TOP SECRET T h e s e c o n s i d e r a t i o n s h a d a d i r e c t b e a r i n g on
t h e p h a s i n g of t h e w a g e s e t t l e m e n t s n o w in q u e s t i o n .
If i t w a s i n d e e d t h e c a s e t h a t f u r t h e r c o n c e s s i o n s of
t h e kind a d v o c a t e d by the r e s p o n s i b l e
Ministers
might provoke an economic c r i s i s requiring further
m e a s u r e s of r e s t r i c t i o n , i t w o u l d p r o b a b l y b e
d e s i r a b l e , on b a l a n c e , t o t r y to d e f e r
such
m e a s u r e s , if p o s s i b l e , u n t i l a f t e r the G e n e r a l
Election.
If t h e L a b o u r P a r t y w e r e t h e n r e t u r n e d
t o p o w e r , i t w o u l d n o d o u b t b e d i s t a s t e f u l to h a v e to
i n t r o d u c e a p o l i c y of r e s t r i c t i o n i m m e d i a t e l y
thereafter;
faced.
b u t t h i s s i t u a t i o n w o u l d h a v e to b e
If, on t h e o t h e r h a n d , t h e y l o s t t h e E l e c t i o n ,
t h e y m i g h t do s o by o n l y a n a r r o w m a r g i n ;
and in
t h a t c a s e t h e C o n s e r v a t i v e P a r t y , who w o u l d t h e n
c o n s t i t u t e the G o v e r n m e n t , w o u l d h a v e to s h o u l d e r
t h e r e s p o n s i b i l i t y for d e a l i n g w i t h the p o t e n t i a l l y
i n f l a t i o n a r y p r o b l e m w h i c h t h e y would h a v e
i n h e r i t e d , a p r o b l e m which they would p r o b a b l y
f i n d i t i m p o s s i b l e to r e s o l v e c o n s i s t e n t l y w i t h t h e i r
d e c l a r e d p o l i c i e s in o t h e r f i e l d s .
In e i t h e r c a s e t h e
L a b o u r P a r t y m i g h t b e b e t t e r p l a c e d t h a n if t h e y h a d
b e e n compelled to introduce f r e s h
disinflationary
m e a s u r e s before appealing to the country.
On t h i s
b a s i s t h e C a b i n e t s h o u l d c o n s i d e r how t h e p h a s i n g of
forthcoming wage settlements - particularly as
r e g a r d s t h e c h o i c e of e f f e c t i v e d a t e s f o r t h e i r
second stages - might contribute most
effectively
t o a p r o c e s s d e s i g n e d to d e f e r for a s l o n g a s
p o s s i b l e t h e n e e d to i n t r o d u c e r e n e w e d m e a s u r e s
of d i s i n f l a t i o n .
THE CHANCELLOR OF THE EXCHEQUER
s a i d t h a t t h e r e w e r e c e r t a i n r i s k s i n a n y c o u r s e of
a c t i o n w h i c h w o u l d m e r e l y s e e k to p o s t p o n e u n t i l
a f t e r a G e n e r a l E l e c t i o n the a c t i o n n e c e s s a r y t o d e a l
with the situation which m i g h t be c r e a t e d by
excessive wage settlements.
The Government
m i g h t b e u n a b l e to a d h e r e to t h e t i m e t a b l e i n v o l v e d ;
a n d in t h a t e v e n t t h e y m i g h t b e c o m p e l l e d to a p p e a l
to the c o u n t r y a t a t i m e and in c i r c u m s t a n c e s which
i n other r e s p e c t s would b e unpr b p i t i o u s .
Moreover
the economy would be in an i n c r e a s i n g l y v u l n e r a b l e
c o n d i t i o n d u r i n g the w h o l e of t h e p e r i o d i n q u e s t i o n ;
a n d the G o v e r n m e n t w o u l d be p u t t i n g a t r i s k t h e
e c o n o m i c r e c o v e r y which they had now a c h i e v e d
a f t e r s e v e r a l y e a r s of g r e a t d i f f i c u l t y a n d a n x i e t y .
I t c o u l d b e a r g u e d to b e b e t t e r f o r t h e L a b o u r P a r t y
t h a t t h e y s h o u l d l o s e the n e x t E l e c t i o n b u t s h o u l d
l e a v e b e h i n d t h e m a r e c o r d of s o u n d m a n a g e m e n t
of t h e e c o n o m y t h a n t h a t t h e y s h o u l d p u t t h a t r e c o r d
a t r i s k i n o r d e r to a c h i e v e an e l e c t o r a l v i c t o r y w h i c h
m i g h t be no m o r e than m a r g i n a l .
endorse this course;
He c o u l d n o t
a n d for t h e r e a s o n s w h i c h
h e had given e a r l i e r in the d i s c u s s i o n he would j u d g e i t w i s e r t o c o n t i n u e to r e s i s t e x c e s s i v e w a g e claims.
U n t i l r e c e n t l y h e had t h o u g h t i t p o s s i b l e to a c c e p t a d e g r e e of r e l a x a t i o n of t h e p r i c e s a n d i n c o m e s p o l i c y w h i c h m i g h t r e s u l t i n a 10-12 p e r c e n t r a t e of w a g e i n c r e a s e .
But this had p r o v e d to b e f e a s i b l e f o r only a s h o r t p e r i o d ;
and now t h a t c l a i m s w e r e r u n n i n g a t a 20 p e r c e n t r a t e of i n c r e a s e i t m u s t be m a d e a p p a r e n t t h a t t h e
G o v e r n m e n t w e r e not p r e p a r e d m e r e l y to
a c q u i e s c e in this tendency but w e r e d e t e r m i n e d
to b r i n g i t t o a h a l t b e f o r e the s i t u a t i o n d e t e r i o r a t e d
still further.
It w a s n o t s u f f i c i e n t l y r e a l i s e d t h a t a l l
t h e i n t e r e s t s now before the Cabinet had a l r e a d y
r e c e i v e d s u b s t a n t i a l wage i n c r e a s e s d u r i n g the
l a s t four o r five y e a r s ;
and a m o r e d e t e r m i n e d
a t t e m p t s h o u l d b e m a d e to c o n v i n c e p u b l i c o p i n i o n
t h a t the p u b l i c s e c t o r h a d n e i t h e r b e e n u n f a i r l y
t r e a t e d i n t h e m a t t e r of w a g e i n c r e a s e s n o r b e e n
a l l o w e d t o f a l l s o f a r b e h i n d the p r i v a t e s e c t o r a s
was commonly supposed.
The Cabinet should take p a r t i c u l a r c a r e to
p r e v e n t a n y d i s c l o s u r e of the f a c t t h a t t h e i r
d i s c u s s i o n had involved, among other things, a
r e f e r e n c e to t h e p o s s i b i l i t y ' of a r e n e w e d t h r e a t
t o t h e s t r e n g t h a n d s t a b i l i t y of s t e r l i n g .
Cabinet Office,
12th F e b r u a r y ,
SrWvl.
1970
S E P ( 6 7 ) 8th M e e t i n g , I t e m 1
M O N D A Y , 26th J U N E ,
1967
E c o n o m i c O u t l o o k t o 1972
( S E P ( 6 7 ) 41)
NO CIRCULATION R E C O R D
T h i s n o t e r e c o r d s p a r t of t h e d i s c u s s i o n on t h e a b o v e i t e m w h i c h
i s n o t r e f e r r e d t o i n t h e m i n u t e s of t h e m e e t i n g .
T H E L O R D P R E S I D E N T s a i d t h a t , if t h e m a x i m u m g r o w t h r a t e
w h i c h w a s c o n s i s t e n t with s t a b i l i t y i n t h e b a l a n c e of p a y m e n t s w a s t h e
a v e r a g e of 3 j p e r c e n t p e r a n n u m p o s t u l a t e d in the r e p o r t by t h e
M e d i u m T e r m A s s e s s m e n t C o m m i t t e e annexed to SEP(67) 4 1 , the
G o v e r n m e n t c o u l d n o t e s c a p e t h e d i l e m m a of b e i n g c o m p e l l e d e i t h e r t o
r e s t r i c t p e r s o n a l c o n s u m p t i o n t o a d e g r e e w h i c h would be u n a c c e p t a b l e
o r t o r e d u c e e x p e n d i t u r e o n s o c i a l s e r v i c e s in a way w h i c h would b e
i n c o n s i s t e n t with the G o v e r n m e n t s philosophy and with t h e i r p o l i t i c a l
commitments.
T h e only w a y of e s c a p i n g f r o m t h i s d i l e m m a w a s t o
s e c u r e a higher growth r a t e .
T h i s m e a n t t h a t we m u s t d e v i s e p o l i c i e s
t o s e c u r e a n i n c r e a s e in e x p o r t s a n d a r e d u c t i o n in i m p o r t s .
T h e r e was
n o s i g n t h a t e x i s t i n g p o l i c i e s w e r e l i k e l y t o a c h i e v e t h i s ; a n d we s h o u l d
t h e r e f o r e r e - e x a m i n e t h e d e s i r a b i l i t y of m o r e d r a s t i c c h a n g e s in p o l i c y .
H e w a s n o t a r g u i n g t h a t a c h a n g e i n t h e p a r i t y of t h e pound w a s
n e c e s s a r i l y t h e r i g h t s o l u t i o n ; h e w a s only s u g g e s t i n g t h a t a t h o r o u g h
e x a m i n a t i o n of t h i s q u e s t i o n w a s d e s i r a b l e b e f o r e e c o n o m i c s t r a t e g y f o r
the m e d i u m - t e r m w a s s e t t l e d .
T H E P R E S I D E N T O F T H E B O A R D O F T R A D E s a i d h e did n o t
b e l i e v e t h a t d e v a l u a t i o n w o u l d s o l v e the p r o b l e m .
N e v e r t h e l e s s , he
a g r e e d with the Lord P r e s i d e n t that existing policies s e e m e d unlikely
to e n s u r e s a t i s f a c t o r y e c o n o m i c p r o g r e s s : it s e e m e d m o r e p r o b a b l e
t h a t t h e y w o u l d c o m p e l u s t o r u n t h e e c o n o m y a t a l e v e l of d e m a n d w h i c h
w o u l d e n t a i l u n d e r - u s e of r e s o u r c e s , h i g h u n e m p l o y m e n t a n d l o w i n v e s t m e n t .
S o m e n e w d e p a r t u r e in p o l i c y m i g h t t h e r e f o r e b e n e e d e d ; a n d q u a n t i t a t i v e
r e s t r i c t i o n of i m p o r t s w a s a p o s s i b i l i t y .
H e did not a d v o c a t e t h a t t h i s
s h o u l d n e c e s s a r i l y b e c o n s i d e r e d n o w ; b u t it s h o u l d b e r e - e x a m i n e d b e f o r e
l o n g u n l e s s s o m e e v i d e n c e w a s f o r t h c o m i n g t h a t e x i s t i n g p o l i c i e s would
lead to a m o r e acceptable economic p r o s p e c t than at p r e s e n t s e e m e d likely.
In d i s c u s s i o n , it w a s p o i n t e d out t h a t the C a b i n e t h a d d i s c u s s e d t h e
q u e s t i o n of p a r i t y a s r e c e n t l y a s t h e m e e t i n g a t C h e q u e r s on 30th A p r i l .
N o u s e f u l p u r p o s e w o u l d b e s e r v e d by r e v e r t i n g to t h i s i s s u e , p a r t i c u l a r l y
in v i e w of t h e r i s k s w h i c h c o u l d a r i s e if it w e r e r e o p e n e d a n d t h i s b e c a m e
known.
T h e r e w e r e no c o n c l u s i v e grounds for thinking that d e v a l u a t i o n
would m a k e p o s s i b l e a h i g h e r growth r a t e and hence a m o r e r a p i d i n c r e a s e
in p e r s o n a l c o n s u m p t i o n a n d p u b l i c e x p e n d i t u r e .
Moreover, devaluation
c o u l d only a c h i e v e t h e d e s i r e d e f f e c t s on. t h e b a l a n c e of p a y m e n t s if it w e r e
a c c o m p a n i e d b y a c o n s i d e r a b l e m e a s u r e of d e f l a t i o n , i n c l u d i n g h i g h e r
taxation.
It w o u l d t h e r e f o r e e n t a i l a r e a l r e d u c t i o n in t h e s t a n d a r d of l i v i n g ,
which would be r e s e n t e d by public opinion.
T h e e x t e n t of t h e b e n e f i t to o u r
e x p o r t s which m i g h t a c c r u e from devaluation was p r o b l e m a t i c , since many
e x p o r t e r s m i g h t s i m p l y a b s o r b t h e i n c r e a s e d p r o f i t s i n s t e a d of r e d u c i n g
p r i c e s and expanding s a l e s abroad.
-1­
A r e c e n t p o l l of i n f o r m e d o p i n i o n s h o w e d t h a t , w h i l e a m a j o r i t y
of e c o n o m i s t s w e r e in f a v o u r of a c h a n g e in p a r i t y , t h e g r e a t e r n u m b e r of
b a n k e r s a n d i n d u s t r i a l i s t s w e r e e q u a l l y o p p o s e d t o it.
