MR. RIPPON'S TOUR OF ASIA AND AFRICA, AUTUMN 1972
DEFENSIVE BRIEF:
THE FLOATING POUND AND EXCHANGE CONTROL.
if we had waited
1. On 23 June HMG decided to float sterling, following a massive outflow of short term capital from the UK which, as the Chancellor of the Exchequer subsequently told the House, In the amounted to $2,500m. in the week preceding floating. circumstances, we had to act decisively; until we had consulted other Commonwealth countries grave
Most of our damage to the UK economy might have resulted. Commonwealth partners have understood the need for prompt action on our part.
2. The rate for the pound has since steadied around $2.45, some 6% below the parity of $2.60 agreed upon last December
The Chancellor of as part of the Smithsonian Settlement.
the Exchequer has said in the House of Commons that he hopes that Britain will be in a position to return to a fixed parity by the end of this year (before our accession to the EEC); but this is not a firm promise on our part.
3. The UK has also for the first time extended exchange control to the Overseas Sterling Area (all Commonwealth countries excluding Canada, together with Iceland, South Africa, Pakistan and some Middle East States). We have explained that our action was necessary in a situation where sterling was floating, since otherwise there could have been damaging outflows of capital from the UK to those OSA countries whose currencies did not float. We have said that our floating is a temporary measure, but we have not said that our exchange control measures are also temporary. We have, in fact, informed Sterling Area Governments in the context of discussions about the Sterling Agreements (see separate brief) that we
CONFIDENTIAL
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