have been increas-
ing their membership.  There are in all more than 600 unions, but the 36
largest unions have a combined membership of about g million.  The size and
ra.mifications of some of the larger unions have made it difficult For offi-
cials to keep in contact with the feelings of members and action has been
taken from time to time by groups of members rather than officially by
their trades union.
43.    In recent years the aim of successive governmients has been to keep
increases in wrages within tne growth of productivity.  The Chancellor of
the Exchequer said recently:
"I am not saying that every wage rate and every price should be
frozen in perpetuity. But if they rove ahead in advance of
increased productivity, there is bound to be trouble and any
real advantage to the wage-earner from increases in wages
will either be lessened or disappear. We have a chronic
dilemma how to ex-,and the economy. We want expansion without
inflation, stability without stagnation."



- A4 -
This analysis has yet to be widely accepted for the purpose of wage negotia-
tions. As in many other countries, trades unions still tend to adhere to their
traditional role of pressing for such progressive inprovement in working con-
ditions as can be secured from employers, and postwar conditions of full
employment and extended national oawnership have fortified their bargaining
strength.



- 15 -
V.  PU13LIC FINAN.NCE AN1D N1ONETARY POLICY
49.    The greater part played by the public sector in capital investment
since the war has already been referred to. For six years after 1948 the
public sector accounted for more than half of gross fixed capital formation
at home, as com-pared with less than one-third in 1938, Since then, investment
in the private sector has surged and in 1958 and 1959 gross fixed capital
formation in the public sector fell to 4;3% of the total.
50.    Current expenditure as well as capital formation in the public sector
has been more important than before the war. Excluding the activities of
public corporations the total expenditure of central government and local
authorities, for both current and capital purposes, has risen from £4,600
million in 1950 to £7,800 million in 1959 and now amounts to about 36% of
gross domestic product. The central government accounts for tihe greater part
of this expenditure but the expenditure of local authorities rose much more
rapidly, from £1,100 million to nearly £2,200 million.
51.    The largest individual items in the total of local and central govern-
ment expenditure are defense, national insurance and pensions, and education.
Expenditure on defense at over £1,600 million in 1956 was twice the 1950
figure. This great rise in defense expenditure followed a change of policy
wlhch had started at the time of the Korean War.  Defense expenditure had been
greatly reduced from the end of the wvar doinn to some £800 million per annum,
or about 7% of gross domestic product. From 1951 expenditure on this account
rose rapidly and in the five years from 1951 amounted to about 10% of gross
domestic product.  Since 1956 defense expenditure has been stabilized at about
£01,600 million per annum and has fallen to about 7.5% of gross domestic pro-
duct,  Defense expenditure, however, has tended to be higher in Britain than
in some of the other principal countries of Europe. In 1958, the share of
defense expenditure in gross national product amounted to 7.7% in the United
Kingdom, 7% in France, 4.3% in Italy and 3.2p in Germany.
52.    Expenditure on social security, insofar as it is represented by out-
goings for national insurance, pensions, etc., and total expenditure of the
central government and the local authoirities on education and child care, have
risen by 120% and 128% respectively between 1950 and 1959 (see table 13 in
Appendix). General government capital formation (i.e. excluding public enter-
prises) in the United Kingdom has, however, taken a smaller share of gross
domestic product than in most industrial countries. 1/
53.    The current budget accounts of the United Kingdom Government for three
years during the past decade are summarized in the following table.
1/ United Kingdom 1.5%, Germnany 2-.6%, Italy 2.5%, France 18%, Belgium 1.5%b,
Japan 3.2%, Netherlands 3.5%. The percentages refer to the years 1950-58.
For 1950-59 the United States figure is 2.3%. Source: United Nations
World Economic Survey, 1959.



- 16 -
Summary of United Kingdom Current Budget Accounts
£ Yillion
1951/52     1955/56      1959/60
Ordinary Revenue
Direct Taxation                        2,362       2,543        3,010
Indirect Taxation                     1,752        2,013        2,282
Total, Including Other Items          4,433        4,893        5,630
dnaryE.enditure
Consolidated Fund Services
(principally service of
national debt)                        592         744          742
Supply Services                       3,461        3,752        4,502
Total                                 4,053        4,496        5,244
Above the line surplus/                  380         397          386
1/ ~'Above the line" items include all receipts from taxation, current
and capital expenditure of government departments and the service
of the national debt. "Below the line" items include repayments
of past loans to nationalized industries and payments made by the
Exchequer by way of loans to nationalized industries and other
statutory bodies, and to colonial governments.
54.    Receipts from direct taxation provide more than half of total revenue.
Income tax is the most important item in this category and contributed more
than two-thirds of the total revenue from direct taxes.  The aim has been
to reduce income tax to increase the incentive to production and to lower
the burden on small incomes. During the 1950's the standard rate of income
tax has been reduced from 9s/6d in the £1 (471k%) to 7s/9d (38-3/4%') and
allowances for small incomes, married persons and dependents and earned
income allowances have been increased. Surtax is chargeable in addition
to income tax on incomes exceeding £2,000 at a rate rising to 10/- in the
£1 (50%) on incomes exceeding £15,000.
55.    Customs and excise duties are imposed principally for revenue pur-
poses, protective duties yielding only about £100 million per annum. The
principal sources of revenue from indirect taxation are duties on tobacco,
alcoholic drinks and petroleum fuels and purchase tax on consumer durables.
More details of revenues from taxation are given in Table 14 in the Appendix.
56.    The central government has resorted to the budget as a major instru-
ment to give effect to its short-term economic policies. Changes in
taxation and in ordinary expenditure from year to year have in part been
made for the purpose of influencing economic activity. Adjustments to rates
of income tax, profits taxes and purchase tax have been most noteworthy in
this respect.



- 17 -
57.   A principal objective of fiscal policy has been to secure sufficient
revenue to provide for a large part of capital expenditure in the central
government sector and to supply local authorities with grants in aid. In
seven of the nine financial years from 1951 to 1960, there was a substantial
surplus of ordinary revenue, usually of around t400 million. The exceptions
were the years 1952-53 and 1953-54 when the "above-the-line" surplus fell to
below £100 million. In every year the "below-the-line" deficit exceeded this
surplus and, including the requirements of the nationalized industries, sub-
stantial resort was made to the public for Exchequer financing.  The total
requirements of the Exchequer in this way ranged from a minimum of £163 millior
in 1958-59 to a maximum of £700 in 1952-53. These amounts were financed to a
small extent from extra-budgetary funds (e.g. the National Insurance Funds) and
from increases in the fiduciary note issue. External resources were also im-
portant in 1951-52, but over the period the net external finance received by
the Exchequer was small. Small savings and the purchase of non-marketable
securities in the earlier years represented a net drain on the Exchequer but
in 1958-59 and 1959-60 small savings were a major source of government fin-
ancing, amounting to over £300 million in each year.
58.   The principal means of raising loans funds have been the issue of
marketable stocks and the increase of the floating debt.  Changes from year to
year in the relative importance of these two sources are a reflection of both
government policy and the absorptive capacity of the market.
59.    At the beginning of the war the floating debt of the United Kingdom
amounted to just over £1,000 million. By 19h6 it was approaching t6,000
million. Immediately after the war the government of the day resorted to a
cheap money policy. The Treasury bill rate had for long been kept at around
1/2%. The government in addition sought to establish a long-term borrowing
rate of 2-1/2% for gilt-edged securities and in October 1946 issued Treasury
stock for redemption in 1975 or thereafter at that rate. At the same time the
intention was to reduce the floating debt by funding operations. By the begin-
ning of 1949 the attempt to establish a 2-1/2% long-term rate was abandoned anc
yields on gilt-edged securities gradually rose. The floating debt was reduced
to £5,000 million in 1951. Throughout this period the Treasury bill rate re-
mained pegged at 1/2%.
60.    In November 1951 a major change of government policy was made.  Bank
rate was raised from 2% to 2-1/2%, the Treasury bill rate rose to 1-1/2% and
it was announced that the Bank of England no longer intended to retain a fixed
Treasury bill rate. For 20 years, except at the outbreak of the war, the
variation of Bank rate, traditionally a major instrument of the Bank of
England in influencing the money market, had been discarded. In 1951 the
extent to which reliance would be placed on Bank rate changes as opposed to
other methods, particularly open market operations, to influence monetary
conditions, was by no means clear. The Annual Report of the Bank of England
for 1952 referred to the changes in these terms: "The change in the Bank rate
marked a return to flexible (as well as higher) short-term interest rates and
indicated that the Bank would no longer be prepared to adjust the cash avail-
able to the market ... to maintain the extreme stability of rates previously
ruling".