So w e r e the g e n e r a l
p u b l i c , on g r o u n d s t h a t it w a s d o m e s t i c a l l y p a i n f u l t o d e v a l u e t h e c u r r e n c y :
e v e n if t h e i s s u e w a s i m p e r f e c t l y u n d e r s t o o d , t h e c o n c l u s i o n s r e a c h e d i n
that r e s p e c t were sound enough.
In any c a s e , a d e c i s i o n t o change the
p a r i t y c o u l d o n l y b e t a k e n in t h e l i g h t of i n t e r n a t i o n a l c o n s i d e r a t i o n s , i n
c i r c u m s t a n c e s i n w h i c h t h e c r e d i b i l i t y of t h e G o v e r n m e n t s a c t i o n would
b e a c c e p t e d , a n d n o t s i m p l y o n t h e g r o u n d s of t h e s t a t e of t h e d o m e s t i c
economy.
28th J u n e ,
1967
CABINET
CONFIDENTIAL ANNEX.
CC(70) 7 t h C o n c l u s i o n s , M i n u t e 4.
T h u r s d a y , 12th F e b r u a r y , 1970, a t 10. 00 a . m .
in t h e c o u r s e of t h e d i s c u s s i o n o n i n c o m e s
policy THE P R I M E MINISTER invited the Cabinet
to c o n s i d e r t h e w a g e c l a i m s b e f o r e t h e m n o t o n l y
o n t h e i r i n d i v i d u a l m e r i t s b u t a l s o in t e r m s of t h e i r
p o l i t i c a l i m p l i c a t i o n s d u r i n g a p e r i o d in which the
G o v e r n m e n t m u s t face an a p p r o a c h i n g GeneralElection.
If e x c e s s i v e w a g e s e t t l e m e n t s p r o v o k e d
a n e w e c o n o m i c c r i s i s of a k i n d r e q u i r i n g f r e s h
m e a s u r e s of r e s t r i c t i o n o r a n a u t u m n B u d g e t ,
the
G o v e r n m e n t s f r e e d o m of e l e c t o r a l m a n o e u v r e c o u l d
be s e r i o u s l y affected;
and this danger would b e
a g g r a v a t e d if i n t e r n a t i o n a l s p e c u l a t i o n a b o u t t h e
r e n e w a l of i n f l a t i o n a r y p r e s s u r e i n t h e U n i t e d
K i n g d o m r e a c h e d a level a t which the s t a b i l i t y
of s t e r l i n g c a m e u n d e r r e n e w e d t h r e a t .
c o n s i d e r i n g the c u r r e n t wage c l a i m s ,
In
therefore,
t h e C a b i n e t m u s t w e i g h c a r e f u l l y the i m p l i e d r i s k
t h a t t h e y m i g h t p r o v o k e a r e v i v a l of d e m a n d i n f l a t i o n .
T h e r i s k of c o s t i n f l a t i o n c o u l d b e h e l d to b e n o l e s s
serious;
and, although the wage c l a i m s under
c o n s i d e r a t i o n , b e i n g c o n f i n e d to the p u b l i c s e c t o r ,
m i g h t be thought to have r e l a t i v e l y little r e l e v a n c e
in this context, this a r g u m e n t would b e nullified in
so far a s they s e t a p r e c e d e n t for c o m p a r a b l e c l a i m s
in the p r i v a t e s e c t o r .
The economy could not stand
a dock s t r i k e or a s e a m e n ' s s t r i k e .
B u t , if t h i s w a s
so.-and if i t f o l l o w e d t h a t t h e C a b i n e t w o u l d h a v e t o
y i e l d in t h e f a c e of a t h r e a t of s u c h a s t r i k e , t h e y
should avoid, so far a s p o s s i b l e , any a c t i o n in
r e l a t i o n to the p u b l i c s e c t o r w h i c h m i g h t p r o v o k e
or a g g r a v a t e d e m a n d s for unacceptable wage c l a i m s
i n the p r i v a t e s e c t o r .
S DOCUMENT
9
IS
THE PROPERTY OF HER
BRITANNIC
MAJESTVS
GOVERNMENT
The circulation of this paper has been strictly limited. It is issued for the personal use of f^Ovr^. V.0r?^^rrr*sr Al.P^-
TOP SECRET
Copy No.
3
CABINET
CONFIDENTIAL ANNEX
CC(69) 15th Conclusions, Minute 1
Thursday, 3rd April, 1969 at 10. 00 a. m.
THE PRIME MINISTER said that, during his absence on
his visit to Nigeria, a political situation had developed, initially
within the Parliamentary Labour Party (PLP) and subsequently
on a nation-wide s c a l e , which clearly required the firmest handling
by the Government.
He himself intended to give a clear lead for
this purpose i but he would need the full support of the Cabinet,
acting in complete unity.
There had for some time been a growing tendency for some
Ministers to act in ways which called in question the collective
responsibility of the Cabinet, in so far as they had apparently felt
f r e e , in their personal dealings both with members of the PLP and
with the P r e s s , to dissociate themselves from certain of the
Governments policies and to allow this to be known to outside
bodies, particularly the Trade Unions, with whom their colleagues
were often conducting difficult and delicate negotiations in the name
of the Government as a whole. Before a decision was reached on any
item of Government policy a Minister was entitled to defend h?.s own
point of view within the Cabinet as strongly and persuasively as he
wished. But once a decision had been taken the principle of
collective responsibility required every member of an Administration
to endorse it and to defend it to any outside body on any occasion,
whether private or public. This remained true even if the
Minister was himself a member of the outside body concerned.
There was no objection in principle to Ministers retaining
affiliations of this kind provided that no conflict of interest or
allegiance resulted. But this proviso was e s p e c i a l l y important
in the case of Ministers who were members of the National Executive
Committee of the Labour Party (NEC), where any clash of loyalties
was liable to be particularly embarrassing.
It had to be
recognised that the N E C S concept of its relationship to the
Parliamentary Party had changed since the Labour Party became the
Government Party, During the Labour Government of 1945-51 the
Executive would never have sought to enforce a decision of the annual
conference of the Party on the Government,
And even in I960,
when the Labour Party were in Opposition, the Executive had
refused to try to impose the decisions of the conference on the PLP.
Now, however, it was seeking to assert a right to withhold support
from the Government on issues on which the annual conference had
not yet expressed a view,
It would be unfortunate if circumstances developed,
perhaps later in the year, in which it proved impossible to deal
with this situation except by means of a ruling that no member of
the Cabinet might offer himself for election to the NEC.
He
himself would greatly regret it if he were forced to give such a
ruling, since the result would be not only to weaken the links
between the Government and the NEC but al^o to reduce the
latter to a body which was competent merely to discuss and to
protest but not to exercise influence or to accept responsibility.
Nevertheless, this situation could be avoided only if Ministers
themselves recognised and accepted that, where any conflict of
loyalties a r o s e , the principle of the collective responsibility of
the Government was absolute and over-riding in all circumstances
and that, if any Minister felt unable to subscribe to this principle
without reservation, it was his duty to resign his office forthwith.
He regretted that he had had to reaffirm this doctrine and
to emphasise its correct interpretation in relation to membership
of the NEC, But recent events had left him no alternative; and,
since NEC membership was not confined to members of the
Cabinet, he would arrange to draw the attention of all members of
the Administration to the principle involved. For this purpose he
must formally invite the Cabinet to endorse his statement as the
definition of a code of conduct to be observed by all Ministers in
relation to the collective responsibility of the Government.
Thereafter it would be necessary to give further consideration to
the best means of improving communication between the
Government and the PLP and restoring the morale of the Party as
a whole.
In discussion reference was made to the meeting of the
NEC on Wednesday, 26th March, at which the Home Secretary
had voted for a resolution which was at variance with the
Governments policy on industrial relations, as recently published
in the White Paper "In Place of Strife" (Cmnd. 3888). THE HOME
SECRETARY said that in his view there had been only a marginal
difference between the attitude which he had adopted at the NEC
meeting and the attitude adopted by the F i r s t Secretary of State
when she had spoken in defence of the White Paper. He would ask
colleagues to remind themselves of the speeches of the F i r s t
Secretary and her Parliamentary Secretary during the debate on
the White Paper in the House of Commons. She had clearly said
on that occasion that its proposals were a matter for discussion
with the interests affected and might therefore need to be amended
before legislation was introduced. Unless this offer was meaning­
l e s s and it was now intended that the Government would not in any
circumstances be prepared to modify the proposals in the White
Paper, there was clearly scope for compromise.
This was all
that he had sought to achieve, bearing in mind the difficult
relationships with the Party and the unions in the summer ahead,
F.ven in its original form the resolution before the NEC had been
**2 *. relatively mildly worded. Moreover, the amendment which had
been proposed would have made it milder still in s o far as it
would have had the effect that the Executive would not have been
committed to oppose "any" of the proposals but would have
indicated that they could not endorse "all" of them and would have
urged the F i r s t Secietary of State to give the matter further
consideration.
In its final form, it came so near to the purpose
of the statement which the Government themselves had made when
the White Paper was originally published that he could not agree
that there had been any breach of collective responsibility on his
part.
But, if a contrary view was taken, he was very ready to
d i s c u s s the matter further with the Prime Minister.
On the other hand it was recalled that the Cabinet had
considered at an earlier stage a suggestion that the Governments
proposals should be published as a Green Paper or in some other
form which would indicate that the controversial proposals in
particular were put forward as a basis for public discussion with­
out commitment on the Governments part. But they had specifically
rejected this suggestion and had decided that the proposals should be
published as a White Paper, L e. as a definite statement of
Government policy which was not negotiable. Equally, the Cabinet
had decided that there could be no concession on the three cardinal
points in these proposals - namely, that an official strike should be
preceded by a secret ballot; that an unofficial strike should be
preceded by a pause for conciliation; and that this pause should, if
n e c e s s a r y , be enforced by the sanction of attachment of earnings.
And they had ruled that only if alternative suggestions which would
be no l e s s effective were produced could there be any question of
modifying these proposals.
Certain hypothetical modifications of
this kind were in fact under consideration; but this did not affect
the fact that those who took part in the meeting of the NEC on
26th March were well aware that the issue with which they were
dealing was an issue of major policy, on which the Governments
position had been made clear in the White Paper.
The Home
Secretary s intervention at the NEC could therefore be argued to
have been, in effect, a vote against the Governments policy and an
attempt to modify that policy from a position outside the Cabinet,
As a result the resolution which had finally emerged had inevitably
prejudged to some extent the outcome of the discussions with the
interests concerned which the Government had undertaken to initiate;
and the extent of the Governments embarrassment was illustrated
by the fact that Trade Union branches in various parts of the country
were now writing to certain Ministers deploring the fact that they
were among those who had voted in favour of the White Paper.
Moreover, the NFC had seen fit, during the public controversy
which had followed their meeting, to refuse to circulate to the
P r e s s certain passages in a statement by a member of the Cabinet
in which he had criticised the proceedings.
The whole episode
demonstrated the need for the Prime Minister to r e a s s e r t his
authority in the Cabinet and to require Ministers to accept the
discipline n e c e s s a r i l y inherent in the concept of collective
r e s pons ib ility.
r
THE PRIME MINISTER, summing up the discussion, said
that, given the Cabinet's earlier decisions about the basis on which
the White Paper should be published, it was clear that any Minister
who had voted in favour of the resolution before the NEC at their
meeting on 26th March had committed a breach of the principle of
collective Ministerial responsibility.
Nevertheless, he was more
concerned with the future than with the past; and, provided that the
basic principle was thenceforward observed strictly, he did not
propose to take any further action in relation to the NEC meeting.
It was open to any Minister to raise any matter within the Cabinet,
which would have another opportunity to discuss the issues involved
when the relevant legislation on industrial relations came forward
for consideration.
Meanwhile Ministers were committed,
individually and collectively, to support the Cabinet's earlier
decision as expressed in the White Paper "In Place of Strife"
unless and until alternative, and no l e s s acceptable, proposals
were put forward.
As regards the more general issue the practice of
canvassing outside support for personal views must thenceforward
c e a s e . It was possible that he had been too tolerant in this respect
in the past; but he must now require the whole Cabinet to reaffirm
the principle of collective Ministerial responsibility in the form in
which he had stated it and in relation not only to White Papers but
a l s o to Green Papers while they were the subject of public
discussion and to any other statements of Government policy. He
would take steps to ensure that all members of the Government who
were not members of the Cabinet were informed that they, too,
would be expected to comply strictly with this principle thence­
forward? and he would give further consideration to the implications
of the action of Transport House in refusing to circulate, and thereby
purporting to censor, a public statement by a Cabinet Minister.
He would use his own discretion in deciding the means by
which the outcome of the Cabinet's discussion should be given
appropriate publicity, as was clearly necessary in order to restore
the morale of the Labour Party.
