Cablegram H343 LONDON, 11 August 1948, 3.25 p.m.
IMPORTANT SECRET
We think that Commonwealth Governments will wish to be aware of how our thoughts are developing here with regard to certain aspects of our economic planning for the future. The central economic planning staff here has been engaged in working on a programme for the United Kingdom for 1948-52.
2. As the Commonwealth Governments are aware in response to requests by the United States authorities OEEC [1] countries have agreed to prepare a programme showing how they intend to attain viability in 1952-3 i.e. on the termination of aid. United States authorities emphasised that such a programme is an essential part of the preparation of the case for the second appropriation on the outcome of which it may have a very great influence. They have asked that the submission by OEEC of the completed programme should be made not later than 15th November (so that it may be available in time for them to prepare their case for the second year’s appropriation which will be considered by Congress in January): accordingly it has now been decided by OEEC that the programmes by individual countries should be despatched to Paris by the 1st October. There would thus be a period of six weeks in which the programmes of the individual countries could be correlated and adjusted and the completed programme prepared.
There are obvious difficulties in the preparation of such a programme especially in so short a time. The United Kingdom pressed for the date of submission to be put back possibly to the beginning of 1949. We were told however that this would be too late for the preparation of the case for Congress and as indicated above OEEC agreed to the preparation of the programme by 15th November. On the other hand we are impressed with the advantages from the point of view both of the important effect on United States opinion and of the encouragement to other participating countries to adopt schemes of European co-operation which are of interest to us.
3. The present position is that the council of OEEC have settled the broad lines on which the programmes by participating countries should be drawn up. It is hoped that the instructions may be received from Paris shortly and the compilation of the necessary reports and returns by this country will involve us in intensive study during the next two months. Copies of the instructions will be forwarded as soon as received. We shall also be communicating our programme to the Commonwealth Governments as soon as we are in a position to do so.
4. The basic consideration in the formulation of our long-term programme will be that we must emerge after the E.R.P. period with gold and dollar reserves at no lesser amounts than they were at the beginning and it is in our common interest to resist any further drawing down of our reserves.
5. Each country will base its programme for submission to Paris on a tentative forecast of its balance of payments in 1952. In our own case certain conclusions which appear to emerge are that (I) We are likely to be in substantial deficit with the dollar area for some time to come and shall therefore still have to continue and indeed to increase our diversion of imports form the dollar area to other sources, and (II) Even with considerably increased exports we might have to be content with a volume of imports lower than in 1938.
6. As regards the other participating countries it is likely that many of them will expect to be short of sterling in 1952. The tables provide for non-sterling participating countries to show in their balance of payments forms a separate column indicating their balance of payments with the rest of the sterling area.
7. Conditions of production and trade in the world outside the area of Western Europe will be of great importance in drawing up the OEEC plan. The secretariat is accordingly making arrangements to secure the necessary information about other parts of the world (for example the Economic Commission for Europe is being asked to provide information about Eastern Europe). The United Kingdom have been asked by OEEC to furnish information about the general lines of development in other Commonwealth countries. Our delegate informed the committee that we could not give any undertaking to make available information about developments in other Commonwealth countries but that we would be willing to bring the proposal to their attention and communicate whatever information they are able to supply. We shall be communicating with you separately about this.
8. It will be clear that there are likely to be a number of matters which will call for close and direct consultation with Commonwealth Governments. We shall naturally take every opportunity to keep Commonwealth Government in touch as our planning develops.
Should propose to do this through ordinary official channels or by discussion with appropriate officials in London. Whenever this may be possible. In particular, we are looking forward to an opportunity of exchanging views with Prime Ministers at the contemplated meeting in October. In this connection it should be explained that although the United Kingdom programme will have to be submitted to OEEC by 1st October, we should propose to make it clear that this was provisional until this exchange of views has taken place. The Chancellor of the Exchequer took the opportunity of mentioning this aspect of the matter to Mr. Hoffman [2] during their recent discussions in Paris, and the latter said that he quite appreciated the position. But it must be emphasised that we must confirm our programme not later than the 15th October.
9. Owing to the closeness of the time-table and in view of the important issues involved we should greatly welcome the opportunity of advance discussion of our plans with appropriate Commonwealth representatives in London. In this connection we have arranged that Sir Edwin Plowden, head of the Central Economic Planning staff, should be available with other experts concerned for consultation with Commonwealth representatives on planning questions. We hope to keep this arrangement as flexible as possible, and our intention would be that it would cover the exchange of information on any planning matters at the initiative of either party. As the next few months will be of great importance it is hoped that Commonwealth Governments will feel able to arrange for qualified officers to be available in London for this purpose.
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1 Organisation for European Economic Co-operation.
2 Paul G. Hoffman, Administrator of the US Economic Cooperation Administration.
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[AA: A3318, L48/3/2/1/11]