Devaluation of Sterling: 18 November 1967 Posted on: 17 November 2017 ‘Faith, hope and parity’ On Saturday, 18 November 1967, sterling was devalued by 14% from $2.80 to $2.40. Although rumours of impending devaluation had been widespread in the press, including in Europe and the United States, the announcement by the Labour government headed by Harold Wilson administered a severe shock to international confidence and to domestic opinion in the UK. James Callaghan Appearing on television the following day, the (Ron Kroon/Anefo, Dutch National Archives) Prime Minister’s assurance, that ‘the pound here in Britain, in your pocket or purse or in your bank’ was worth no less than before, was seen as a damaging blunder. The Chancellor of the Exchequer, James Callaghan, had vowed to resign if sterling were devalued, and was replaced by Home Secretary Roy Jenkins, who spent the next six weeks drawing up a programme of swingeing cuts at home and abroad that were to be fought over bitterly in Cabinet in January 1968. Yet devaluation, despite being an unmentionable word in Cabinet, ministerial or official discussions (papers referring to it were burned), had long been on the cards; many thought it should have happened long before, perhaps even when the government took office in 1964. Since then ministers had struggled with recurrent economic difficulties, including a sterling crisis in the summer of 1966 only weathered with US support. In 1967, a combination of domestic and overseas events would make devaluation inevitable. But for Wilson and Callaghan, refusal to countenance devaluation had been a point of principle, symbolic of a range of issues, economic, moral, personal and political. ‘The government was in headlong retreat in the face of forces it was no longer able to control’ The Labour government had weathered a number of economic storms since 1964, but actually achieved a budget surplus in the first half of 1967. However, from the summer onwards a series of events destabilised the economy, in particular the Arab-Israeli SixDay War in June, leading to the closure of the Suez Canal and subsequent sharp rise in oil and other commodity prices. The Americans were unwilling to bail sterling out yet again, particularly since defence cuts entailed withdrawing British forces from East of Suez at a time when the US Administration was embroiled in Vietnam. The government was also beset by a range of complex foreign policy issues, including Sino-British tension after the torching of the British Embassy in Peking in August, riots in
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