The Cabinet ­
(1)
Took note, with approval, of the Prime Minister's statement about the principle of collective Ministerial responsibility and of his intention to bring his statement to the notice of all members of the Administration as a code of conduct to be
strictly observed.
(2)
Assured the Prime Minister of their full support in any action which he might find it necessary to take in order to deal with any breach of this principle. -4­
(3)
Agrraed that in the exceptional circumstances of
the case it would be desirable that appropriate
publicity should be given to the outcome of their
discussion and took note that the Prime Minister
himself, in his sole discretion, would make the
necessary arrangements for this purpose.
(4)
Agreed that it would be necessary after the
Easter R e c e s s to consider how best to improve
communication between the Government on the
one hand and the Parliamentary Labour Party,
the National Executive Committee and the
Labour Party in the country on the other hand.
(5)
Reaffirmed their endorsement of the proposals in
the White Paper "In Place of Strife" (Cmnd. 3888),
subject to further consideration in the light of any­
alternative proposals which might be put forward
before the Cabinet had to approve the relevant
legislation.
Cabinet Office, S. W. 1.
21st April, 1969
-5­
THIS DOCUMENT IS THE PROPERTY OF HER
BRITANNIC MAJESTYS GOVERNMENT
The circulation of this paper has been strictly limited.
It is issued for the personal use of I s e v ^ ^ L ^ . . . . ^ . ^ ^
s
TOP SECRET
Copy No..
X
CABINET
CONFIDENTIAL ANNEX
CC(69) 22nd Conclusions, Minute 1
Thursday. 8th May, 1969 at 11. 00 a . m .
THE PRIME MINISTER said that on the previous day the
3RNMENT
Chairman of the Parliamentary Labour Party (PLP),
THE
Mr. Houghton, had made a prepared statement warning the
LIAMENTARYGovernment that they should not press their proposed Industrial
OUR PARTY Relations Bill in the face of the opposition of their own back­
benchers to the point of risking the disintegration of the Labour
Party. This statement raised an important issue which had
constitutional implications comparable with those which had been
involved when Mr. Harold Laski, then Chairman of the Labour
Party, had presented a similar challenge to the Prime Minister
I
of the 1945-51 Labour Government, Mr. Attlee. It implied either
I
that the Government must accept that they could not. carry on the
I
government of the country and must face a Dissolution of
I
Parliament or that, if they continued to govern, they must do so
II
on sufferance and in the knowledge that there were certain policies
I
which they must not pursue, however necessary in the country^
interests they might consider them to be. If the Government
accepted such a situation at the dictation of the P L P , they would
be acquiescing in a dangerous precedent, which might be invoked
against them on subsequent and equally critical occasions; and
they would be demonstrating the truth of their opponents claim
that Labour government did not work and could not v/ork in any
foreseeable future circumstances. The Cabinet themselves must
be clear where they stood on this issue.
1
THE HOME SECRETARY said that the issues of principle
raised by the proposed Industrial Relations Bill had strained the
loyalty of the PLP and of some Ministers to breaking point. The
Cabinet were not in fact in unanimous agreement on the Bill; and
it could not be expected to achieve more than a bare majority in
the House of Commons, even if all members of the Government
voted in its favour? and that was an issue which they would need
to consider when the Bill was available for discussion. He
himself did not believe that the benefits which it was claimed would
-1­
result from the Bill were worth the destruction of the Labour
Partyj and he would do all in his power to prevent a Dissolution
on an issue which was of such little real significance.
He
therefore strongly urged the Cabinet to consider how they could
withdraw from the brink of disaster; in particular, they should
realise that they could not enact the Bill in its present form and
they should therefore refrain from publishing it before the
Conference of the Trades Union Congress (TUC) on 5th June,
Otherwise, they would inevitably destroy any possibility that the
TUC might bring forward alternative proposals which would
afford a way out of the i m p a s s e .
In discussion it was argued that, although Mr, Houghton
had been at fault in issuing his warning as Chairman of the P L P ,
particularly on the eve of the local government elections in
England and Wales, he had not in fact raised a strictly
constitutional i s s u e , unlike Mr, La ski who had addressed the
Government of the day from a position outside Parliament.
No
Government could govern without the support of their own
Parliamentary Party; and it was the right of any member of that
Party, not least its chairman, to warn them that they ran the risk
The
cf forfeiting that support and destroying the Party itself.
Cabinet had throughout underestimated the opposition to the Bill;
and it was a mistake to suppose that support for their policy was
now growing or that it could be secured by the threat of a
Dissolution, On the contrary, many members of the P L P now
foresaw only defeat for themselves and for the Party at the next
General Election in any event; and the Government should
therefore lose no time in r e a s s e s s i n g their attitude to the Bill for
the sake of the Party s morale.
1
On the other hand there was reason to believe that many
members of the PLP were content that the Government were actively
seeking agreement with the TUC; and it was in the Governments
interests to encourage the Party to turn from arguments about
principles to the discussion of the details of industrial policy,
from which agreement might e m e r g e . The wisest course,
therefore, would be to avoid any appearance of rebuking
Mr. Houghton who had claimed to have alternative proposals of
his own, and to allow time for a calmer approach to the Industrial
Relations Bill to develop. At the same time the Government must
avoid encouraging the irrational belief in the PLP that a new, but
unidentified, Leader could rescue them from a desperate situation.
It must be made clear to them that in this respect they were
pursuing a fantasy: there was no question of the Cabinets
accepting that the PLP could overthrow the present Prime Minister
and expect a s u c c e s s o r to emerge in his place. The Party must
shed the illusion that they could at the same time govern and not
govern. If they rejected one Government they must be able and
willing to support another; but this they could not produce from
within themselves.
THE PRIME MINISTER, summing up the discussion, said
that it must be clearly understood that any Minister who did not
vote in favour of the Bill in whatever form it was eventually
introduced could not, of course, remain a member of the
Government. But it was clearly important that the Government,
with the help which Mr. Houghton had promised earlier in the
week, should endeavour in their forthcoming discussions with the
TUC about the Industrial Relations Bill to find means of reducing
the controversy within the Party and making the proposed
legislation generally acceptable. It must not be thought that the
statement by the Chairman of the PLP had placed the Government
in a dilemmaj but, equally, the Party should be in no doubt that,
if they sought to overthrow the Prime Minister and it became
impossible to maintain effective government, a Dissolution of
Parliament would be inevitable. He would arrange to give
further consideration, in consultation with senior colleagues,
to the best way of handling the political situation henceforward.
The Cabinet Took note, with approval, of the Prime Minister s summing up of their discussion. T
Cabinet Office, S.W.1.
23rd May, 1969
HIS DOCUMENT IS THE PROPERTY OF HER BRITANNIC MAJESTVS GOVERNMENT
9
The circulation of this paper has been strictly limited.
It is issued for the personal use of ^sxrfysme^^
"7 \ 1*
(;' ^ ' y
f e
TOP SECRET
Copy No
CABINET
CONFIDENTIAL ANNEX
CC(69) 41st Conclusions
Tuesday, 19th August, 1969 at 2.00 p . m .
The Cabinet considered a memorandum by the Home
Secretary (copies of which are available Li the Cabinet Office)
reviewing the situation in Northern Ireland and making proposals
for the handling of the discussions between the Prime Minister and
the Prime Minister of Northern Ireland later than afternoon.
THE HOME SECPJ2TARY said that the situation in Northern
Ireland had become more grave since the Cabinet last reviewed it
on 30th July, There had been rioting in Belfast on t h e nights of the
2nd and 3rd August, barricades being built and petrol b o m b s
thrown. The following week had been fairly quiet but he h a d
suggested to the Prime Minister of Northern Ireland that to reduce
the risk of further violence, he might consider banning the
demonstration planned by the Civil Rights Association on t h e
11th August, the Parade of the (Protestant) Apprentice Boys on the
12th and the meeting of the (Catholic) Order of Hibernians on the
15th August, Major Chiehester-Clark however, h a d considered
that it would be impossible to ban one of these occasions without
banning them all; he had not expected that the March of the
Apprentice Boys would itself lead to violence in view of t h e
accommodation which had been reached locally between Catholics
and Protestants and no trouble had been thought likely t o result
from the meeting of the Order of Hibernians. The Civil Rights
Rally on the Monday (11th August) had been disorderly; o n t h e
Tuesday, there had been fighting in Londonderry, with t h e
residents of Bogside determined to keep the Royal Ulster
Constabulary (RUG) out of the area; and after a lull on Wednesday,
h e r e had been worse rioting on the Thursday, with tension
mounting in Belfast,
On the Thursday he had met t h e Prime
Minister at the RAF Station^ S t . Mawgan, to discuss the situation,
and later that day, with the Prime Minisfcer ' o authority he h a d agreed
to the request of the Northern Ireland Gover&merrfif or troops to be brought
in to restore order in Londonderry. Similar action h a d later been
taken in regard to Belfast,
Thanks to t h e efficient pre-planning of
the Ministry of Defence, the troops had moved in very fast and o r d e r
s
f
s
-1­
had been rapidly restored in,the limited areas where they could be
deployed in force, although there had been some minor incidents
elsewhere^ Their arrival had been generally welcomed, in
particular by the Catholics.
The question before the Government was what to do next.
Opinions differed as to who was responsible for the troubles.
There was a good deal of corroboration for the view that the
Catholics had acted largely in Gelf-defence, and there was little
evidence to support the view of the Northern Ireland Government
that the Irish Republican Army (IRA) were mainly responsible? but
there was no doubt that the dominant feeling in Northern Ireland
The initial impact made by the arrival of British troops
was f e a r
could not be expected to l a s t , and it was essential to act urgently to
lower the temperature. He had himself posted a senior official
and an Inspector of Constabulary with the General Officer
Commanding (GOC) to advise him on the Governments political
objectives and on English police practice; and he had sent the
Deputy Commissioner of Police of the Metropolis and the Chief
Constable of Hampshire to be liaison officers and consultants with
the RUC and to a s s e s s the structural changes that might be needed
in that f o r c e .
B
These were the a i m s which he suggested the Prime Minister
should pursue in his discussions with Major CLichesfcer-Clark. He
thought that the latter was now a chastened man and that he would be
willing to collaborate so far as he felt able. So long as he was
willing to do s o , it would be better to avoid direct intervention and
TOP
SFCRET THE SECRETARY OF STATE FOR FOREIGN AND
COMMONWEALTH AFFAIRS said that the Government of the Irish
Republic had been over-anxious to outflank the IRA and the extremists
generally. Their Minister of Foreign Affairs, Dr. Hillery, had
paid an uninvited visit to London, but had been told ihat we regarded
Northern Ireland as a matter of internal jurisdiction. Dr. Hillery
had now'requested a meeting of the Security Council of the United
Nations, and if normal practice were followed this request would be
acceded to
He had a l s o asked to addrees the Council?. The
Foreign and Commonwealth Secretary did not propose to object to
h i s doing so, but he thought there was a good chance that the Irish
would fail to muster the votes necessary fcr the item to be included
on the agenda; that would be a satisfactory outcome. He was
instructing our Ambassador in Dublin to remind the Government
of the Irish Republic of their responsibility for curbing die activities
of rhe IRA in Northern Ireland. The Prime Minister of Northern
Ireland should also be reminded that foreign relations were the
responsibility of the United Kingdom Government! a break with
the Irish Republic would be most damaging, in the short run more
damaging to us than tc the Republic. Bu; in h?.s view the i s s u e s
were mainly domestic, and their international significance, though
important should not be exaggerated. He agreed with the
immediate steps proposed by the Home Secretary and on the need
for immediate results (particularly in regard to the *B* Specials)
to be seen to flow from that evening s meeting. For the future he
would prefer to work through the Northern Ireland Government
and thought that the proposal to influence them through senior civil
servants stationed in Belfast was workable,, But if they would not
co-operate the Government would have no alternative but to assume
direct control.
a
t
In discussion there was general agreement that the
immediate need was to contain the situation and that for this purpose
the steps proposed by the Home Secretary were the right ones;
there would be no advantage in recalling Parliament. The first
priority was to persuade the Prime Minister of Northern Ireland to
accept the withdrawal of the Specials from the streets and their
effective disarming. Subject to this, it would be desirable to leave
the Ministers conducting the discussions with the Northern Ireland
Government the widest possible discretion to play the hand as they
thought best. The replacement of the Inspector-General of the
RUC was also highly desirable, because withdrawal of the troops
depended on the reconstitution of that force, but most members of
the Cabinet thought that the talks should not be allowed to break down
on this point. There was a l s o agreement on the urgent need for
results to be seen to flow from that evening's talks. They should
aim at the publication of a communique laying down basic principles
and setting out the immediate decisions. This should make clear
that the border was not in issue and that the problem lay wholly
to use the Northern Ireland Government as agentsj he would propose
to place senior civil servants in the Prime M i n i s t e r s Office and the
Ministry of Home Affaire a s a mean3 of bringing influence to bear.