- 18 -
61.    although Bank rate was raised from 22% to 4% in March 1952, the
tendency for some years thereafter was to resort to only marginal changes
in interest rates. As exYperience was gained, however, the authorities
resorted more and more to the use of Bank rate as a major instrument of
economic policy.  In 1957 changes in Bank rate were made more frequently
than in the difficult years of 1929-31.  In September of that year Bank
rate was raised by 2% to the record level of 7% as an anti-inflationary
measure and in 1958 it was reduced five times, down to 4%, to encourage
the revival of bank advances to the private sector. Thereafter Bank
rate remained stationary until 1960 when two increases each of 1% to
bring it to 6% were made to discourage the further growth of Bank credit
which had risen greatly since the middle of 1958.  Treasury bill
rates moved in sympathy and yields on gilt-edged securities moved within
narrower limits, largely between 4h% and 6%' Action since 1951, and es-
pecially during the last three years, suggests that variation in the price
of money has come to be regarded as an important factor to influence its
volume.
62.    After such a long period of cheap money, the rise of both short and
long-term interest rates brought difficulties to the authorities. Falling
prices for gilt-edged securities discouraged traditional purchasers of
government securities, and led them to resort to other forms of invest-
ment which, while not gilt-edged, offered better protection against rising
prices.
63.    Throughout the 1950's, great interest was shown in the market for
inducrtrial equities and yields fell to levels which since September 1959
have been below those currently obtainable for gilt-edged. In this situa-
tion the authorities have been presented with a narrowing market for new
issues.
64.    The state of the gilt-edged market has been further affected by the
behavior of the commercial banks during the credit expansion in the last
two years.  To maintain their liquidity the commercial banks have reduced
their holdings of gilt-edged investments while expanding their advances.
In 1958-59 the public disposed of some £400 million of marketable securi-
ties and in no one of the last three fiscal years was there a positive
figure of net issues of government securities to the public.  In these
circumstances the requirements of the Exchequer have tended to be met by
increasing the floating debt and in 1960 the increase in Treasury bills
held in the market amounted to some £460 million.  From 1952-53 the float-
ing debt rose by about £1 billion to nearly £6 billion at the end of 1959.
65.    The table of Exchequer financing on the next page has been adapted
from the Padeliffe Beport and more recent information. It will be seen
that no breakdown is available of the destination of net issues of market-
able stocks of the government before 1957-58. Over the whole period since
1947 total net national debt rose from £25.6 billion to £27.4 billion at
the end of 1959.



Exche-uer Financing
L Million
Years Ended 31st UHarch
1951/2   1932/3   1953/4   1954/5   1955/6   1956/7   1957/8   1958/9   1959/60
Requirements
Ordinary Revenue                 4, 433    4,439    4.,368    4,738    4,893    5,158    5,343    5,480    5,630
Ordinary Exopenditure
(incl. sinking funds)          4,C53    4,351    4,274    4,305    4,496    4,868    4,920    5,103    5,244
hbove the line surplus             380        33       94+      433       397      290       423       377       386
Below the line deficit             529       524      391       501       538       621      635       559       700
Overall deficit                    149       436      297        68       141       331      212       182       314
Total Requirements (incl.
nationalized industries                                                                                                   H
issue of guaranteed stock)l/    280         711      607       239       457      316       192       163       296
Financing
Extra Budgetary Funds, etc.         27       108      146       170        98       122        87      191        _6
External (incl. Exchange
Equalization Account)           1,063      -127     -341      -175       120       201     -139      -250       -81
Increase in fiduciary issue         50       150       75       100       150        50      125                 100
Borrowing:
Non-marketable securities        -369      -159      -16        78      -112      127        -6       347       305
Marketable stocks:
Total Net Issues                 1,107      LOG       618       200       731      225       -69      -1423      -42
Increase (-) or decrease (+)
in holdings of Bank of England
& National Debt Commissioners  -273         +33     -159      -1.82     -499      -45       -41      +35'9     -470
Increase in Market Treasury   -63                                                            235       -_
Bills                          1,325       3o6       2          48      -31      -364                -111
/ Replaceed in 1956 by advances from tUe Exchequer.
Source: Rdport of Committee on the Lforkin  of thie Tarettary System, 1959 and AnnuaI Abstract of Statistics. 1960.



- 20 -
66.    Throughout the 1950's government policy was moving progressively
away from direct control of the economy. Initially investment was con-
trolled to determine its direction and to limit demand. Control of capi-
tal issues remained, but during the last two years, the powers of the
Capital Issues Committee have been drastically curtailed. Physical con-
trol of the economy has mostly disappeared and has been replaced by
monetary measures. For many years the commercial banks were advised by
the government in respect of the volume and direction of bank credit.
The removal of this control two years ago enabled the commercial banks
not only to expand credit but also to increase remarkably the level of
advances outstanding for developing forms of credit, particularly for
hire purchase transactions (see Section II - Developments Since 1955).
67.    fpart from the reintroduction of hire purchase restrictions earlier
this year, the authorities have therefore come to rely primarily on tradi-
tional monetary measures. When restrictions on credit were lifted in 1958,
however, the commercial banks agreed with the Bank of England that the con-
ventional 30% minimum relationship of liquid assets to deposits would be
maintained but in addition the Bank of England introduced a new requirement
of special deposits which it would call when necessary for mopping up excess
liquidity. The calling of special deposits has already been resorted to in
1960.



- 21 -
VI. EXTERNAL TRADE AND PAIDENTS
68.    Britain is more dependent on the supply of foodstuffs and raw mate-
rials from abroad than the other major industrial countries of the world.
The total value of its import trade is now exceeded by that of the United
States, but imports of goods are still equivalent to about 20% of gross
national product.  The United Kingdom has traditionally been a major ex-
porter of manufactured goods, a supplier of shipping and financial services
and a source of capital.
69.    Since the end of the war successive governments in the U.K. have been
beset by problems of external payments. The disposal of external assets in
the early years of the war left a situation in which new export earnings were
required to replace the lost income from investment.  The country still neede
to be able to maintain command over imports and wished to continue to invest
abroad, particularly in the sterling Commonwealth.
70.    After the war the annual net income from investments overseas declined
from more than 2200 million to between £S0-8l0 million, and efforts to over-
come this reduction of overseas income encountered a further factor, a deter-
ioration in the terms of trade.
71.    For some time after the war, and particularly during the Korean War,
the U.K. found prices in international trade moving unfavorably. These were
years of shortages of basic materials and foodstuffs supplied largely by the
primary producing countries of the world. By 1952 the U.K. needed to supply
nearly 25% more exports to conmand the same amount of imports as in 1947.
Most of the deterioration occurred after the devaluation of sterling in 1949,
and particularly in the year 1951. Since the Korean War prices of raw mate-
rials and fooestuffs have fallen as supply has risen to meet or overtake
demand. Conditions have favored the industrial countries importing primary
products and exporting manufactured goods and by 1959 the index of the United
Kingdom's terms of trade was almost back to its 1947 level.
72.    Though the performance of the Sterling frea as a whole was mitigated
somewhat by the surplus position of other sterling countries in transactions
with the rest of the world, the movement in the terms of trade is of some
importance in relation to the recurrence of periods of extreme difficulty
for sterling during much of the postwar period and the more favorable posi-
tion which has been achieved in recent years. The adverse balance of the
United Kingdom on current payments of £419 million in 1951, for instance,
can be attributed to the deterioration in the terms of trade in that year.
73.    The following table gives in summary form the experience of the U.K.
in respect of external payments since 1946.



