DRAFT LETTER FROM THE MINISTER OF STATE TO
Robert S Redmond Esq TD MP
House of Commons
LONDON SW1A OAA
te
You wrote to Terence Higgins on 15 August enclosing this cutting from the Bolton Evening News sent to you by your constituent, Mr S Britland.
It is, of course, nonsense to talk about national bankruptcy in this way. On the contrary, the present Administration has paid off the legacy of short and medium-term international debt left us by the former Government and has rebuilt the gold and foreign currency reserves to levels at which, as the Chancellor has said, they are now ample for our needs.
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I cannot comment on reports about Hong Kong's plans for the management of her reserves. But under the present Sterling Agreement, which however expires this year, she has obligations to maintain certain balances in sterling.7
In any case it is important to set in context the sometimes rather extreme statements that appear in the press about the consequences to the United Kingdom of possible decisions
It is true by other countries to buy or sell sterling. that such purchases and sales, like those by private indivi- duals and companies, can have an effect upon the British economy and they are of course taken into account in the Government's economic policy. But to talk of national bankruptcy because of such movements is to ignore the fact that the pros- perity of a country consists of the standards of living of its inhabitants and the growth of the economy as a whole.
In this
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