It was important to remember that the majority of the population of
Northern Ireland were Protestant; in seeking to allay the
apprehensions of the Catholics, they must not drive that majority
beyond endurance. He thought that in the circumstances
Major Chichester-Clark would feel able to accept the withdrawal
of the Specials and arrangements for their a r m s to be kept in
a r m o u r i e s . Reactions-to the proposals for an enquiry and for a
change in the Inspector-General were difficult to forecast; there
might be resignations at the top, but he thought that some middle­
rank officers would welcome a change in the ethos of the force.
THE SECRETARY OF STATE FOR DEFENCE said that
the deployment of troops had gone smoothly, and they had been
welcomed by both s i d e s j but there were already signs that the
honeymoon period was ending. There would shortly be two
brigades in Northern Ireland. Further units could be made
available if needed, without affecting our North Atlantic Treaty
Organisation (NATO) commitment, and this force should be adequate
for its present role; but it would be quite inadequate to cope with
a major emergency, such as would a r i s e if the Protestant majority
w e r e stung into armed opposition. In that event, it would be
n e c e s s a r y to draw on forces assigned to NATO. He was in
agreement with the Home Secretary on the need to act urgently to
make the situation l e s s explosive; but at the same time, he wished
to s t r e s s the importance of not pushing too hard and so alienating
Protestant opinion. It was important to remove the B Specials
f r o m Catholic and mixed a r e a s - if possible this should be announced
tonight - and to withdraw their weapons into armouries where they
could be kept under control, and would not constitute a temptation
to the IRA and other subversives.
The GOC would then be able to
consider what further troops he needed to maintain law and order;
he was aiming at a light coverage of the whole country by mobile
troops. The arrangement whereby the troops had been introduced
at the request of the Northern Ireland Government and the
continuing close contacts between the GOC, the Northern Ireland
Government and the Home S e c r e t a r y ^ representatives ensured
civil control over the disposition of the troops.
t
t
He agreed that they should aim to retain the Northern Ireland
Government a s an effective force, for in that way they stood more
chance of being able to withdraw the troops.
:
, Fjinany hje . wished to support the proposal made by the Northern
Q Ireland^Moyer^^
the GOC, for fche blocking
r* pfjsome minor roads crossing the ""border by cratering or other
m e a n s ; this w o u l d make it more difficult for the IRA to smuggle
-riarms,in and generally^exploit the situation.
f1
1
;
HE PuBuC KfcCOff)S Afrr S
within the jurisdiction of the United Kingdom Government, should
IpSkplain the basis on which troops had been committed, and should
refer to the programme of reforms already promised. The
communique should be acccwnpsnled by a declaration of the right to
; eqoal!fijri!a£l:f^eatnient'Of all citizens irrespective of political v i e w s
IJaMirellg^
- ".
^
.
s p l P p ^ ^ ^ t i i n e had not yet come to take decisions about the long­
P ^ ^ r k ' f u t u r e relationship between the two Governments! but the
Government of Northern Ireland would have to reoftgnioe that the
face that they were unable to maintain law and order without the use
.:i.of fcvoope. created a new political situation
The Prime-Minister of
^ ^ S l ^ s a S i ^ s l a n d :had spoken of forming a more b r o a d l y based .
administration, and he should be asked what he meant by this,,
Pr There;might be virtue in appointing a Minister of Community
Relations^, advised by a Commission representing both communities
"to eliminate discrimination,^ v Part of the frustration felt by the
Catholic community arose from the fact that they had at present no
hope- of taking part in the Government; and the Commission on the
Constitution might be asked to consider means of remedying this
situation^ These and other ideas should be studied with a view to
f: legislation being introduced to amend the Government of Ireland Act,
;
9
^^SI^feAll-present were agreed that it would be preferable to work
P''feK^^^!6,;.the,;Government of Northern Ireland rather than-take direct
eontrol s o long a s that Government was prepared to co-operate and
effective means of bringing influence to bear upon it could be found.
D i r e c t rule would pose a severe administrative problem and would
increase the risk of armed conflict with the Protestant community,,
; The Government should pursue a middle of the road policy and a i m
So prevent the future of Northern Ireland becoming a matter of acute
s^poMtij^^cbntroversy,
0
r
^ ^ ^ ^ ^ K ; o s i the other hand the talks that evenfctgproduced no
acceptable agreement more drastic measures would be inevitable.
I In that-;case^; the Cabinet should resume their discussion a s soon as
:
^POBfliblie^f^lj;-:-. v:vv­
^ ^ i l i S l y M " f u r t h e r discussion doubts were expressed about the wisdom
It was suggested
of Mocking minor roads crossing the frontier.
-. that such action would be over-dramatic and unlikely to be effective,
the more s o since the IRA, were not the main cause of the trouble.
-i On the other hand it was pointed out that similar action had been
taken in 1956 and that it would add to the difficulties of the IRA in
exploiting the situation? the request of the Northern Ireland
; Government was supported by the GOC, Agreement on this point
ffwlght be a uSeful concession in the talks; no public announcement
;:
:
l:WOuM?be 'ne eded.'.'
f^j^m^S&^Sti^'-MINISTER,
summing up the discussion, said
£hat: he had thought i t right that the Cabinet should have the
opportunity to consider the situation despite the authority which had
b e e n delegated to hirrife They were agreed that the first need was
'fco cMt^ln^er^iosition and that for tliis purpose the steps proposed
^^^^^0^0etv6takiif''VfeTe
appropriate. They were a l s o agreed
^(^t:t^$t^itb^'r^wsi'aBd' ei'fective disarming of the Specials were
e s s e n t i a l and he would make It his prime purpose in his talk with
Ithe^PrirnetMlnister of Northern Ireland to secure his agreement to
£ h i s * F o r t h e rest the Cabinet were content that he should reach
^l&e^BeBtlsettlement that he could on the lines which they had
discussed?; agreement to the blocking of roads might be an element
in such a settlement, but he would not take the initiative In proposing
it* ;- He proposed to start the talks that evening with a general
d i s M s s i d a ^ ^ n d then work towards an agreed communique which
would declare that the border was not an Issue and that the
disfnirl^hceslwere entirely an internal affair within the
Ijurisdlictiori& the United Kingdom Governmehtj explain the basis
J-bn^wbich; trbops had been brought in; and refer to the programme
::^r^oixit8 to
which the Northern Ireland Government were
tcbh^imittedivthis should be accompanied by a declaration setting out
fctoejjplr&ciple
would guide the policies and the mutual
i
tx^jtt^iihip^iif' the two Governments.
The P r i m e Minister of
Norther^Ireland would be supported by a number of Ministers at
^"e^talKs^kiW^he therefore proposed that the Foreign and
Commonwealth and Defence Secretaries should be present in
addition to the Home Secretary. Assuming that the talks were
s u c c e s s f u l , it would probably be appropriate to have a second round
?of talks in about a f o r t n i g h t s time at which longer term arrange­
in^hfcs^could be d i s c u s s e d . T£ however the talks came to no
\ s a t i e ^ c t o r y conclusion, it would be n e c e s s a r y for the Cabinet to
resume their discussion a s soon a s possible and he asked those
present t o hold themselves available. He would consider further In
eoaesulltadon with the Ministers most concerned how security
p^telligence; might be improved. JFlnally he wished to emphasise
l^eSimp^rtanc^of ensuring that noTiint of their discussions reached
the Press\\which could be exploited by the Opposition or others to
suggest that there w a s any disagreement In the Cabinet; the l i v e s
fbf odr troops were at s t a k e . !
:
:
r
:
;
S ^ ^ ^ ' T h e ' ' Cabinet-: -Took note, with approval, of the P r i m e
^feg -^--;:Minister*s-summing up of their
%$0mM "discussion.
;
g p i f i p p t "office;. s. Wet.-;;
DOCUMENT IS THE PROPERTY OF HER BRITANNIC MAJESTVS
GOVERNMENT
The circulation of this paper has been strictlyJmuted
- , X , iA * Q
V IMS-
It is issued for the personal use o f S t a d & X ^
TOP SECRET
Copy No
0.
CABINET
CONFIDENTIAL ANNEX
C C (69) 42nd Cone lu s ion s, Minu te 2
Thursday, 4th September, 1969 at 3,, 0 0 p . m .
THE PRIME MINISTER said that the meeting which had
taken place on 19th August with the Northern Ireland Prime
Minister, Major Chichester-Clark, had gone well.
The
discussions had been protracted largely by the need to discuss
among ourselves the proposal made at the meeting by the Northern
Ireland Prime Minister with - as was subsequently confirmed - the
agreement of the General Officer Commanding, Northern Ireland,
that the latter should assume overall responsibility for security
operations. There had also been a good deal of discussion with
the Northern Ireland representatives over the terms of the
Declaration of Principles and Communique, However, the
final result had been satisfactory.
There had been no need,
as at one time had appeared possible, to recall the Cabinet;
and the objectives agreed by the latter at their meeting earlier
in the day had in substance been achieved. Subsequently, the
Home Secretary had visited Northern Ireland from 27th to 29th
August' he invited the Home Secretary to report on the outcome
of this visit.
THE HOME SECRETARY said that he had been accompanied
on his visit by the Minister of State at the Home Office,
Lord Stonham, and also by his Parliamentary Private Secretary,
Mr. Roland Moyle, MP, both of whom had rendered invaluable
services behind the s c e n e s . He had found the Northern Ireland
Government bewildered and inert. It had been difficult to arouse
them to a realisation of the full g r a v i t y of the situation, possibly
because for obvious reasons they hadjjbeen able to s e e for t h e m ­
s e l v e s the situation in the areas where tension was at its highest.
But though there was inertia, there was no ill-will and they had
appeared ready enough to co-operate once they had been given a
lead. He had addressed the backbenchers of the Ulster Unionist
Party and had sensed a surprising amount of agreement with what
he had said to them.
They v/ere however clearly apprehensive
about the extent to which they could carry their supporters with
them. He had a l s o had contacts with religious leaders.
Both
Protestants and Catholics had emphasised that the problems of
Northern Ireland were political and economic rather than religious^
TOP SECRET ^ O I C i q A A A l
4)
I STAINED UNDER SECTION 3 U
but both had also expressed mi
.i s e r v i n g s a b o u t t h e e x t e n t t o w h i c h
\
the other P r o t e s t a n t c h u r c h e s
w e r e l o s i n g s u p p o r t e r s t o r/ir. P a i s l e y .
T h e N o r t h e r n I r i s h w e r e a t o u g h - p e o p l e : ^ t h e , m a i n t e n a n c e of l a w ^ a r f d
v
a
A
*
. . . . . . . Mr,-),
auviiriniif MHW Hi
lllBlt
o r d e r i n U l s t e r w a s a d i f f i c u l t t a s k a t t h e b e s t of t i m e s ;
Mr.
­
and
T h e r e w a s i n d e e d s o m e d a n g e r of a P r o t e s t a n t r i g h t w i n g b a c k l a s h in w h i c h the U l s t e r U n i o n i s t P a r t y would l o s e s u p p o r t not to the left b u t to the r i g h t .
So f a r a s s e c u r i t y w a s c o n c e r n e d , h e had s p o k e n t o t h e C o m m a n d a n t s of t h e B ' S p e c i a l s , a l l of w h o m w e r e retired Service officers.
He had a p p e a l e d - he thought not without s u c c e s s - to their loyalty to the C r o w n and the c o n s t i t u t i o n a l Government.
A l t h o u g h t h i s w o u l d b e s u b j e c t e d to a s e v e r e s t r a i n if t h e r e w e r e a r a d i c a l c h a n g e i n t h e r o l e of t h e 3 S p e c i a l s , t h e p o s i t i o n w o u l d b e e a s e d if t h e c h a n g e c a m e a s a r e s u l t of t h e i n d e p e n d e n t i n v e s t i g a t i o n a t p r e s e n t b e i n g c o n d u c t e d by L o r d Hunt. The Commandants would obey o r d e r s , but there r e m a i n e d some d o u b t s a b o u t the e x t e n t to w h i c h t h e i r m e n w o u l d follow t h e m . T h e h a n d i n g i n of t h e B S p e c i a l s ' a r m s w a s a n e x t r e m e l y d e l i c a t e o p e r a t i o n , but it h a d b e e n p r o c e e d i n g r e a s o n a b l y well.
T h e r e w e r e h o w e v e r r e p o r t s t h a t s o m e of t h e s e a r m s h a d b e e n finding t h e i r v/ay to the P r o t e s t a n t v o l u n t e e r s c o n t r o l l e d b y M r . P a i s l e y and o t h e r s j a n d the s i t u a t i o n v/ould have to b e carefully watched.
M e a n w h i l e , the ' B Specials h a d b e e n w i t h d r a w n f r o m c r o w d c o n t r o l d u t i e s a n d r e s t r i c t e d t o t h e g u a r d i n g of v u l n e r a b l e points and police stations.