- 22-
Balance of Payments
United Kingdom
Holdings of
Net    Current   Long-  : Gold & Convert-
Exports &  Visible  Invis-  Account   term   : ible Currency
Imports  Reexports  Balance   ibles  Balance  Capital*c:  End of Periodf*e
£. Million                   :   $ Billion
1946    1,082       920     -162     -133    -295      +214   *         2.7
1948    1,794    1,60o4     -190     +197    +  7      +304   :         1.9
1950    2,390    2,254      -136     +433    +297      - 14             3.3
1951    3,501    2,752      -749     +330    -419      - 68   :         2.3
1952    2,959    2,831      -128      +355    +227     -180   :         1.8
1953    2,896    2,677      -219      +398    +179     -241             2.5
1954    3,020    2,825      -195     +399    +204      -240   :         2.8
1955    3,1432    3,076     -356      +264    - 92     -183             2.1
1956    3,1466    3,L02     - 64     +256    +192      -241   :         2.2
1957    3,570    3,543     - 27      +256    +229     -183   :         2.3
1958    3,341    3,1432     + 91     +254    +345      -259   :         3.1
1959    3,616    3,556      - 60      +199    +139     -553   :         2.7
1960
(lst
half)   1,968    1,941      - 27     + 62    + 35      -138   :         2.9
*  Government long-term capital only for years 1946-1951, all long-term
capital thereafter,
,8* Before 1959 "gold and dollar reserves".
Source:  United Kingdom Balance of Payments 1946-1957 and 1957-1959.
H.M.Treasury.
74.    Immediately after the war the U.K.'s aim in international trade was to
build up as rapidly as possible its production and exports of manufactured
goods. It will be seen that exports rose rapidly until 1951. Thereafter they
remained at about their 1951 level until 1955-1956 when another rise occurred.
Since then, exports have made little further progress. After their very sharp
rise in 1951, imports were much lower for the next three years rising again in
1955 to 1951 levels which have since been surpassed. With the exception of
1958, when imports sagged temporarily, the country has failed to achieve a
favorable balance of payments on visible account.
75.   Net receipts from invisible transactions rose rapidly after the war to a
postwar peak figure of £1433 million in 1950. The U.K. quickly resumed her
peacetime position as a major supplier of shipping and other services and net
income from overseas investments, though at a lower level than prewar, tended
to rise. Due to military expenditure abroad, government transactions have
shown large net payments on invisible account throughout the period, With the
exception of the years 1951 and 1955, however, the surplus from other invisible
transactions was sufficient to cover the adverse visible balance and the bal-
ance of government transactions and at the same time to have a surplus of
varying magnitude on all current transactions.  The surplus, however, has
generally been insufficient to provide for the twin aims of government policie
on capital account of building up external reserves and of investing overseas
on a large scale.



- 23 -
76.    The U.K. has in recent years set a target of £450 million net per annum
for all overseas investment and improvement of the monetary position. At no
time in the postwar period has the surplus on current account approached this
figure and even in favorable years the surplus has usually been nearer to half
that amount. The U.K.,however, has endeavored to rebuild its investments
overseas particularly in the sterling area. The capital demands of developing
countries far exceeded what the U.K. itself could contemplate and for many
years access to the London market by both governments and private undertakings
was strictly controlled.  Njo restrictions were, however, placed on the transfei
of funds by residents from London to countries in the sterling area. In addi-
tion, since 1946 the United Kingdom has supplied more than £450 million in
grants to dependent territories,
77.    The United Kingdom is progressively transferring governmental responsi-
bilities to its overseas territories but has decided to assist them financially
to the extent of £12-16 million per annum to retain the services of expatriate
civil servants.  As they become independent members of the Commonwealth, they
will be eligible for Commonwealth Assistance loans if they are unable to raise
funds in the market. Much of the present outflow of caoital is to former de-
pendencies and the transfer of power in itself may have little effect on the
overall rate of British overseas investment.
78.    Initially the postwar recovery of the U.K. was assisted by large long-
term loans from the U.S. and Canada, but these were soon used up and (except
for resort to the International 11onetary Fund and to short-term credits from
the Export-Import Bank in 1957), the U.K. has since become a large net exporte-
of capital.  Capital exports in some years, taken in conjunction with perfor-
mance on current account, led to a considerable decline in external reserves.
The largest net export of capital (£553 million) occurred in 1959, but was
accounted for by payments to the Fund and the repayment of the short-term
credits referred to above. Otherwise during the last eight years the net long--
term export of capital ranged between £180 and £260 million per annum. This
persistent capital export has, it is said, reestablished the value of the
U.K.'s foreign invrestments at about its prewar level and has made it once again
a creditor country.*  From 1962 onwards performance of external transactions
on current account will be assisted by a reduction in payments on the external
debt of £23 million per annum (as compared with 1960, see Appendix Table 2).
But, to attain an outflow of capital and an improvement in external reserves
together totaling around f,450 million annually, a current surplus persistently
larger by some £200 million than that which has been achieved on average in
recent years will be required,
79.    The total of overseas holdings of sterling amounted to £3.9 million
in 1947. These holdings have shown very little change in total over the post-
war period as a whole, but fluctuations from year to year presented problems
and for a time some control was exercised over withdrawals to avoid pressure
on external reserves.
80.    Table 1  in the  Appendix  lists in  detail  the  external public
debt of  the United Kingdom  at the end of 1959,  including
* A. R. Conan - Westminster Bank Review, August 1960.



- 24 -
amounts undisbursed. Table 2 gives an estimate of annual contractual pay-
ments required to be made on this debt up to 1974. These vary between 2.2%
and 1.5% of current earnings (gross) in 1959. Unfortunately information is
not readily available to enable comparable tables to be prepared in respect
of loans made by the United Kingdom to other governments.
8l.    Over the period since the war external reserves have been low and
have shown considerable fluctuations. P progressive fall from 1946 to 1949
was followed by a rapid build-up of reserves after the devaluation of ster-
ling in September 1949 to a peak figure of (3.3 billion at the end of 1950.
Since then, reserves have continued to fluctuate and are now once again
above 03 billion. They are supported by the enlarged resources of the Fund.
The recent build-up of external reserves from t2.1 billion at the end of
1955 has, however, been accomDanied by a favorable movement of the terms of
trade and at the current levei of imports, a rise of only 1% in import prices
would increase annual external Dayments by about $100 million.
82.    External reserves of .3 billion are the equivalent of less than four
months imports at the 1959 level. In addition there is the possibility of
a call on the reserves to meet the requirements of the countries of the
sterling area which keep their external reserves in sterling. Including
sales of gold in London, these countries taken together tend, however, to
be in a position of surplus in respect of transactions outside the sterling
area. Further reference to the Sterling Area is made later in this chapter.
Exroot Trade
83.    Some account has already been given of the growth in exports since
the war. Total exports (including reexports) have risen in value by nearly
60% since 1950.  The increase in volume has, however, been less spectacular,
domestic exports having risen by some 20% between 1950 and 1959 largely as
a result of expansion in the years 1954-57.
Volume of Exports of United Kingdom Produce and Manufactures
1950 - 100
1938    1947    129     1951    1954    1955    1956    1957    1958    192
63*     62      86       101     104      108     118      120     116      121
* Using 1947 prices as weights.
Source: United Kingdom Annual Abstracts of Statistics.
84.    -fter recovering in 1959, exports in 1960 again became static in value
and the U.K. Government has been increasing its endeavors to encourage manu-
facturers to take a greater interest in the export trade. The sluggish
behavior of British exports in recent years has been a matter of some dis-
appointment in that exports have been languishing at a time when the export
trade of some other industrial nations has been rising rapidly. The follow-
ing table shows the comparative performance of British exports and those of
some other industrial countries of Western Europe.



- 25 -
Value of Domestic ExDorts f.o.b.
(Willions of U.S. dollars)
Monthly           United    Federal German
Averages          Kingdom     Perublic         France    Italy   Netherlands
1953                596          366            315        127         180
1955                670           511           409        155         224
1956                732          613            378        179         239
1957                768           715           421        213         258
1958                740           733           427        215         268
1959                777          814            468        241         301
1959 Jan.-June      764          752            434        214         28l
1960 Jan.-June      846           910            582       299         324
Source:  United Nations Mionthly Bulletin of Statistics.
$5.    Experience since 1957 shows a much more rapid rate of growth in
the exports of the continental countries than of the United Kingdom and
in 1959 for the first time Western Germany's exports exceeded British
exports in value. Not only is the U.K.'s share in world trade in manu-
factured goods tending to diminish, but her ability to provide for a
continuing build-up of investments overseas as well as for higher levels
of consumption at hore is being affected.
Exnorts of United Kingdom Produce and Yanufactures
By Destination
Monthly !verages
£ Million
1953   1955   1957   1958   1959       1960
1st Half
Australia, New Zealand &
South Africa               39     49      46     46      39       42
India, Pakistan & Ceylon    14       16     20      18     20       (7
Other Sterling Area           51     50     54      52     53       (75
Total Sterling Area      104    115    120    116    112        117
Western Europe                58     65     75      69     76        87
North America                26      27     36      38     47        49
Latin America                 9       9     14      13     13        14
Other                        1$      23     29      28     29        34
Total All Countries      215    239    274    264    277        303
Source: Annual Abstract of Statistics and Yonthly Digest of Statistics,
Central Ftatistical Office.



