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SECRET
57
derived from income taxes, to indirect, mainly
this figure from £250 millions, prewar; of this
customs and excises. An important element
total India and Pakistan alone hold over
of the annual expenditures, both because of its
£1,000 millions. It is the contention of the
size (£485 millions in 1948-49) and purpose, is
United Kingdom that these balances represent
the food subsidy. The expenditures on sub-
a joint contribution to the war effort and as
sidies are defended by the government on the
such should be liberally scaled down, if not
ground that they prevent inflation by restrain-
written off entirely. This view, however, is
ing the demand for increased personal income
not shared by the creditor nations. Pending
to meet the increased cost of living that would
a final settlement of the matter, as stipulated
otherwise arise. The government's hopes of
under the terms of the Anglo-American Loan
attaining its desired budgetary surplus were
Agreement of 1946, the United Kingdom has
jeopardized by the possibly increasing expendi-
frozen many of the larger balances in special
tures of the rearmament program, which was
accounts, although releases of certain portions
initiated in September 1948; by the costs of
of them for current expenditures are mutually
the government-sponsored health services,
which are running higher than anticipated;
agreed upon from time to time.
and by the increased costs of the food sub-
b. The Balance of Payments.
sidies. Nevertheless, _revenues likewise ex-
The supreme problem of British postwar
ceeded expectations and the 1948 surplus was
economic planning is to restore the balance
achieved.
of payments to such a position that the stand-
The net National Debt of the United King-
ard of living can be maintained without bor-
dom in 1948 is estimated at nearly £26 billions,
rowing from other countries. So central is
down about £10 millions from 1947. The debt
this problem that the degree to which it has
amounts to about £500 per head of population
been solved has been accepted as a rough in-
and calls for an annual service charge of about
dication of the degree to which postwar recov-
£500 million. The external or foreign portion
ery has been achieved.
of the National Debt is estimated at £1,556 mil-
The importance of the balance of payments
lion for 1948, which includes the US Loan of
to Britain arises from the nature of the Brit-
1946 of $3,750 million, Canadian Loans and
ish economy, which, as has been described
Credits of about $1,500 million, and the South
above, depends to a very great degree upon
African Gold Loan of an amount equivalent
international trade in the absence of an abun-
to $320 million. An added external obligation
dance of natural resources at home. For many
of the United Kingdom consists of the Sterling
years the United Kingdom, as an international
balances, accumulated during the war period
creditor, had shown deficits on balance of mer-
from sales of goods and services to the Brit-
chandise trade; these deficits had been more
ish and from the sale of dollars and other cur-
than made up by income derived from foreign
rencies contributed to the foreign exchange
investments as well as from the earnings of
pool by members of the sterling area. They
shipping, banking, and other services. Some
were estimated in December 1947 to amount
of these surpluses were customarily invested
to some £3,675 millions, having advanced to
overseas, and swelled the annual returns of
ECRE
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"ocrText": "SECRET\n57\nderived from income taxes, to indirect, mainly\nthis figure from £250 millions, prewar; of this\ncustoms and excises. An important element\ntotal India and Pakistan alone hold over\nof the annual expenditures, both because of its\n£1,000 millions. It is the contention of the\nsize (£485 millions in 1948-49) and purpose, is\nUnited Kingdom that these balances represent\nthe food subsidy. The expenditures on sub-\na joint contribution to the war effort and as\nsidies are defended by the government on the\nsuch should be liberally scaled down, if not\nground that they prevent inflation by restrain-\nwritten off entirely. This view, however, is\ning the demand for increased personal income\nnot shared by the creditor nations. Pending\nto meet the increased cost of living that would\na final settlement of the matter, as stipulated\notherwise arise. The government's hopes of\nunder the terms of the Anglo-American Loan\nattaining its desired budgetary surplus were\nAgreement of 1946, the United Kingdom has\njeopardized by the possibly increasing expendi-\nfrozen many of the larger balances in special\ntures of the rearmament program, which was\naccounts, although releases of certain portions\ninitiated in September 1948; by the costs of\nof them for current expenditures are mutually\nthe government-sponsored health services,\nwhich are running higher than anticipated;\nagreed upon from time to time.\nand by the increased costs of the food sub-\nb. The Balance of Payments.\nsidies. Nevertheless, _revenues likewise ex-\nThe supreme problem of British postwar\nceeded expectations and the 1948 surplus was\neconomic planning is to restore the balance\nachieved.\nof payments to such a position that the stand-\nThe net National Debt of the United King-\nard of living can be maintained without bor-\ndom in 1948 is estimated at nearly £26 billions,\nrowing from other countries. So central is\ndown about £10 millions from 1947. The debt\nthis problem that the degree to which it has\namounts to about £500 per head of population\nbeen solved has been accepted as a rough in-\nand calls for an annual service charge of about\ndication of the degree to which postwar recov-\n£500 million. The external or foreign portion\nery has been achieved.\nof the National Debt is estimated at £1,556 mil-\nThe importance of the balance of payments\nlion for 1948, which includes the US Loan of\nto Britain arises from the nature of the Brit-\n1946 of $3,750 million, Canadian Loans and\nish economy, which, as has been described\nCredits of about $1,500 million, and the South\nabove, depends to a very great degree upon\nAfrican Gold Loan of an amount equivalent\ninternational trade in the absence of an abun-\nto $320 million. An added external obligation\ndance of natural resources at home. For many\nof the United Kingdom consists of the Sterling\nyears the United Kingdom, as an international\nbalances, accumulated during the war period\ncreditor, had shown deficits on balance of mer-\nfrom sales of goods and services to the Brit-\nchandise trade; these deficits had been more\nish and from the sale of dollars and other cur-\nthan made up by income derived from foreign\nrencies contributed to the foreign exchange\ninvestments as well as from the earnings of\npool by members of the sterling area. They\nshipping, banking, and other services. Some\nwere estimated in December 1947 to amount\nof these surpluses were customarily invested\nto some £3,675 millions, having advanced to\noverseas, and swelled the annual returns of\nECRE"
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