The Royal Ulster C o n s t a b u l a r y (RUG) r e m a i n e d u n a c c e p t a b l e to l a r g e s e c t i o n s of p u b l i c o p i n i o n , b o t h f o r r e a s o n s of h i s t o r y a n d b e c a u s e f e e l i n g a g a i n s t t h e m w a s b e i n g e x p l o i t e d for u l t e r i o r p o l i t i c a l m o t i v e s ; a n d s o m e a r e a s in t h e l a r g e c i t i e s w e r e s t i l l e i t h e r s e l f - p o l i c e d o r w i t h o u t a n y e f f e c t i v e e n f o r c e m e n t of l a w a n d o r d e r .
It w o u l d b e d i f f i c u l t to r e s t o r e p u b l i c c o n f i d e n c e in t h e R U C a n d t h e F o r c e ' s c o n f i d e n c e i n i t s e l f : a n d m a j o r c h a n g e s of p o l i c y , o r g a n i s a t i o n a n d p e r s o n n e l w e r e l i k e l y t o b e c a l l e d f o r i n t h e l i g h t of L o r d H u n t ' s report.
T h e p u b l i c l a c k of c o n f i d e n c e i n t h e p o l i c e f o r c e s t h r o w a h e a v y b u r d e n on t h e A r m y , w h o s e c o m m i t m e n t to the m a i n t e n a n c e of l a w a n d o r d e r w a s l i k e l y t o h a v e t o c o n t i n u e f o r s o m e c o n s i d e r a b l e time.
Although the t r o o p s had done v e r y well, they were not t r a i n e d in p o l i c e d u t i e s : t h e y c o u l d n o t be e x p e c t e d to c a r r y t h e m out indefinitely: but for the present there was no alternative. S
,
J
I
J
!
After outlining the m e a s u r e s taken following the N o r t h e r n I r e l a n d P r i m e L i i n i s t e r s visit to London and his own visit to U l s t e r the H o m e S e c r e t a r y pointed out that while civil r i g h t s and n o n ­
d i s c r i m i n a t i o n w e r e of c a r d i n a l i m p o r t a n c e , t h e p r o b l e m of N o r t h e r n I r e l a n d v/as a l s o to a v e r y l a r g e e x t e n t a n e c o n o m i c one.
F r o m t h i s p o i n t of v i e w , t h e b i g g e s t p r o b l e m of a l l w a s L o n d o n d e r r y - a city divided against itself and without hope. T h e p a t t e r n w a s that u n e m p l o y m e n t led to p o l i t i c a l e x t r e m i s m , a n d e x t r e m i s m to d i s o r d e r s , which w e r e t h e n r e f l e c t e d in B e l f a s t . !
If even 1, 500 jobs could be created in Londonderry, this would go
a long way towards transforming the situation: and he appealed to
his colleagues for their co-operation.
The Irish problem, after
nearly 50 years of relative stagnation, was on the move again and
unrest was likely to continue as long as the long-term problem
p e r s i s t e d , whatever we did in the short term to ease immediate
pressures.
The situation was a grave and urgent one.
Time
was not on our side. More barricades had been set up by both
sides in Belfast the previous night. While this was more of a
gesture than anything else, it was indicative of the atmosphere
that still prevailed. But disturbing though the outlook was, it
was more promising than it had been a generation a g e
In contrast
to the position in 191^* the British Army was not now emotionally
involved. The Opposition at Westminster, whom he had been at
great pains to keep informed - were no longer totally committed
to the Protestant North? and despite some unhelpful public
utterances by the P r i m e Minister of the Irish Republic,
Mr. Lynch, and others, ha judged that the temper in the
Irish Republic was very different. As to this last point,
he believed tha.t our long-term objective should be to move
forward towards a better relationship between Northern Ireland
and the Republic. This would need very careful consideration and
it might be that no major progress would be achieved within the
lifetime of the present Parliament.
However, as a first step
it might be useful for the P r i m e Minister to see Mr. Lynch.
The timing of this would need further thought: but talks might
take place after he himself had paid a second visit to Northern
Ireland, which it was his present intention to do about 8th-9th
October? after the reports of the various commissions and other
investigating bodies which had been set up had been received? and
after further discussions in London with the Northern Ireland
P r i m e Minister,
in discussion general appreciation was expressed of the
way in which both the political and military aspects of the
situation had been handled. The conduct of the troops had
been exemplary: but they were not equipped or trained to do
a long-term policing job. Although their presence and their
obvious impartiality had been a valuable psychological deterrent,
this was to some extent a wasting asset; and there was some doubt
whether if there were further major outbreaks of violence, the
troops would have the n e c e s s a r y experience or techniques to
contain them. This made it all the more urgent to press on
with the reorganisation of the regular police forces and the
restoration of public confidence in them. The point was made
that one illegal broadcasting station was attempting to create
friction in Belfast and Londonderry between the troops and the
local population: and it might be necessary to take action against
the anarchist groups who were behind it. The Irish Republican
Army was also trying to maintain tension and foment violence:
but it had not b e e n v e r y effective; its i m p o r t a n c e had been g r e a t l y
o v e r - e s t i m a t e d by the N o r t h e r n I r e l a n d a u t h o r i t y ; and t h e r e h a d
b e e n l i t t l e r e a l c o - o p e r a t i o n b e t w e e n it a n d t h e e x t r e m e l e f t , e v e n
in the a r e a s , s u c h a s the Bogside in L o n d o n d e r r y , w h e r e the w r i t
of t h e N o r t h e r n I r e l a n d G o v e r n m e n t s t i l l d i d n o t r u n .
There was
g e n e r a l a g r e e m e n t o n t h e u r g e n t n e c e s s i t y ox c r e a t i n g m o r e
o p p o r t u n i t i e s for e m p l o y m e n t , e s p e c i a l l y in L o n d o n d e r r y and,
i n g e n e r a l , i n t h e a r e a s w e s t of t h e R i v e r B a r m , w h e r e b o t h
u n e m p l o y m e n t a n d t h e p r o p o r t i o n of R o m a n . C a t h o l i c s w e r e
highest.
T h e f i n a n c i a l i m p l i c a t i o n s would h a v e to b e c o n s i d e r e d
f u r t h e r v/hen specific p r o p o s a l s had been w o r k e d out.
The point
was m a d e that intelligence about the internal security situation
had b e e n deficient in the e a r l y s t a g e s .
A t that point, we had had
to r e l y on the R U C whose i n f o r m a t i o n w a s both o n e - s i d e d and
i n a d e q u a t e and it had n o t b e e n c o n s i d e r e d a d v i s a b l e to e s t a b l i s h
an independent intelligence o r g a n i s a t i o n
Steps had however
n o w b e e n taken to i m p r o v e b o t h the R U C s and our own s o u r c e s
of i n f o r m a t i o n .
In g e n e r a l , P r e s s a n d p u b l i c r e a c t i o n s to the
m e a s u r e s which had b e e n t a k e n had b e e n f a v o u r a b l e ; and the
O p p o s i t i o n had n o t s o u g h t to e x p l o i t the G o v e r n m e n t s difficulties,,
R e a c t i o n s a b r o a d h a d a l s o b e e n f a v o u r a b l e , a n d the v i s i t c.C
M i s s B e r n a d e t t e D e v l i n , M P , to the United S t a t e s h a d on t h e
whole been a failure,
THE P R I M E MINISTER, summing up the discussion,
s a i d t h a t t h e m e e t i n g of 19th A u g u s t w i t h t h e N o r t h e r n I r e l a n d
P r i m e M i n i s t e r and the H o m e S e c r e t a r y ' s s u b s e q u e n t visit to
N o r t h e r n I r e l a n d h a d a c h i a v e d t h e s u b s t a n c e of t h e o b j e c t i v e s
laid down by the Cabinet,
M e a s u r e s had b e e n s e t in t r a i n to
deal with the m o s t urgent p r o b l e m s .
T h e a c t i o n t a k e n h a d be o n
w e l l r e c e i v e d by public opinion, a n d would r e f l e c t c r e d i t on t h e
Government,,
Y/e h a d b o u g h t t i m e i n w h i c h t o w o r k o u t a l o n g ­
t e r m solution.
T h i s m i g h t b e a l o n g t i m e in c o m i n g , and i t w a s
u n l i k e l y t o b e a c h i e v e d w i t h i n t h e l i f e t i m e of t h e p r e s e n t
Parliament,
Meanwhile we should avoid being r u s h e d ;
and in p a r t i c u l a r there should be no p r e m a t u r e withdrawal
of t h e t r o o p s .
The Cabinet
-
T o o k n o t e of t h e P r i m e M i n i s t e r ' s s u m m i n g u p a n d
of t h e p o i n t s m a d e i n d i s c u s s i o n .
Cabinet Office,
5th S e p t e m b e r ,
S. V / , 1 .
1969
DOCUMENT IS THE PROPERTY OF HER BRITANNIC MAJESTVS GOVERNMENT
The circulation of this paper has been strictly limited.
It is issued for the personal use of S t e t r r r ^ ^ ^ J - H ^
TOP SECRET
r
Copy N o -
m
, ^
N
\\
qQ
1
q
CABINET
CONFIDENTIAL ANNEX
CC(69) 43rd Conclusions, Minute 3
Thursday, 11th September, 1969 at 10. 00 a.zn.
THE HOME SECRETARY said that although he was l e s s
p e s s i m i s t i c about the outlook than he had been 24 hours earlier,
the situation in Northern Ireland was still extremely tense. The
tension was unlikely to be diminished by fche publication of the
Cameron Report on the origins of the disturbances of last January,
which would take place on the following day. Arrangements had been
made for the Roman Catholic Archbishop of Armagh,
Cardinal Conway, to receive a copy of the report in advance of
publication, and to have the main features of it explained to him.
This would go some way towards dissipating the impression the
Cardinal had formed that we were not taking him fully into our
confidence. Most of the problems raised in the report were being
covered by the various working parties and commissions which had
been s e t up following the London meeting with the Northern Ireland
P r i m e Minister, Major Chichester-Clark, and his own v i s i t to
Northern Ireland. In presenting the report to public opinion,
emphasis would be laid on the fact that the disorders had taken place
nine months ago, and that since then, action had been initiated on a
number of the grievances which had caused themj but the task of
presentation remained a difficult one. Much of the recent increase
in tension v/as due to the activities of the illegal broadcasting
stations which had been set up by both s i d e s : for instance the crowd
of 3 000 which had been responsible for the disorders in Belfast on
7th September had been called together by incitements f r o m
"Radio Orange". It had not been thought advisable to attempt to
c l o s e the illegal stations down: but it had now been decided that
despite the various legal and ethical objections to such a course,
they must be jammed, and this was now being done, though the
jamming was not yet fully effective.
One difficulty was that the
frequencies employed by the illegal stations were very close to that
used by a station in the Irish Republic, and there was a risk of
protests from the Government of the Republic if there were interference
e
-1­
with it, \There was a l s o some ground to suppose that some of the
illegal Protestant stations had the support of influential Ulster
Unionists, \ The situation would be carefully watched, and the
broadcasts monitored. There was increasing concern in Northern
Ireland at a situation in which political tension was leading to a
p r o g r e s s i v e breakdown in the enforcement of law and orders and
it was likely that the Northern Ireland Prime M i n i s t e r s statement
of 9th September on the removal of the barricades - of which the
Home Secretary had had only an hour*s warning - had been prompted
by p r e s s u r e from the business community rather than from the
Ulster Unionist hard-liners*. When he had seen the Northern
Ireland Minister for Commerce, Mr. Bradford, the Home Secretary
had emphasised the need for closer consultation on pronouncements
like this which caused serious implications for the troops in
Northern Irelands but the Northern Ireland Government had been
under considerable political pressure to show that they were still
in control of affairs and he did not want to add to their difficulties.
Over the past few days he had had a number of contacts with the
f
"HIS IS A COPY. THE ORIGINAL
RETAINED UNDER SECTION 3 (4
)F THE PUBLIC RECORDS
The Home Secretary would
that afternoon be receiving a deputation consisting of Mr, Fitt and
other influential Roman Catholics, including Father Padraic Murphy,
a parish priest from the F a l l s Road area of Belfast, He hoped that
the deputation would come out publicly with a statement urging the
removal of the barricade a if necessary over a period and if
n e c e s s a r y under the protection of the Army. This would do a great
deal to Improve the atmosphere. So far a s the Northern Ireland
Government was concerned, the Northern Ireland Prime M i n i s t e r ^
statement of 9th September had been a gambles but it was satisfactory
that he (and now the Minister of Commerce) had staked his political
future firmly on the continuance of reform. Major Chichester-Clark
was still hesitating about the appointment, foreshadowed in the
communique issued on 29th August,, of a Minister for Community
Relations, but we were keeping up the pressure on this. It was
difficult to give a f i r m forecast of p r o g r e s s . But most of the working
parties would have completed their reports by the end of September,
Liord H u h f s enquiry into the police forces would probably be
completed about 6th October, though he proposed that its results
should not be published until he himself visited Northern Ireland a
few days later, when he would be in a position to say something
about the views and intentions of the British Government,
The
n e c e s s a r y legislation by the Northern Ireland Parliament might be
p a s s e d by the end of the y e a r .
f
T h e r e w o u l d c l e a r l y h a v e to b e a d e b a t e o n N o r t h e r n I r e l a n d
at Westminster when Parliament reassembled.