- 26 -
86.    Before the war the countries which now form the Sterling !Area took more
than L0% of the United Kingdom's exports and supplied about 30% of its imports.
During most of the postwar period Britain and many of the countries of the
Sterling Area restricted  impor'ts from non-sterling sources while
admitting sterling goods freely or subject to less severe restrictions and
maintaining Conmnonwealth preferences. The proportion of the United Kingdom's
total external trade conducted with the Sterling Area therefore tended to rise.
Over the years from 1948 to 1953 the pronortion of total imports ori4inating ir
the sterling area rose from 35% to 45% and about 50% of domestic exports went
to countries in that group.  Since 1953 the importance of the Sterling Area
both as a source of imports and as a market for British goods has declined and
in 1959 some 36% of the United Kingdom's import trade and 140% of its export
trade was conducted with the Sterling Area.
87.    This decline can partly be attributed to the progressive removal of dis-
criminatory import restrictions by the United Kingdom and other countries of
the Sterling Area and the greater availability of raanufactured goods from
countries of Western Europe. It is also a reflection of the decline in the
prices of primary products which has affected the export earnings of other
countries of the sterling area and in consequence their ability to import.
This change is particularly noticeable during the years from 1957 to 1959 when
the total imDorts of countries of the sterling area outside Europe from all
sources fell by about 5% wxhile the imports of the industrial countries of the
world, after falling in the recession of 1958, reached a record figure in 1959
88.    British exports to North America have risen rapidly but this advance may
be short-lived.  Exports to W1estern Europe have risen rapidly and until prices
of primary products recover, the expansion of British exports may depend more
on ability to market in that area.
89.    Since the war, major changes have occurred in the composition of
British exports.  The following table gives an indication of the principal
changes.
Leading Exports
Percentage of Total Exports by Value
1938          1957           1959
Machinery other than electric           11            17             19
Cotton goods                            10             3              2
Coal                                     9      (under 1)      (under 1)
Iron and steel                          6              6              6
Chemicals                                6             8              9
Manufacture of metals                    5             5              5
Vehicles and aircraft                    5            12             16
Miscellaneous textiles                   5             3              2
Electrical machinery & apparatus         5              7             7
Woolen goods                             4              3             3
Petroleum & petroleum products           -             3              3
Total                             66             67             72



- 27 -
The outstanding developments during the period have been the relative decline
in exports of coal and textiles and the increasing importance of machinery of
all kinds, electrical equipment, vehicles and aircraft.
90.    Before the war, coal was one of the leading exports of the U.K.  After
the war, difficulties were at first encountered in producing sufficient coal
to meet internal demand and at times imports had to be arranged. In recent
years exports of coal have dwindled as world production has expanded and
countries have turned increasingly to other fuels. In Britain itself the
growth of production as well as consumption of petroleum products has been
rapid and a substantial export trade in petroleum products has been built
up. The industry, however, is based on imported crude oil and whereas
before the war the value of coal exports was equal to the value of imports
of all fuels, net imports of fuel are rising rapidly, and amounted in 1959
to nearly £350 million or more than one-tenth of the value of all domestic
exports.
91.    The exoerience of the textile industry is mentioned in Section III.
The chief decline has been in cotton goods and, with increasing competition
from Far Eastern sources and the expansion of domestic production in major
markets, a reversal of the trend of cotton exports cannot be expected.
92.    The expansion of exports of vehicles and aircraft has been remarkable
particularly in recent years, but a pause in the growth of this export trade
is to be seen at present as North American producers turn to compact cars
and the growth of markets in many developing countries is affected by stag-
nation in export incomes and declining rates of investment. Another factor
is the increasing tendency of developing countries to establish their own
vehicle assembly plants, which may change the form in which British vehicles
are exported. In general, the prospects for growth of motor vehicles and
aircraft exports are favorable. ?xports of electrical machinery and apparatu
have also risen remarkably, but recent figures have shown a decline. Exports
of chemicals have also risen more than proportionately and machinery other
than electric has become by far the most important export.
Sterling Area
93.    The sterling area consists of the United Kingdom and a group of
countries whose trade is financed mainly in sterling and whose reserves
are mainly held in sterling.    It came to be recognized as such after
Britain's departure from the gold standard in 1931, but membership of the
Sterling Area was not defined until the beginning of the war when it began
to operate as a single unit for exchange control purposes. Formally the
cterling Area consists of the "Scheduled Territories" in terms of the Ex-
change Control lct. The Scheduled Territories include all the members of
the British Commonwealth, except Canada, together with a number of countries
outside the Commonwealth.
94.    The control aspect was of greatest significance in the difficult
years during the war, and after the abandonment of the convertibility of
sterling in 1947, when common policies of direct control of external



- 28 -
transactions rere adopted to preserve the stability of sterling in which the
member countries had a mutual interest. Although many of their exchange
control practices were similar, th-ley w-ere by no means uniform.  Many member
countries like the U.K. and its dependencies adopted policies of discrimina-
tory import control favoring other members and restricting imports from the
non-sterling and, in particular, from the dollar -world.  Others did not prac-
tice discrimination, but restricted imports irrespective of source.
95.    Successive balance of payments crises marked by a running domn of gold
and dollar reserves were overcome primarily by an intensification of restric-
tions on payments outside the sterling area. From the time of the Commonwealt
Economic Conference in 1952, however, the countries of the sterling area have
been gradually and progressively liberalizing their restrictions on trade and
payments. Since non-resident sterling was made convertible at the end of 1959
countries of the sterling area have almost entirely dismantled their discri-
minatory import controls.  Some, however, have retained overall import control
for their own domestic economic purposes and capital transactions with non-
sterling countries are still subject to exchange control.
96.    About 60% of the sterling balances in London referred to in paragraph
11 is hleld bey sterling area countries. Many of these countries conduct a
major portion of' their external trade w(ithin the sterling area. Thus in 1957
the rest of the sterling area acquired 315% of its total imports in value from
the U.K. and another 17% from other members of the area. Similarly the rest
of the sterling area sent 31,) of its exports to the United Kingdom and 20%o to
other members of the sterling area.
97.    Some of the traditional factors influencing the growlth of trade within
the sterling area are, however, becoming less important. The United Kingdom
and nany of the independent and dependent countries of the Commonmaealth apply
preferential customs tariffs to goods of Commonwealth origin. Article 1 of
GATT placed a ceiling on preferences and thougzh the matter has been discussed
from time to time no comprehensive effort has been made to secure a revalori-
zation of preferences expressed in specific terms. Specific preferences
applied by the United Kingdom have, therefore, declined in significance as
prices rise and its ad valorem preferences are small. In the outer sterling
area preferences have either tended to be reduced for political reasons or as
part of economic policies designed to foster the growth of domestic industry.
Nevertheless, Commonwealth preferences in the United Kingdom and the prefer-
ential position of Britain in many Commonwealth countries presented a major
stumbling block when the subject of closer economic association of the United
Kingdom with W-Iestern Europe came to be given serious consideration.
Economic Relations with Western Europe
98.    In the mid-1950's, six countries in WJestern Europe - Belgium, France,
Western Germany, Italy, Luxembourg and the Netherlands - decided to establish
the European Economic Community and provide for a customs union and other
forms of economic cooperation among themselves, and special trade relations
with associated overseas territories of metropolitan countries. While dis-
cussions were proceeding, the U.K. proposed an industrial free trade area
consisting of the members of the OEEC. A free trade area rather than a
wider customs union was proposed to retain the ability of individual members



- 29 -
to vary tariffs on imports from outside the area and to enable Commonwealth
imports into the U.K. to retain their preferences in relation to imports from
outside Europe and to be placed on a parity with imports from members of the
free trade area. To maintain the preferential position of Commonwealth sup-
pliers in the U.K. market and to le-ve the position of British agriculture
undisturbed, agricultural products were excluded from the proposal.
99.    A lengthy series of negotiations within OEEC failed to produce agree-
ment and certain members of CEEC outside the Six then reconsidered their
trade relations and decided early in 1959 to establish an industrial free
trade area among themselves. In the course of negotiations bilateral
arrangements were made in respect of certain agricultural products and the
European Free Trade Association of the Seven (Austria, Denmark, Norway,
Portugal, Sweden, Switzerland and the U.K.) emerged. Commonwealth prefer-
ences in the United Kingdom were retained except for imports of industrial
products from the Seven and a small number of foodstuffs. Apart from a
tariff agreement with Denmark on pig products, British agriculture was not
affected.
100,   The U.K.'s interest in closer economic association with Western
Europe is manifold. Both economic and political factors are of great
importance, About 27% of the United Kingdom's exports go to countries
of Western Europe. Furthermore, trade between industrial nations has been
increasing at a greater rate than trade between industrial and primary pro-
ducing countries, and the U.K. was attracted by the possibilities of expand-
ing trade in a Europe free from protective barriers. It was thought that a
wider trading area in Europe would progress at a greater rate and achieve
more stability than one confined to the Six. Politically a wider free trade
area would be of greater benefit to the Wilestern world. On the other hand,
an economic association confined to the Six could detract from the long-term
economic growth of the U.K.
101.   An aim of the Seven in forming the European Free Trade Association
was to assist the conclusion of arrangements for closer association with
the European Economic Community. In 1960 the U.K. had further discussions
with members of the Six, but no indications of progress or of the form
which such an association might take have been reported.



