Devaluation 1967 under Wilson

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Devaluation 1967 under Wilson
Wilson felt that industrial problems were a key reason to why Britain's
trade deficit was growing
Borrowed money fro the IMF caused Britain to become bankrupt
Government was loosing control over its own finances
It was absolutely vital that the £ was held at $2.80, despite the pressure
this was causing the money that was being spent
The fear was that if enough investors sold sterling on the market, the price
fof it would fall making the Bank of England spend more money to prop up
the pound
This was making matters worse since the conservative had left over a
huge balance of payments deficit
Callahan, the chancellor of the exchequer tried to save the pound by
making it harder to buy imports by increasing the taxes on them and by
putting up income tax to 41.25% to deflate the economy
'67 Wilson bowed to the markets and took devalued the pound from
$2.80 and $2.40
He tried to assure people in a TV broad cast that the pound in their
pocket was worth the same amount as before mocked as patronising, if
not actually wrong
If Wilson had done it earlier, or in a less dramatic fashion, he may well
have got away with it but it created huge criticisms and was seen as an
economic and political failure
Callaghan the chancellor of the Exchequer resigned over it
Jenkins replaced and immediately went about putting the national
accounts in order and cut government spending over the next few years
Taxes were raised in attempt to stop British people from buying imports
By the end of `69 a BoP was recorded in Britain
Could have corrected the deficit by cutting public spending earlier, but this
would have had knock on effects politically, such as cutting benefits or
increasing prescription charges


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