The m o s t suitable
t i m e f o r t h i s m i g h t b e a f t e r t h e p u b l i c a t i o n of t h e v a r i o u s r e p o r t s a n d
a f t e r h i s own v i s i t t o U l s t e r .
He had been considering whether, as
a l o n g - t e r m m e a s u r e , i t w o u l d b e p o s s i b l e t o r e l i e v e t h e A r m y of t h e
b u r d e n of p o l i c e d u t i e s , f o r w h i c h t h e y w e r e n o t e q u i p p e d o r t r a i n e d ,
by bringing in s u b s t a n t i a l police contingents f r o m G r e a t B r i t a i n .
T h i s w o u l d r e q u i r e l e g i s l a t i o n in the U n i t e d K i n g d o m P a r l i a m e n t ,
a n d o n e p o s s i b i l i t y m i g h t b e f o r t h e N o r t h e r n I r e l a n d d e b a t e t o be
held on this.
Although it was impossible to forecast the future
c o u r s e of e v e n t s w i t h a n y a c c u r a c y , i t w a s c l e a r t h a t t h e w h o l e I r i s h
p r o b l e m w a s once m o r e on the m o v e and that t h e r e would be p r e s s u r e
f o r f u n d a m e n t a l c h a n g e s going f a r beyond w h a t w a s at p r e s e n t
contemplated.
I n t h e s e c i r c u m s t a n c e s , it w a s i m p o r t a n t t o g e t a
d i a l o g u e g o i n g w i t h t h e G o v e r n m e n t of t h e I r i s h R e p u b l i c a f t e r the
r e p o r t s h a d b e e n p u b l i s h e d , h e h i m s e l f h a d p a i d a s e c o n d v i s i t to
N o r t h e r n Ireland and a debate had been held at W e s t m i n s t e r .
The
a t t i t u d e of t h e P r i m e M i n i s t e r of t h e I r : l s h R e p u b l i c , M r . L y n c h ,
h a d not been helpful or e a s y to a s s e s s .
Though he had specifically
r e n o u n c e d t h e u s e of f o r c e , h e h a d s e n t t r o o p s t o t h e b o r d e r s a n d h e
h a d e m b a r k e d on a v / o r l d - w i d e p r o p a g a n d a c a m p a i g n a g a i n s t the
United Kingdom and Northern Ireland G o v e r n m e n t s ,
If h e r e a l l y
w a n t e d a u n i t e d I r e l a n d , h e m u s t c o n c i l i a t e P r o t e s t a n t o p i n i o n ; but
s o f a r h i s t a c t i c s h a d d o n e n o t h i n g b u t a l a r m it,,
N e v e r t h e l e s s , if
t h e r e w e r e t o b e a n y p r o s p e c t of a f i n a l s o l u t i o n , r e l a t i o n s b e t w e e n
t h e N o r t h a n d S o u t h of I r e l a n d , a n d b e t w e e n t h e S o u t h a n d t h e
United Kingdom m u s t be lifted to a different plane.
A s things
stood at p r e s e n t this w a s likely to take a long t i m e .
In c o n c l u s i o n , the H o m e S e c r e t a r y p a i d t r i b u t e to the m a n n e r
in w h i c h the A r m y h a d d i s c h a r g e d an a r d u o u s and u n g r a t e f u l t a s k .
He e x p r e s s e d h i s g r a t i t u d e for the support h e had r e c e i v e d f r o m his
c o l l e a g u e s , a n d i n p a r t i c u l a r f o r the h e l p t h e y h a d g i v e n h i m i n the
p r o v i s i o n of s t a f f f o r t h e v a r i o u s w o r k i n g p a r t i e s a n d c o m m i s s i o n s .
H e w o u l d h a v e to a s k for the p r e s e n t p r o v i s i o n a l a r r a n g e m e n t s to be
continued for s o m e t i m e to c o m e , and he hoped that h i s colleagues
would b e a r with h i m in t h i s ; but it would p r o b a b l y be p o s s i b l e to
r e g u l a r i s e t h e p o s i t i o n a f t e r t h e e n d of O c t o b e r ,
T H E D E F E N C E S E C R E T A R Y s a i d t h a t v/ith e i g h t b a t t a l i o n s
i n N o r t h e r n I r e l a n d a n d t w o i n r e s e r v e , w e h a d r e a c h e d t h e l i m i t of
a v a i l a b i l i t y of t r o o p s u n c o m m i t t e d t o t h e N o r t h A t l a n t i c T r e a t y
Organisation.
F u r t h e r r e i n f o r c e m e n t s c o u l d of c o u r s e b e m a d e
a v a i l a b l e if n e e d b e u n d e r t h e p r o c e d u r e s a g r e e d w i t h t h e S u p r e m e
Allied C o m m a n d e r , E u r o p e ; and he fully a p p r e c i a t e d the n e c e s s i t y
e s p e c i a l l y f r o m t h e p o i n t of v i e w of m a i n t a i n i n g t h e c o n f i d e n c e of t h e
R o m a n C a t h o l i c s , of p r o v i d i n g w h a t e v e r f o r c e s w e r e r e q u i r e d .
He
m u s t h o w e v e r g i v e w a r n i n g t h a t the f o r c e s a t o u r d i s p o s a l v / e r e not
-3­
T
inexhaustible. The calling"in of the arms of the B* Specials had
gone reasonably well in Belfast and Londonderry, but l e s s well in
the country. The present arrangements might have to be changed;
and this might lead to an increase in tension.
In discussion general agreement was expressed with the
Home S e c r e t a r y ^ analysis of the situation. The Cabinet agreed
that i t might lead to, a considerable slackening in tension if the
Roman Catholic deputation to be received by the Home Secretary that
day could be induced to make a statement on the lines he had
While the Army's image as an impartial authority had been
proposed.
a m a j o r a s s e t in the early atagec, Protestant confidence in the Army'a
objectivity had been shaken by recent events and by m i s r e p r e s e n t a ­
tions in Illegal broadcasts, and there was now a danger of some
d e g r e e of polarisation, with the Protestants placing their reliance
on the Royal Ulster Constabulary (RUC) and the Roman Catholics
putting their trust in the Army. This might lead to distrust and
tension between the police and the Army: and the tone of the recent
RUC statement on the use by the Army of CS gas In Belfast on
7th September suggested that this might already be happening. It
would be useful if the General Officer Commanding, Northern
Ireland,- could come to London and give his appreciation of the
m i l l t a r y s i t u a t i o n to the Ministers most closely concerned.
There
was general approval of the Home Secretary s suggestion that
1
T
Though the tension in Northern Ireland
was not n e c e s s a r i l y entirely religious in origin, the Churches were
c l e a r l y a key factor: and the Cabinet welcomed the efforts which
had b e e n made to take them into our confidence. Reporting by the
P r e s s and other information media had not always been strictly
objective, and a watch should be kept on this: in particular, an eye
should be kept on commercial television in Ulster, which was under
U l s t e r Unionist control. Although the Northern Ireland P r i m e
Minister and several of h i s colleagues had committed themselves
f i r m l y to the cause of reform, the Government was in danger from
both left and right, and the possibility could not be excluded of its
losing control of the situation. In that event the United Kingdom
Government might have to assume direct responsibility. E this
contingency a r o s e , it would be better both, presentationally and
politically if the United Kingdom Government were to take over at
the request of the Northern Ireland Government rather than on its
own initiative. A c r i s i s might arise at very short notice, and the
arrangements for the introduction of direct rule should be reviewed
and if n e c e s s a r y brought up to date.
c o l l e a g u e s a t t h e i r next m e e t i n g ; a n d he w a r n e d the C a b i n e t that
they m i g h t h a v e to be r e c a l l e d e a r l i e r than w a s at p r e s e n t
c o n t e m p l a t e d if t h e r e w e r e a n y m a r k e d d e t e r i o r a t i o n i n t h e
situation.
The a r r a n g e m e n t s for transition to d i r e c t rule should
be r e - e x a m i n e d by officials with a v i e w to a d i s c u s s i o n in the
M i n i s t e r i a l G r o u p on N o r t h e r n I r e l a n d ,
Officials should give
f u r t h e r c o n s i d e r a t i o n to the l o n g - t e r m p o s s i b i l i t i e s to w h i c h the
H o m e S e c r e t a r y h a d r e f e r r e d a n d i n p a r t i c u l a r t o t h a t of p l a c i n g
r e l a t i o n s w i t h the I r i s h R e p u b l i c on a b e t t e r a n d m o r e c o n s t r u c t i v e
footing.
T h e y should a l s o e x a m i n e our d i p l o m a t i c p o s t u r e and the
i n t e r n a t i o n a l i m p l i c a t i o n s of fche N o r t h e r n I r e l a n d s i t u a t i o n i n t e r m s
n o t o n l y of fche I r i s h p r o p o s a l , t o w h i c h t h e F o r e i g n a n d
C o m m o n w e a l t h S e c r e t a r y h a d r e f e r r e d e a r l i e r , f o r fche i n s c r i p t i o n
of fche N o r t h e r n I r e l a n d s i t u a t i o n o n t h e a g e n d a of t h e f o r t h c o m i n g
m e e t i n g of t h e G e n e r a l A s s e m b l y of fche U n i t e d N a t i o n s , b u t i n t e r m s
of o u r b i l a t e r a l r e l a t i o n s w i t h C o m m o n w e a l t h a n d f o r e i g n c o u n t r i e s .
I n v i e w of t h e g r a v i t y of t h e N o r t h e r n I r e l a n d cituafcion a n d
the p o t e n t i a l l y s e r i o u s c o n s e q u e n c e s , both i n t e r n a l and
i n t e r n a t i o n a l , of a n y i n d i s c r e t i o n s , m e m b e r s of t h e G o v e r n m e n t
would h a v e to e x e r c i s e p a r t i c u l a r c a r e to avoid m a k i n g any public
p r o n o u n c e m e n t w h i c h m i g h t be e x p l o i t e d to the G o v e r n m e n t s
d e t r i m e n t or tq i n c r e a s e t e n s i o n .
He would c i r c u l a t e a w a r n i n g to
M i n i s t e r s not in the C a b i n e t a n d to j u n i o r M i n i s t e r s on this point.
The Cabinet ­
(1)
T o o k n o t e of fche s t a t e m e n t s b y fche H o m e S e c r e t a r y and Defence S e c r e t a r y , a n d of t h e p o i n t s m a d e i n d i s c u s s i o n , , ( 2 )
T o o k n o t e wifch a p p r o v a l of t h e P r i m e M i n i s t e r ^ s u m m i n g u p of t h e i r discussion.
C a b i n e t Office, S. W . l .
12th S e p t e m b e r , ,
1959
CUMENT IS THE PROPERTY OF HER
BRITANNIC MAJESTY'?,
The circulation of this paper has been strictly limited.
It is issued for the personal use o f . . % J 5 ^
GOVERNMENT
K
fc-, *
MrP
^ ^ & ^ ^
1
Mk
n
9
TOP SECRET
Copy No...
CABINET
CONFIDENTIAL ANNEX
CC(69) 44th Conclusions,, Minute 1
Tuesday, 16th September., 1969* at 1L 00 a, m.
THE PRIME MINISTER said that on the previous evening
he, the Home Secretary and the Defence Secretary had met with
the General Officer Commanding (GOC), Northern Ireland,
General Sir Ian Freeland, and Mr, Oliver Wright, the United
Kingdom Governments special representative in Northern Ireland.
General Freeland and Mr. Wright had given the meeting their
appreciation of the situation, which showed that the position was
still a very serious one.
This had been followed by a discussion
of the situation arising from the issue by the extremist committee
which was in de facto control of the Catholic enclaves in Belfast
and Londonderry of a statement in connection with the removal of
the barricades which linked this to far-reaching political demands
and affirmed that the extremists were prepared to negotiate only
with the Army and not with the Government of Northern Ireland,
During the meeting the Government of Northern Ireland had informed
us of their intention to issue immediately a statement which would
set a time limit for the removal of the barricades by agreement,
failing which they v/ould be removed by force.
The Northern
Ireland P r i m e Minister, Major Chichester -Clark, was clearly
under pressure from his right wing. If he failed to make a firm
statement on the removal of the barricades, or was inhibited from
doing so by u s , there was a danger that a large section of his
supporters would be alienated and join the "Protestant backlash"
which had recently become evident, and that there might be
resignations from his Government which would threaten its
survival. At one point it had seemed possible that the Prime
Minister himself or the Government collectively might resign.