STATISTICAL APPENDIX
Table
1  External Public Debt
2  Estimated Contractual Interest and Amortization Payments on
External Public Debt
3   National Income and Expenditure and Gross National Product
by Industry
h   Gross Fixed Capital Formation in Selected Industries
5   Index of Industrial Production
6   Index of Production of Manufacturing Industries
7   Population
8  Distribution of Manpower
9  Distribution of Manpowe-r - Manufacturing Industries
10 Registered Unemployed
1! Industrial Stoppages
12  Average Wieekly Earnings of Adult Hale Operatives
13 Combined Current and Capital Expenditure of Public Authorities
14 Exchequer Revenue
15 London Clearing Banks Balance Sheet
16 Bank Advances



Table 1:  UNITED KINGDOM - EXTERNAL PUBLIC DEBT OUTSTANDTNG AS OF DECEMBER 31,1960
(In thousands)
Page 1
Debt outstanding
Item                                        December 31, 1960
In currency      In U.S. dollar
of  payment       equivalents
TOTAL EXTERNIAL PUBLIC DEBT /a                                          5,736,681
U.S. Government loans                                                 4,372,288
$3,75O,00,000 loan of 1945, 2%, - 2001 /b        3 3,314,460 /c    3,314,460 /c
$139,791,879 interest arrears
2%, 1956-2002 Ld                              139,792           139,792
$650,000,000 Surplus property and Lend-
leaue  2%, 1945-2001 /b /e                 $    523,714 a         523,7114 /f
622,274h915 interest arrears
2%, 1956-2002 /g                         $     22,275            22,275
pd3221700,000 ERP loan 21%, 1948-1983 /h      $    310,599            310,599
1d:114,2O,000 BEP loan 214, 1950-1983  h      $      13,668            13,668
$47,900,000 NISA loan 21%, 1952-1987 Th       $      47,780            47,780
Canadian Government loan                                              1,095,926
Canf~ 1,185,000,000 loan 2%, 1946-2001 a Can$  1,047,369 ai         1,051,575 a
Can$ 44,174,234 interest arrears
2%,5 1956-2002 /k                    Can$     44,174            44,351
Intergovernmental debt arising from
liquida"ion of European Payments Union                                268,467
BF 3,305,499,500 to Government of Belgium
23 and 3%, 1958-1961                       BF  1,125,116             22,502
DH 1,125,236,175 to Government of Federal
Rep. of Germany 3%, 1958-1971              DII   948,836            225,913
Lit 12,632,041,974 to Government of Italy
2j%, 1958-1961                            Lit  4,200,000              6,720
f. 51,261,579 to Government of the
Netherlands 23%, 1958-1961                 f,      17,087             4,497
SKr 123,799,897 to Government of
Sweden 23 and 3%, 1958-1961               SKr      45,704             8,835
Exchange rates - The following exchange rates have been used:
Par values: BF 1 = $0.02; DM 1 = $0.238095  f.l - $0.263158;
SKr 1 = $0,.193304; Lit 1 = $o.0016.
Current market values: Cant 1 = `1.004016 as of December 31,1960.
/a   Does not include the following:
1) IMiscellaneous loans about which no detailed information is available:
Indian pensions annuity, Z 2,000,000 estimated outstanding
June 30, 1959.
Indian railway annuity, due 1959, t 184,000 outstanding
December 31, 1958.
Pakistan pensions annuity, -e 5,213,000 outstanding
December 31, 1958.
Portugal sterling bond, £ 63,385,000 outstanding
December 31, 1958.
Ceylon War Loans, Cey Rs 9,608,450 outstanding
June 30, 1959.



/a  (Cont.)                              -2-
1) Cont.
Debt to individuals, Y 18,094 outstanding, June 30, 1959.
Debt in various colonial currencies equivalent to
$3,270,000 outstanding December 31, 1958.
2) Loans made by the International Bank for Reconstruction and Devel-
opment, guaranteed by the United Kingdom:
Debt outstanding
December 31, 1960
Outstanding         Un-
including       disbursed
undisbursed
;.285,000,000 to Southern Rhodesia  $  22,000,000         -
414,000,000 to Northern Rhodesia      10,834;000          -
$24,000,000 to East Africa High
Commission                          21,027,000          -
$80,000,000 to Federal Power
Board, Rhodesia & Nyasaland         80o,000000    $  3,571,983
$i28,000,000 to Niigeria              28,000,000        4,071,458
$19,000,000 to Rhodesia and
Nyasaland                           19,000,000        1,6149,378
5,600,000 to Rhodesia and
Nyasaland                            5,600,000        4,l30,i450
$ 5,600,000 to Kenya                   5,600,000        5,317,976
3) e, 5,000,000 ERP loan to Northern and Southern Rhodesia, 2-%, 1951-1965;
equivalent of A5,907,773 outstanding June 30, 1960.  Guaranteed by
United Kingdom,
4) Other loans guaranteed by the United Kingdom. Some of these loans are
guaranteed as to interest only and sorme are guaranteed jointly and
severally with other countries:
Z 3,763,L00 Sudan 412%, 1923-1973
£ 1,500,000 Sudan 4%, 1924-1974
P13,649,690 Irish land purchase 23%, 1892
Z58,328,369 Irish land purchase 2%, 1901
£71,861,470 Irish land purchase 3%, 1910
£25,297,463 Irish Free State land purchase 4h1%, 1924-2004
e 3,600,000 Palestine 3%, 1942-1967
£   500,000 Tanganyika 4%, 1932-1972
£ 1,570,000 Nyasaland 30,0 1934-1974
-17,797,532 Newfoundland 3%, 1934-1963
£ 5,000,000 Turkey 41,,i85,o
5) t232,500O000 portion of the $500,000,000 Export-Import Bank loan
42W, 1956-1965 which has not yet been utilized.  The balance of
this loan has been repaid or cancelled.
6) £ 2,390,000 MSA loan repayable in local currency, equivalent of
*5,237,218 outstanding December 31, 1960.
/b   The agreement on this loan contains the following provisions:
"In any year in which the Government of the United Kingdom requests the
Government of the United States to waive the amount of the interest due in
the instalment of that year, the Government of the United States will grant
the waiver if:-



-3-
/b   (Cont.)
(1) The Government of the United Kingdom finds that a waiver is
necessary in view of the present and prospective conditions
of international exchange and the level of its gold and
foreign exchange reserves, and
(2) the International iMonetary Fund certifies that the income of the
United Kingdom from homne-produced exports plus its net income
from invisible current transactions in its balance of payments
was on the average over the five preceding calendar years less
than the average annual amount of United Kingdom imports during
1936-8 fixed at £ 8665000,000, as such figure may be adjusted
for changes in the price level of these imports, Any amount in
excess of £ 43,750o000 released or paid in any year on account
of sterling balances accumulated to the credit of overseas
governments, monetary authorities and banks before the effective
date of this Agreement shall be regarded as a capital transaction
and therefore shall not be included in the above calculation of
the net income from invisible current transactions for that year.
If waiver is requested for an interest payment prior to that due
in 1955, the average income shall be computed for the calendar
years from 1950 through the year preceding that in which the
request is made.
Waiver of interest will not be requested or allowed under section
5 in any year unless the aggregate of the releases or payments
in that year of sterling balances accumulated to the credit of
overseas governments, monetary authorities and banks (except in
the case of colonial dependencies) before the effective date of
this Agreement is reduced proportionately, and unless interest
payments due in that year on loans referred to above are waived.
The proportionate reduietion of the releases or payments of
sterling balances shall be calculated in relation to the aggre-
gate released and paid in the most recent year in which waiver
of interest was not requested.
The application of the principles set forth in this section
shall be the subject of full consultation between the two
governnents as occasion may arise."'
The provisions of this loan were revised on iMlarch 6, 1957 as follows:-
(l)"In any calendar year after December 31, 1956, in which the Govern-
ment of the United Kingdom advises the Government of the United
States that it finds that a deferment is necessary in view of
the present and prospective conditions of international exchange
and the level of its gold and foreign exchange reserves, the
Government of the United Kingdom may defer the payment of the
annual instalment for that year of principal repayment and
interest specified under Section 4. Nlot more than seven (7)
annual instalments may be so deferred. The first of any such
deferred instalments shall be paid on December 31, 2C01, and
the others shall be paid annually thereafter, in order.



