Private Secretary
SECRET
Scarchary
HONG KONG STERLING BALANCES
1.
2.
I was present on 9 August at a meeting between Sir Murray
MacLehose and Mr Nott in the Treasury. Mr Haddon-Cove was with
Sir Murray, and Mr Mitchell and Mrs Hodley-Miller with My Nott.
After Sir Hurray had outlined his problems along the lines
of his recent telegrams, Mr Nott and the Treasury officials
explained that the Chancellor would be sending a further
message to those governments with whom we had sterling agreements
early in September, possibly in the first week of that month
and certainly not later than the early part of the second week.
This message would explain what the British Government had in
mind for the future. It was not possible for any indication to
be given of its likely contents because the Chancellor had not
yet taken any decisions, about which he would in any case have
to consult some of his colleagues and the Prime Minister. But
they asked why, given that this message was known to be coming,
the position could not be held. Could not the Banks in Hong Jony:
be persuaded not to embark on major diversification pending the
receipt of the Chancellor's message? (At one time in the
discussion Mr Nott said "The Banks must at all costs be stopped
from major forward selling".)
3.
Sir Murray said that the position could perhaps be held,
but he did not think it right to send Mr Haddon-Cave back to
Hong Kong with instructions to reassure the Banks unless he
could be given some indication of what was in the Chancellor's
mind. It would be disastrous for the Goverment to cajole the
/Banks
SBORET