In that event, it was unlikely that any alternative Government
could be formed with which we could co-operate. It might not
be possible to form a government at all, in which case we should
have no choice but to assume direct responsibility for the government
of Northern Ireland, It might be n e c e s s a r y in the last resort to use
force. On the other hand, a threat, explicit or implicit, to use it
committed the United Kingdom Government, which would have to
provide the force.
The use of force would have the gravest
implications, and the GOC, Northern Ireland, had expressed
s t r o n g m i s g i v i n g s a b o u t t h e c o n s e q u e n c e s of o u r b e c o m i n g
i n v o l v e d , a s w e v/ell m i g h t b e , in a n u r b a n g u e r i l l a w a r .
It s e e m e d a d v i s a b l e to b r i n g p r e s s u r e to b e a r on the N o r t h e r n
I r e l a n d G o v e r n m e n t to o m i t f r o m their s t a t e m e n t any r e f e r e n c e
t o a t i m e l i m i t o r t o t h e u s e of f o r c e , a n d t o h o l d t h e s i t u a t i o n s o
f a r a s t h e y w e r e c o n c e r n e d b y s a y i n g - a n d a l l o w i n g t h e m , if t h e y
w i s h e d , t o s a y - t h a t G e n e r a l F r e e l a n d h a d b e e n a u t h o r i s e d to d i s c u s s
w i t h t h e G o v e r n m e n t of N o r t h e r n I r e l a n d t h e n a t u r e of t h e a c t i o n
i n v o l v e d in d i s m a n t l i n g the b a r r i c a d e s a n d the m a n n e r in which
tills would be done.
In s u c h d i s c u s s i o n s t h e G O C w a s n o t to c o m m i t
h i m s e l f to any p r e c i s e t i m e t a b l e .
If t h e r e w e r e a n y q u e s t i o n of t h e
u s e of f o r c e h e w a s t o r e f e r b a c k f o r i n s t r u c t i o n s , w h i c h w o u l d h a v e
t o b e c o n s i d e r e d c o l l e c t i v e l y by M i n i s t e r s .
In t h e e v e n t t h e
N o r t h e r n I r e l a n d G o v e r n m e n t had a g r e e d to i s s u e a s t a t e m e n t
o n l i n e s a c c e p t a b l e to u s .
This had b e e n followed by a t e l e v i s i o n
i n t e r v i e w given by the H o m e S e c r e t a r y i n w h i c h M r , C a l l a g h a n h a d
e m p h a s i s e d t h a t t h e r e c o u l d b e n o q u e s t i o n of e n t e r i n g i n t o a
p o l i t i c a l n e g o t i a t i o n i n t h e c o n t e x t of t h e r e m o v a l of t h e b a r r i c a d e s .
Thi3 w a s a -security p r o b l e m which the GOC w a s e m p o w e r e d to
d i s c u s s i but he w a s n o t e m p o w e r e d to d i s c u s s with s e l f - a p p o i n t e d
b o d i e s p o l i t i c a l i s s u e s w h i c h w e r e p r o p e r l y t h e c o n c e r n of t h e
G o v e r n m e n t of N o r t h e r n I r e l a n d , w h i c h h a d a l r e a d y p u t f o r w a r d
t h r o u g h the a p p r o p r i a t e c o n s t i t u t i o n a l c h a n n e l s its p r o p o s a l s for
d e a l i n g w i t h t h e m a j o r i t y of t h e p r o b l e m s i n v o l v e d .
Meanwhile,
n e g o t i a t i o n s o n t h e s p o t f o r t h e r e m o v a l of t h e b a r r i c a d e s c o n t i n u e d ,
THE D E F E N C E SECRETARY said that Londonderry was
r e l a t i v e l y c a l m , but t h a t t h e s i t u a t i o n in B e J i a s t r e m a i n e d v e r y
tense.
The t r o o p s w e r e s u b j e c t e d t o c o n s t a n t v i l i f i c a t i o n by
e x t r e m i s t P r o t e s t a n t e l e m e n t s : but by the s t a n d a r d s which
applied to active s e r v i c e the strain on t h e m was not excessive,
a n d the GOC w a s not w o r r i e d about m o r a l e .
With the a r r i v a l
t h a t d a y of a f u r t h e r b a t t a l i o n i n B e l f a s t ( m a k i n g b i x b a t t a l i o n s
i n a l l i n that a r e a ) t h e G O C f e l t that h e w o u l d b e a b l e to c o n t a i n
t h e s i t u a t i o n , p r o v i d e d that t h e r e v/as n o m a j o r d e t e r i o r a t i o n .
H e i n t e n d e d to p a y a s h o r t v i s i t to N o r t h e r n I r e l a n d h i m s e l f on
18th S e p t e m b e r .
T H E M I N I S T E R O F S T A T E F O R F O R E I G N AND
C O M M O N W E A L T H A F F A I R S said that the I r i s h p r o p o s a l
f o r t h e i n s c r i p t i o n o n t h e a g e n d a of t h e G e n e r a l A s s e m b l y
of t h e U n i t e d N a t i o n s w o u l d b e c o n s i d e r e d b y t h e G e n e r a l
C o m m i t t e e of t h e U n i t e d N a t i o n s o n 17th S e p t e m b e r ,
We
h a d been lobbying with s o m e s u c c e s s , and the p r o s p e c t s
for an a d v e r s e vote w e r e quite favourable, but p r o m i s e s
of s u p p o r t o b t a i n e d i n c a p i t a l s d i d n o t a l w a y s r e s u l t i n v o t e s
i n the d e s i r e d s e n s e by d e l e g a t e s .
E v e n if t h e I r i s h p r o p o s a l
w e r e r e j e c t e d b y the G e n e r a l C o m m i t t e e the m a t t e r could be
If t h i s h a p p e n e d
r a i s e d a f r e s h in the G e n e r a l A s s e m b l y itself,
and if the proposal for inscription succeeded, the United Kingdom Permanent Representative to the United Nations, Lord Caradon, had been instructed to press for the matter to be referred to the Human Rights Commission where it could be argued that it would be out of order to discuss the political aspects of the question. In discussion there was general approval of the action taken
by Ministers arising out of the meeting on 15th September.
The
point was made that we should not recoil from political demands
a s such. What was at issue was the manner in which these were
made.
They could not be channelled through the GOC who was
concerned solely with security, but should be dealt with through
the Northern Ireland Government which in many instances had
already initiated action on the alleged points of grievance., It
would be n e c e s s a r y to keep up the pressure in Stormont.
Full
u s e should be made of the good offices of moderates on both sides
and in particular of responsible churchmen. In this connection it
was noted that the Catholic hierarchy were already in touch with
the leader of the committee running the Catholic barricaded areas
in Belfast and Londonderry, a Mr. Sullivan,
with a view
to inducing Mm to adopt a more reasonable attitude.
Consideration
w a s given to the position which might arise if the present Northern
Ireland Prime Minister were forced into resignation. If the
present Minister of Development, Mr. Faulkner, were able to
form a government, he would probably continue in the main with
present policies and we should be able to co-operate with him.
A government headed by the former Minister of Home Affairs,
Mr. Craig, would however present an entirely different situation,
and we could not allow ourselves to be forced into the position of
supporting an administration of extreme and uncompromising
right-wingers. It had to be borne in mind that it might prove
impossible to form a viable Northern Ireland government at all.
Emergency legislation to deal with tMs contingency had been
prepared, and had recently been reviewed, as had the general
constitutional position. It was true that there had been some
weakening in confidence in the Army a s an impartial force as
between Protestants and Catholics, in particular among the
former.
The use by the Army on a very small scale of CS
gas against a Protestant crowd had produced a much more
violent reaction than the expenditure of CS gas on a much
larger scale by the Royal Ulster Constabulary against Catholics
at an earHer stage. But accusations, however unsubstantiated,
that the Army load a. pro^Catholic bias were probably inevitable
in a situation where the Catholics were on the whole on the
defensive: where Army intervention had in the main been
with a view to their protection; and where reforms, mostly
pro-Catholic in effect, which had been delayed for 50 years
- j­
D UNDER SECTION 3 (4J
XQR&EORET
!
The Cabinet
-
T o o k n o t e of t h e s t a t e m e n t s b y t h e P r i m e M i n i s t e r ,
t h e D e f e n c e S e c r e t a r y a n d t h e M i n i s t e r of S t a t e f o r
F o r e i g n a n d C o m m o n w e a l t h A f f a i r s a n d of t h e
p o i n t s m a d e in d i s c u s s i o n .
Cabinet Office, S . \ 7 . 1 .
16th September, 1969
The circulation of this paper has been strictly limited.
It is issued for the personal use of
. .
TOP SECRET
\
g
Copy No
CABINET
CONFIDENT 3AL ANNEX
CC(59) 46th Conclusions,, Minute 4
^Tuesday, 7th October,, 1969 at 3.00 p,rru
y-:r$l%MThe Cabinet considered statements by the Home Secretary and the Defence Secretary about the report to the Northern Ireland Government of Lord Hunt*s Advisory Board on the future of the Royal-Ulster Constabulary (RUC) and the Ulster Special Constabulary (USC)j and a memorandum by the Home Secretary (C(69) '331) dealing with the proposals of tlie three working parties and the^economic m i s s i o n which he had initiated on his v i s i t to Northern Ireland in August. ;
r
;, THE HOME SECRETARY said that the Government could
applaud the principal recommendations of Lord Hunt s report.
T h e s e were that the RUC should be stripped of its para-military'
functions and concentrate on normal policing; a police authority?
on the Great Britain pattern, should be interposed between the force
and the?:Northern Ireland Government; HM Inspectors of Constabulary
should inspect the force at regular intervals; arms should not
normally be carried; the uniform should be rede signed and be blue
instead of black; the establishment should be much enlarged; means
should be found of recruiting more Roman Catholics; there should
-be interchange with police forces in Great Britain; and links should
be formed with police institutions in Great Britain.
T
The Home Secretary said that[he had a Chief Constable of a
force in Great Britain ready to take charge; and the a i m should be
to have this officer In post simultaneously with the publication of the
. report and the announcement of the decisions on it. He was seeking
L e g i s l a t i o n would be n e c e s s a r y e i t h e r in the o v e r s p i l l p e r i o d o r early­
next S e s s i o n to i m p l e m e n t the a r r a n g e m e n t s f o r the t r a n s f e r and
s e c o n d m e n t of G r e a t B r i t a i n p o l i c e .
He hoped that he could
p e r s u a d e the N o r t h e r n I r e l a n d G o v e r n m e n t to a c q u i e s c e in a l l t h e s e
p r o p o s a l s f o r the R U C ,
T h e p r o p o s a l s r e l a t i n g to the USC (the B S p e c i a l s ) , w e r e
m o r e difficult; and h e and the Defence S e c r e t a r y s h a r e d r e s e r v a t i o n s
about them.
T h e H u n t R e p o r t p r o p o s e d t h a t the USG s h o u l d be
d i s b a n d e d a n d that t h e i r f o r m e r functions should be u n d e r t a k e n by
t w o new' b o d i e s : a s p e c i a l c o n s t a b u l a r y , on the G r e a t B r i t a i n
p a t t e r n , of u n p a i d , u n a r m e d v o l u n t e e r s u n d e r p o l i c e c o n t r o l , w h i c h
w o u l d r e l i e v e t h e R U G of r o u t i n e d u t i e s s u c h a s t r a f f i c c o n t r o l ;
and a p a r t - t i m e , locally r e c r u i t e d , paid and a r m e d defence f o r c e ,
r a t h e r like the w a r t i m e L o c a l D e f e n c e V o l u n t e e r s , t o g u a r d the
b o r d e r and key i n s t a l l a t i o n s , who would t e c e i v e military training
f r o m t h e B r i t i s h A r m y a n d w o u l d b e u n d e r t h e c o n t r o l of t h e
G e n e r a l Officer C o m m a n d i n g ( G O C ) , a c t i n g in c o n s u l t a t i o n w i t h t h e
Northern Ireland Government,
Lord Hunt's Advisory Board
t h o u g h t t h a t t h e p o l i t i c a l r e p e r c u s s i o n s of d i s b a n d i n g t h e U S C w o u l d
b e l e s s s e v e r e if i t w a s r e p l a c e d b y s u c h a f o r c e ; s o m e of t h e
m o r e s u i t a b l e of i t s e x - m e m b e r s m i g h t b e a b s o r b e d i n t o t h e n e w
f o r c e a n d t h e c r e a t i o n of t h e f o r c e w o u l d r e d u c e t h e r i s k of t h e
USC going u n d e r g r o u n d .
E v e n s o , t h e r e w a s s o m e r i s k of a n
a d v e r s e P r o t e s t a n t r e a c t i o n ^ a l t h o u g h it w a s p e r h a p s n o t a s g r a v e
a s M r , QuSnfcSn H o g g h a d s u g g e s t e d t o h i m i t m i g h t b e .
i
1
T h e m o s t d i f f i c u l t p r o b l e m i n t h i s p a r t of t h e p r o p o s a l s w a s
h o w a n d to what e x t e n t the N o r t h e r n I r e l a n d G o v e r n m e n t should
s h a r e i n t h e c o n t r o l of t h e n e w d e f e n c e f o r c e . .