/b  (Cont.)
(2) In addition, the instalment of interest in respect of the year
1956 is hereby deferred, in lieu of any right of waiver hitherto
existing. This instalmrient shall be paid on December 31 of the
year following that in which the lass of all other instalments,
including instalments deferred under the preceding paragraph,
is due.
(3) Deferred instalments shall bear interest at the rate of 2 per
cent per annum, payable annually on December 31 of each year
following that in which deferment occurs.
(4) Payment of deferred instalments may be accelerat-ed, in whole
or in part, at the option of the Government of the United
Kingdom."
The Government of the United Kingdom undertakes not to defer an instalment
in any year unless it also defers the instalment due in that year under
the Financial Agreement between the Government of Canada and the Government
of the United Kingdom, dated i4arch 6, 1946.
/a   Includes CS49,929,819 instalment of principal deferred in December 1957e
d   Consists of `.70,385,447 deferred in December 1956, and %69 406,431 deferred
in December 1957,
/e   The agreement on these loans contains the same clauses as are quoted in
footnote b above.  In addition it contains the followsing provision:
tTLhe Government of the United Kingdom agrees that, when requested
by the Government of the United States from time to time prior to
Desember 31, 1951, it wAill transfer, in cash, pounds sterling
to an aggregate dollar value not in excess of $50,CO,,,00at the
exchange rates prevailing at the time of transfer, to be credited
against the dollar payments due to the Government of the United
States as principal under this settlement. The Government of the
United States will use these pounds sterling exclusively to acquire
land or to acquire or cons,ruct buildings in the United Kingdom and
the colonial dependencies for the use of the Government of the
United States, and for carrying out educational programs in accordance
with agreements to be concluded between the two Governments.rt
A subsequent exchange of notes between the Government of the TUnited Kindgom
and the Government of the United States increased the amount by $14,250,000
to $r64h250,C00, and extended the effective date from December 31, 1951 to
such time as the additional amounts are expended.
/f   Includes $ 6,372,932.35 instalment of principal deferred in December 1957.
/g   $11,230,808.63 deferred in December 1956, and dll,h44,105.93 deferred in
December 1957.
,'h The agreement on this loan contains the following provision:
"If at any time or from time to time the parties hereto determine that
it would be in their common interest, because of adverse economic
conditions or for any other reason, to postpone or provide for the
postponement of any instalments of interest or principal, or to alter
or provide for the alteration of any provisions of the aforesaid



/~(cont.)                              5
promissory note relating to payment of interest and principal, or
to modify the aforesaid promissory note in any other respect, they
may by mutual agreement in wuriting provide fcr any such post-
ponemen-t-or alteration or other modification."
/i   The agreement on this loan contains the following provisions:
"_n any year in which the Government of the United Kingdom requests
the Government of Canada to waive the amount of the interest due
in the instalment of that year, the Government of Canada will grant
the waiver if:
(1) The Government of the United Kingdom finds that a waiver
is necessary in view of the present and prospective
conditions of international exchange and the level of
its gold and foreign exchange reserves; and
(2) The International Monetary Fund certifies that the income
of the United Kingdom from home-produced exports plus its
net income from invisible current transactions in its
balance of payments was on the average over the five pre-
ceding calendar years less than the average annual amount
of United hingdom imports during 1936-1938, fixed at 866
million pounds as such figure may be adjusted for changes
in the price level of these imports. If waiver is re-
quested for an interest payment prior to that due in 1955,
the average income shall be computed for the calendar
years from 1950 through the year preceding that in which
the request is made; and
(3) Interest payments due in that year on any credit made
available to the Government of the United Kingdom to which
a similar provision for waiver of interest applies are
also waived."
The provisions of this loan were revised on Iliarch 6, 1957 as follows:
(1)"In any calendar year after December 31, 1956, in which the
Government of the United Kingdom advises the Government of
Canada that it finds that a deferment is necessary in view
of the present and prospective conditions of international
exmhange and the level of its gold and foreign exchange
reserves the Government of the United Kingdom may defer the
payment of the annual instalment for that year of principal
and interest required to be made under Article 3. No more
than seven such annual instalments may be so deferred. The
first of any such deferred instalment shall be paid on
December 31, 2001, and the others shall be paid annually
thereafter, in order.
(2) In addition to the foregoing, the instalment of interest,
in respect of the year 1956, is hereby deferred in lieu of
any right of waiver hitherto existing. This instalment of
interest shall be paid on December 31 of the year immediately
following the year in which the last of all other instalments,
including instalments deferred under the preceding paragraph,
is due.



./i (Cont.)
(3) Deferred instalments shall bear interest at the rate of 2 per
cent per annum payable annually on December 31 of each year
folloTwing that in which deferment occurs.
(l) Payment of deferred instalmernts may be accelerated, in whole
or in part, at the option of the Government of the United
Kingdom."
The Government of the United Kingdom undertakes not to defer an
instalment in any year unless it also defers the instalment due in
that year under the Financial Agreement between the Government of
the United Kingdom and the Government of the United States, dated
December 6, 19450
/j  Includes Can$ 15,777,822.67 installment of principal deferred in December
1957.
/k   Can$ 22,241h,801l,4  deferred in December 1956 and Can$, 21,932,432,33 deferred
in December 1957.
IBED - Economic Staff
February 17, 1961



Table 2: UNITED KINGDOM - ESTIMATED CONTRACTUAL SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBT OUTSTANDIM AS OF
DECEMBER 31, 1960 /a
(In thousands of U.S. dollar equivalents)
r stanoung      Payments during year              Debt out-Payments during year
udisbursed       zation  terest     Total         disbursed     zation    terest       Total
Total deb                                      U.S. Goverrnment loans
1961 5 9 3-. 6 8 1   i-426862 3   119  Q   _26,523        4,372,288    68,926    89,274   158,200
1962   5,587,058   10964, 7   1159586   225,233           4.303,362     71,161      87,863    159,024
lA963   5477, 411L112,258   211,143   2254Q               4,232o,201    73.422    86,402   1 5 9, 824
1964   5, 3 6 5, 1 53   1149,03   110,64; o      22, 551  4 1 5 8, 7 7 9                      I, 710    84*89 16* 6 0 2
1J26L   %*?S50?2iO    1 1 7.5;7(    102 .iZ194   22r)5,f472j  4,083,069  78,020    83,331    161,351
1966   5 132,674   120,203   105,480   225,768            4*005,049    809360    81,719    162,079
1S61_ ___ 3>Q54                     R,2) 'I   2 2         30924t689    82,748    80,055    1629803
1968   4,6899332   125,814   1009076   225,890            3,841,941    85,122    7-78-, 339___. 1 63,461
j%9   4.763,518   I                       2 25t315        397569819    87,547    76,569   164t116
1970   4,634,885   131,488       i4,42a   225,91-6        3,669,272   '90,000    74,747   164,747
I21__ 4s5f s3,397   1,2.294     21.514   220,3nS8         3,579,272    92,483    72,873    165,356
1972   4,374,103   116,314    88,687   205 00i            394869789    94,998    70,941    165,939
ll7ik_L_I1J8&H c     il*282    or6,2i-8 205,560           3,391,791    97,540    689958    166,498
1574   4,133,507   122,233   03,80 1   2ooo ,o            3,2949251   100,116_   66,916    167,032
L9 75  3k1LU1L t12L,3Ak           l                       39194,135   102,724    64,819    167,543
Canadian Government loan    -PU liqudation dbt
1961   1,095,926    17,143   221,919_   39062              268,467    63,554        79707     71,261
1962   1,078,783    17,486    21,576    39s062              204,913    219000        6,147     27,147
1963   1,061,297      17,9836    21,226    39,062           183,913    219000        5,517     26,517
1964   1,043,461    18,193    20,869    39,062              162,913    219000        4,887     25,887
1965   1.Q25.268    18,556    20,506    399062              141,913    21,000       4,257      25%27)
1966   1,006,712    18,928    20,134    39,062              iu6,9i3         u u U    32,
1967    9_87O784    19,306__  10 67 5-  Z39,O4                ',9ii         000       ,9'i7      3   7
1968     968,478    19,692    19,370    399062               70,913     210 00       213o7    23,Dut
1969     948,786   i2O86          89_  _9,n62                D7,913     21,000       1,7,7    22, 737
1970     9289700    20,488    18,574    39,062               Di)3                    1 ,107    22,107 1
1971     9089212    20,898    18164    399062               15,913    15,913    _   77         6
1972     887,314    21,316    17,746    399062
1973     865.998    212742       17,320    35.9062 _
1974     844,256    22,177    16,885    39,062
975      822-079 _226           16A 442    19206 2
a Includes service on all debt included in Table-1 prepared on February 17, 1961.
IBRD - Economic Staff



TABLE 3
NATIONAL INC O1E AND EXPENDITURE
rt current prices)
£ billions
19L9     1952     1955      1958     1959
Incomes
Income from employment             7.2       9.1     11.2      13.4     13X9
Income from self-employment         i.4      1.5      1.7       1.8     19
Gross trading profits of
companies                        1.8       2.2      2.9       3.1      3.4
Gross trading profits of public
corporations and other public
enterprises                       .3        .3       .4        .5       .5
Rent                                 .1       o6       .7       1.0      1.1
111      13*7     17.0      19.8     20.9
Stock changes and residual
error                           -  2      + e2     - .2      + .2     - .2
Gross doriestic product at
factor cost                     10.9      13.9     16.8     20.0      20.7
Net income fron abroad              .2        .1       .1        .2       .2
Gross National Product            11.1      14.0     16.9      20,2     20.9
Expenditure
Consumers'expenditure              8.9      10.6     12.9      15.1     15.7
Public authorities current
expenditure                      2.0       2.9      3.2       3.7      4.0
Gross fixed capital formation
at home                          1.6       2.1      2.8       3.5      3.7
Change in stocks and work in
progress                          .1        .1       .3        .1       .1
Total domestic expenditure at
market prices                   12.5      15.7     19.3      22e4     2365
Exports and income from abroad    2.7       4h1       4.6       5.2      5.3
Less Imports and income paid
abroad                           2.6       3.9      4.7      4.8       5.0
Less Taxes on expenditure          2.0       2.3      2.6       3.0      3.2
Subsid-ies                           .5       .4        .3       .4       .4
Gross National Product            11.1      14.0     16.9      20.2     20.9
Less Capital consumption             .9      1.3      1.5       1.9      2.0
National Income                   10.2      12.7     15.4      18,3     18.9



TABLZ 3
(Continued)
GROSS NATIONAL PRODUCT BY INDUSTRY  /
(at current prices)
E Billions
1949    1952    1955    1958    1959
Agricultural forestry & fishing         .7       .8      .8      .9       .9
Mining and quarrying                    .4       .5      6       .7       .7
14anufacturing                         3.7     4.7      6ca     7.0     7.5
Construction                            .6       .8     1.0     1.2     1.2
Power, water, transport and
ccmmunication                        1.1     1.5      1.8     2e1     2.2
Distribution trades                    1.5     1.7      2.2     2.5     2.6
Other services                         1.6     1,8      203     2.7     2.8
Total production and trade             9.7    11.7    14.7    17.0    17.8
Public administration, defense          .7       .9    l1O      1.2     1.3
Public health and education             .3       .4      .5      .7  _     8
Gross domestic product at factor
cost 2/                             10.9    13.9    16.8    20,0    20.7
Net income from abroad                  .2       .1      .1       2       .2
Gross National Product                11.1    14.0    16.9    20,2    20.9
1/ The contribution of each industry includes provision for depreciation
and stock appreciation.
2 Includes other services and deduction for stock appreciationo
Source:  National Income and Expenditure, Central Statistical Office.



TABLE 4
GROSS FIXED CAPITAL FOR(IAT ION INi SELECTED INDUSlTRIES
(At current prices)
1992  12 jO        1   L-n .L2 13   17 5§4   19 .5  1956   1957   1298   19
Agriculture                                 87     87      91     93     90      96    104      95    106    125    134
Manufacturing                              377    444    514    549    547    531    673    817    903    893    820
Of which:
Food, drink & tokacco                     45     53     58      57     56      60     73      84     91     95      92
Oil refining                             18      32     34      40     33      16     13      22     42     40      28
Chemicals, etc.                           43     57     75      31     92      96    103    L'.0    153    165    126
Iron and steel                           42      49     54      55     52      69     69    383    107    126    113
Engineering, electrical goods, ship-
building & marine engineering            58     62     77      95     96    106    130    151    159    159   (
Vehicles and aircraft                     21     33      54     70             5 1    63      83     8       72   (248
Textiles, clothirng & leather             64     64     63      54     53      65     75      70     73      60     67
Coal Mining                                 28     26      28     40    155      70     77      82     91      95    105
Gas, electricity ard water                 171    195    227    239    265    304    344    340    357    385    425
Railways                                    42     44      44     40      54     65      69     39    124    138    167
Shipping                                    72     66      54     53     33      83     76    103    131    149    160
Posts, telephones, etc.                     40     41      48     59      68     69     82      94     96      90     89
Distributiona, roacl -transport, etc,      239    254    269    282    297    355    450    490    517    575    592
Dwellings                                  332    331    376    494    630    6b4    614    626    610    532    646
Education & chi'ld care                     44      58     69    '78      80     82      90    114    136    142    148
Total (including other)                  1,610  1,733  1,920  2,1j37  23392  2,588  2,849  3,147  3,409  3,532  3,673
Source:  National Income and Expenditure:  Central Statistical Office,



T ABLE, 5
INDE' OF INDU3STRIp.L '7 ODUCTION
(1954=l100)
1948   1949   1950   1951   1952   1953   1954   195 5   1956   1957   1958   1959
14ining and quarrying             91     94     95     98     99      99     100    99      99     99     94     92
Construction                      87     91     91     87      90     96     100   100    106    106    105    111
Gas, electricity *& water         69     74     80     86     88      93     100   105    110    114    119    123
Manufacturing                     77     82     33     92    3m       94     100   106    106    108    107    114
All Industries                    79     84     88     91     89      94     100  1]05    106    107    106    113
Source:  Annual '.bstract of Statistics:  Central Jtatistical Office.



T BL1, 6
IND.T: OF -cj'07IJCTION "If (,ANTUF =TUYITjG INDUSTR=IS
(Average 1954 = 100)
1948   1949   1950   1951   1952   1953   1954   1955   1956   1957   1958   1959
LL IdANUFACTURING INDUSTEIES         77     82      80     92  _          94    100    106    106    1048 107        114
Industries Increasing Output at
Greater than WveraRe Rate
Coke ovens, oil refineries, etc.   47      57      58     70     80      86    100    105    112    110    116    127
General chemicals, etc.             72     74      84,    86     80      90    100    106    110    116    115    132
Engineering & electrical  oods      69     76      86     91     92      94    100    107    107    110    112    120
Vehicles                            61     71      76     80     80      90    100    115    107    115    118    131
Paper, printing & publishing        66     75      87     91     77      86    100    108    106    109    111    117
Timber, furniture, etc.             70     80      84     91     80      89    100    100      94     96      94    101
Industries Increasing Cutput at
Less than *iverage -iate
Food                                79     84      85     89     92      98    100    101    104    104    108    110
Drink & tobacco                    103    103      99    100    100    100    100    106    108    112    113    120
Ferrous metals                      82     85      88     92     95      96    100    108    111    113    100    104
Non-ferrous metals                  87     80      87     98     98      85    100    111    108    107    106    113
Shipbuilding & mechanical eng.    117    106       94     96     99    105    100    109    117    108    109    101
Other mertal gods                   93     93      95    101     98      92    100    112    108    109    106    114
Textiles                            86     92    100    100      82      97    100      98     96     97      87     92
Clothing & footwear                 88      97    101     96     92    100    100    104    106    105    102    112
Leather and fur                    108    109    110    107      94    102    100    100       94     93      88     91
Bricks, cement, etc.                75     78      83     87     91      97    100    101    101      97      94    100
China & earthenware                 92     95    100    105      99      98    1CO    100      90     90      92     97
Glass                               86      92     98    105      91     96    100    114    114    111    115    122
Source   Annual 'bstract of Statistics.



TABLE 7
POPULATION
1. Age Distribuition of the de facto Population
(As at 30 June each year)
1939    1951    1959
Millions
Under 15                                       io.4    11.3    12,1
15-64                                          333l             33e8
65 and over                                     4o3 5.5           6GO
Total Pcpulation                           47.8    50o2      52.O
- -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -     -
2. Birth Rate
1939      1946-1949              195o-1956              1957-1959
TLve5 births per 1,000 total population)
l152  Between 16.7 and 20O5 Between 15O and 15.9 Between 16.1 and 16(.,
Source: Annual Abstract of Statisticsg Central Statistical Office.



TABLE 8
DISTRIBUTION OF MANTPOWER
IJnited Kingdom
(Millions)
End of June
19463      19514l9SLi.  1957   195~3        1960
l/     1/
H.M.  Forces                             .9     .8     .8      .7     .6    .6       .5
Agriculture, forestry and fishing      1.3    1,2    1.2    1.1    101   10    1.0
Mining and quarrying                     .9     .9     .9      .9     .9     .8      .8
M4anufacturing industries               8.3    8e9    9,2    9,5    9.3    8.5    8,8
Building and contracting               1.5    1.5    1.5    1.6    1.5    165    1.5
ras, electricity and water               .3     .4     .4      .4     .4     .4      .4
Transport and communications           1.8    1.8    1.7    1.8    1.7    1.7    1.7
Distributive trades                    2.5    2.7    208    3.O    3.0    3.2    3.3
Public administration                  1.4    1.4    1.4    1.3    1.3    1.2    1.2
Insurance, banking & finance             4      o5 65 6                5   (
Professional services                  1.5    1.7    1.8    1.9    2.0   (4.9    5.0
Miiscellaneous services                 2.1    1.9    1.9    1.8    1.8   (
Registered unemployed                    03     .2     .3      .3      5     .4      .3
Total Working Population              23., 23,8  24.2  2h48   24h6   24.2   24.4
1/ Figures exclude Northern Ireland.
Standard Industrial Classification 1958, previous years 1948 classification.
Sources: Annual Abstract of Statistics, 1959 and Monthly Digest of Statistics.



TABLE 9
DISTRIBUTION OF MANPOWER
Manufacturing Industries
(In thousands)
End of June:      1948      1954     1958      19592/   196011
Industries showing the largest
percentage increases 1958:1948
Chemicals, etc.                            442      503       538      518       530
Engineering, shipbuilding and
electrical goods                      1,834    2,014    2,177    2f,175    2,281
Vehicles                                   983    1,195    1,253       862       911
Food, drink and tobacco                    771      911       954      803       815
Paper and printing                         478      546      591       568      6oo
Industries registering decreases in
manpower since 1948 or 1954
Textiles                                 1,002    1,c66       927      842       854
Clothing and footwear                      681      723       676      545       558
Leather goods and fur                       83       77        68       63        63
Other Manufacturing Industries             2,065    2,154    2,163    2,101    2,122
Total                      8,339    9,189    9,347    8,477    8,834
1/ Figures exclude Northern Ireland.
Standard Industrial Classification 1958; earlier years 1948 classification.
Sources: Annual Abstract of Statistics 1959 and 1Ionthly Digest of Statistics.
Central Statistical Office.



T_A9 LE 10
RE,GT5TEPE, D U!NE1-iFLCYT~D
1938   1943   1951   1954   1957   1953   1959           _1959                  1960
MI:.onthly kverages                  Jan.   IIay   Aug.   Jan.   May   Aug.
Numbers in Thousands
Great Britain             1,791    282    253    285    313    457    475    621   481    427    461   341    321
Northern Ireland             91     28      29     33     35      44     37      46    38      34     37    32      29
United Kingdom           1,882    310    282    318    348    501    512    667   519    461    498   373    350
)'ercerrtare of Total
Number of Eimloyees
Great Britain              11.6    1.4    1.2    1.3    1.4    2.1    2.2    2.8   2.2    2.0    2.1   1.5    1.4
Northem  Ireland           26.1    6.1    6.1    7.0    7.3    9.3    7.8    9.7   8.0    7.2    7.8   6.7    6.1
Source:  Annual Statistical Abstract and Monthly Digest of U-tatistics, Central Statistical Office.



TABLE 11
INDUSTRIAL ST07-?AGES
All Industries and Services
(Milillions)
1938   1949   1950   1951   1952   1953   1954   1955   1956   1957   l958   1959
Number of lorkers Involved        .3    .4       .3     .4     .4    1.4      .4     .7      .5    1.4     .5      .6
Total W4orking Days Lost         1.3    1.8    1.4    1.7    1.8    2.2    2.5    3.8    2.1    8.4    3.5    5.3
Of which:
Mining and quarrying          . 7    .8     .4      .4     .7     .4      .5    1.1      .5     .5     .5      .4
Mvetals, engineering, ship)-
building & vehicles         .2     .3     .3      .5     .8    1.5      .7     .7    1.0    6.6      .6    1.0
Transocrt & communications  -;       .5      .2    .6      7       .1     .9    1.7            1.0    2.1      .1
* Negligible.
Note: Total number of man-working days per annum exceeds 5,500 million.
Solrce:  An-nual Abstract of :statistics, Central Statistical Office.



TABLE 12
AVERAGE WEEKL! EARNINGS OF ADULT MAIE OPERATIVES IN CERTAIN INDUSTRIES
1950       1959
(Earnings to nearest
shilling in April of   Percentage
each year)               Increase
All IndustriesA/                         1146       263         80
Vehicles                                163         297         82
Metal manufacture                        166        289         74
Chemicals & allied trades               148         268        81
Engineering, shipbuilding &
electrical goods                      151         274        81
Textiles                                142         240         69
Clothing                                141         234         69
Food, drink and tobacco                 134         243         81
Buuilding and contracting               140         255         82
Gas, electricity and water              137         246         80
Government service                       117        20          75
Dock labor (all wage earners)            156        291         78
Coal mining                             182         3151        71
British Railways                        139         235         69
Agriculture3/                            111        194         75
1/  Excludes dock labor, coal mining, nationalized surface transport
and agriculture.
2/ 1958 - comparing 1958 with 1950 the percentage increase in average
earnings per manshift worked was 81.
3/ Average weekly earnings of agricultural workers in six-month period
ending 31st March of each year.
Souarce: Annual Abstract of Statistics, Central Statistical Office.



TABLE 13
COMBINED CURRENT AND CAPITAL EXPENDITURE CF PUBLIC AUTHORITIES
£ Millions
1950     1955     1959
Debt interest                                    551       771      920
Defense                                          863    1,620    1,610
Housing                                          340      422       369
Education and child care                         442       676    1,008
Health services                                  478       585      797
National insurance, pensions & assistance        674    i,016    1,482
Total (including other items)                  4,588    6,243    7,833
Source:  National Income and Expenditure:  Central Statistical Office.



TABLE 14
EXCHEQUER REVENUE
£ Millions
Years Ended 31 March
1950    1952    1954    1956    1958    1959
Principal Items of Inland Revenue
Income tax                        1,438   1,669   1,731   1,943   2,208   2,322
(Standard rate                  9sOd    9s6d    9sOd    8s6d    8s6d    7s9d)
Surtax                               115     130     133     139      157     167
Death duties                         190     183     165      176     171     187
Profits tax                          261     321     195     196      252     272
Excess profits tax and levy           36      --      59       16       3       3
Principal Items of Customs and
Excess Revenue
Beer                                 277     261     255      259     261     253
Wines and spirits                    117     118     128      150     160     157
Tobacco                              601     614     627      669     713     737
Hydrocarbon oils                      63     201     290      323     322     346
Protective duties                     65     116      67       87     104     110
Purchase tax                         292     338     300     419      494     498
Total Ordinary Revenue               3,924   4,433   4,368   4,893   5,342  5,,480
Source: Annual Abstract of Statistics: Central Statistical Office.
9j