T h e y h a d m a d e it
c l e a r that t h e y wanted to p l a y a l a r g e r p a r t than L o r d Hunt had
e n v i s a g e d , w h e r e b y the GOC would e x e r c i s e his c o m m a n d in close
c o n s u l t a t i o n w i t h t h e m t h r o u g h t h e m e d i u m of a S e c u r i t y C o m m i t t e e
u n d e r t h e c h a i r m a n s h i p of t h e M i n i s t e r of H o m e A f f a i r s .
He
r e c o g n i s e d the s p e c i a l difficulty for the N o r t h e r n I r e l a n d
G o v e r n m e n t i n a c c e p t i n g t h i s e l e m e n t in the p r o p o s a l s ; a n d it w o u l d
c l e a r l y be m u c h e a s i e r to p e r s u a d e P r o t e s t a n t opinion to a c c e p t the
d i s b a n d m e n t of t h e U S C if t h e p a c k a g e i n c l u d e d a g o c d m e a s u r e of
c o n t r o l of t h e n e w f o r c e b y S t o r r n o n t ; b u t i t w o u l d n o t b e p o s s i b l e
t o g o b e y o n d a n a r r a n g e m e n t f o r t h e G O C t o c o n s u l t w i t h the.
N o r t h e r n I r e l a n d G o v e r n m e n t o n a n y m a t t e r s of t h e f o r c e s s i z e a n d
d e p l o y m e n t , w h e r e their l o c a l knowledge would obviously be helpful.
The m a t t e r w a s s o d e l i c a t e that L o r d Hunt and h i s c o l l e a g u e s had
n o t b e e n a b l e to r e a c h a fully w o i k e d out s o l u t i o n a n d it w o u l d
t h e r e f o r e f a l l t o h i m , k e e p i n g in t o u c h w i t h t h e D e f e n c e S e c r e t a r y
t o d o this d u r i n g h i s f o r t h c o m i n g t a l k s w i t h the S t o r m e n t
Government.
T h e d i s b a n d m e n t of t h e U S C a n d t h e e s t a b l i s h m e n t of
t h e n e w l o c a l d e f e n c e f o r c e u n d e r t h e c o n t r o l of t h e G C C azud :he
v
i V
;
.2­
Ministry of Defence were integral parts of the package of reforms,
which were the minimum that we should require
He believed that
he would be able to persuade the Northern Ireland Government of
this but h e would need the Cabinefs authority for a measure of
discretion in his talks
0
0
THE DEFENCE SECRETARY said that he found the Hunt
R e p o r t s recommendations for the RUC itself admirable. He
agreed that the USC should be abolished in its present form and
he accepted that there v/as a case for a military force to undertake
the tasks which they had performed in the border a r e a s . It would
not be possible for the regular forces to shoulder this burden
t h e m s e l v e s , and, even if they had the manpower, there were other
objections to their becoming involved In it. He accepted, therefore,
that mere would have to be a separate new military force. To be
adequate, the new force would need a strength nearer 5,000 than
the 4 , 000 proposed by the Hunt Reports and It would need about
250 British officers and NCOs in its command structure.
Their
task would be similar to that which the Army and the USC had had
to perform in blocking the frontier during the Iriah Republican Army
(IRA) insurgencies of the 1950s, The nature of this task would
require the force to be raised in mainly rural areas and to be
provided with a r m s which they would keep at home, He saw no
serious objection to this. The force should not be part of the
existing Reserve Army but rather should be analagous to the
Home Guard, with a flavour more of the original Local Defence
Volunteers, The Home Guard legislation, which was still on the
Statute Book, would provide a convenient model for a separate
comprehensive Bill - to be passed by the United Kingdom
Parliament ** to cover the new force, which would be preferable to
attempting to make provision for it by amendments to Reserve Army
legislation. He would wish- to be sure that adequate arrangements
would be made to offset the extra £1 million cost of the force to the
Defence budgeto Like the Home Secretary, he recognised that
these proposals raised a political dilemma. To make the new
force acceptable to Roman Catholic opinion, it would have to be
clearly under the control of the Westminster Government and
firmly linked to the A r m y . On the other hand, to avoid a serious
Protestant reaction, the Stormont Government would somehow have
to be involved in its management,, He was content to leave it to
the Home Secretary to obtain the best terms of agreement he could
with the Northern Ireland Governmentp so long a s ultimate control
of the force lay with the GOC responsible to the Ministry of Defence.
i;
la discussion it was argued that no hasty decision should be
made on the proposed new defence force. Several major questions
needed to be answered. How could it be ensured that the force
would contain a reasonable balance of Protestants and Roman
Catholics ? If the force were dominated by Protestants - a s seemed
M3**
l i k e l y , a n d , i n d e e d , p e r h a p s n e c e s s a r y if i t w e r e t o d e f e n d t h e
b o r d e r with resolution - how would the I r i s h Republic r e a c t to it,
a n d h o w c o u l d R o m a n C a t h o l i c o p i n i o n i n t h e N o r t h b e p e r s u a d e d of
i t s a d v a n t a g e s o v e r the USC ?
It w a s n o t s u f f i c i e n t t o c o m p a r e i t
f a v o u r a b l y w i t h t h e U S C , b e c a u s e t h e U S C w a s a r e l i c of t h e p a s t
which w a s widely r e c o g n i s e d a s offensive and which the G o v e r n m e n t
now had to r e m o v e .
We should be m o s t c i r c u m s p e c t about
c r e a t i n g , a t t h i s s t a g e of N o r t h e r n I r e l a n d s h i s t o r y , a n e w s p e c i a l
m i l i t a r y f o r c e , e v e n though it a d m i t t e d l y would be b e t t e r than what
it replaced.
r
On t h e o t h e r h a n d , it w a s p o i n t e d out t h a t the G o v e r n m e n t
h a d o n l y a c h o i c e of e v i l s b e f o r e t h e m .
There were undoubtedly
s e r i o u s objections to the proposed new defence forcej but it would
b e a s u b s t a n t i a l i m p r o v e m e n t cn the U S C
It w o u l d b e o n l y h a l f
a s l a r g e r i t w o a l d b e l o c a t e d a w a y f r o m i;he u r b a n a r e a s of t e n s i o n ?
a n d it would be d i r e c t l y u n d e r A r m y c o m m a n d and not I n d i r e c t l y
a n d ineffectively c o n t r o l l e d through the R U C
T h e i s s u e of t h e
m i n i m u m n e c e s s a r y a r m s to t h e m h a d to be v i e w e d a g a i n s t the
b a c k g r o u n d of t h e h u n d r e d s of t h o u s a n d s of s m a l l a r m s p r i v a t e l y
h e l d i n U l s t e r , m a n y of t h e m b y t h e U S C t h e m s e l v e s .
But the
decisive consideration w a s that there was no satisfactory alternative
T h e A r m y would n e e d five f u r t h e r b a t t a l i o n s to u n d e r t a k e the d u t i e s
e n v i s a g e d for the d e f e n c e f o r c e .
T h e s e would be additional to the
e x t r a g a r r i s o n that would be r e q u i r e d in the long t e r m f o r the A r m y
t o f u l f i l I t s r o l e of a s s i s t i n g t h e c i v i l p o w e r a n d b a c k i n g t h e d e f e n c e
of t h e f r o n t i e r .
T h e A r m y s o t h e r c o m m i t m e n t s would not a l l o w it
t o p r o v i d e a f o r c e t o t a l l i n g t h e 11 b a t t a l i o n s w h i c h w o u l d be n e e d e d .
I n t h e l o n g r u n it w a s t o b e h o p e d t h a t the d e f e n c e f o r c e v/ould
w i t h e r a w a y w h e n it h a d s e r v e d i t s p u r p o s e .
0
f
In f u r t h e r d l s c u s r i o n t h e r e w a s g e n e r a l a g r e e m e n t that the
N o r t h e r n I r e l a n d G o v e r n m e n t should not h a v e a s l a r g e a say in the
c o n t r o l of t h e f o r c e a s L o r d H u n t p r o p o s e d , , l e s t i t s h o u l d i n e f f e c t
b e c o m e s i m p l y a r e i n c a r n a t i o n of t h e U S C .
T H E P R I M E M I N I S T E R , s u m m i n g u p t h i s p a r t of t h e
d i s c u s s i o n , s a i d t h a t t h e C a b i n e t w e l c o m e d t h e p r o p o s a l s of
L o r d Hunt*s A d v i s o r y B o a r d for bringing the U l s t e r police s y s t e m
a s c l o s e l y a s p o s s i b l e i n t o l i n e with t h a t in G r e a t Britain.? a n d t h e y
a g r e e d w i t h t h e H o m e S e c r e t a r y ^ p r o p o s a l s f o r t h e p u b l i c a t i o n of
t h e r e p o r t , t h e a n n o u n c e m e n t of d e c i s i o n s on i t a n d t h e a p p o i n t m e n t
of t h e n e w I n s p e c t o r - G e n e r a l .
They a g r e e d a l s o that h e should
b r i n g i n a B i l l t o m a k e p o s s i b l e t h e t r a n s f e r a n d s e c o n d m e n t of
p o l i c e f r o m f o r c e s i n G:*eat B r i t a i n t o t h e R U C ,
They a g r e e d with
t h e p r o p o s a l t o a b o l i s h t h e U S C j b u t thc-y c h a r e d t h e u n e a s e of t h e
H o m e and Defence S e c r e t a r i e s about the p r o p o s e d defence f o r c e ,
to which there w e r e s e v e r a l cogent objections.
But t h e y a c c e p t e d
t h a t t h e r e w a s n o s a t i s f a c t o r y a l t e r n a t i v e w a y of p r o v i d i n g f o r t h e
-4­
long-term protection of the border and of key installations, given
that the British Army could not undertake the entire burden.
Furthermore, the force v/ouid be a n e c e s s a r y political counterweight
to the abolition of the USCj if nothing w e r e put in its place, it might
not be possible to contain the reaction by the Protestants to the
abolition of the force on which they pinned such reliance. So long
as the essential condition that the GOC, and through him the
Westminster Government, controlled the new force was met, the
Cabinet reluctantly accepted that it was the best solution in a most
delicate and intractable situation. The Hunt Report had not given a
definitive answer to the problem how to associate the Northern
Ireland Government with the management of the new force in order
to secure their co-operation. The Home Secretary, in consultation
with the Defence Secretary, should have discretion for this
purpose in working out an acceptable arrangement, subject to
ensuring that the ultimate control of the force was safeguarded in
the manner which the Cabinet considered e s s e n t i a l .
The Cabinet ­
(1)
(2)
Took note, with approval, of the P r i m e M i n i s t e r s summing up of this part of their discussion. Invited the Home Secretary to proceed with the arrangements for introducing v the reforms of the RUC a s agreed in discussion, and to bring in a Bill to provide for the transfer and secondment of Great Britain police. . (3)
Invited the Home Secretary, in consultation with the Defence Secretary, to secure the best practicable arrangements for control of the new defence force, subject to the essential requirements agreed in discussion, and to report to the Cabinet, (4)
Invited the Defence Secretary, in consultation with the Home Secretary, to consider urgently the n e c e s s a r y legislative provision in the United Kingdom Parliament for establishing the new defence f o r c e . -5­
T H E H O M E S E C R E T A R Y s a i d t h a t the two G o v e r n m e n t s h a d
r e c e i v e d r e p o r t s f r o m the t h r e e W o r k i n g P a r t i e s and the e c o n o m i c
m i s s i o n of o f f i c i a l s w h i c h h e h a d i n i t i a t e d o n h i s v i s i t t o U l s t e r i n
August,
The t h r e e Working P a r t i e s h a d e x a m i n e d the extent to
which the N o r t h e r n Ireland G o v e r n m e n t s p r e s e n t p r a c t i c e or
p l e d g e d c o m m i t m e n t s a d e q t i a t e l y e n s u r e d t h e p r o m o t i o n of g o o d
c o m m u n i t y r e l a t i o n s b y m e t h o d s i n c l u d i n g t h e p r o h i b i t i o n of
i n c i t e m e n t t o r e l i g i o u s h a t r e d ? t h e a v o i d a n c e of a n y d i s c r i m i n a t i o n
i n a n y f o r m of p u b l i c e m p l o y m e n t s a n d t h e f a i r a l l o c a t i o n of h o u s e s
b y p u b l i c a u t h o r i s e So
T h e e c o n o m i c m i s s i o n had a s s e s s e d the
e c o n o m i c and i n d u s t r i a l p r o s p e c t s in N o r t h e r n I r e l a n d in the light
of r e c e n t e v e n t s , ,
He p r o p o s e d in h i s f o r t h c o m i n g v i s i t to d i s c u s s
w h a t a c t i o n should follow f r o m these r e p o r t s .
T h e c o n c l u s i o n s of
t h e W o r k i n g P a r t i e s o n c o m m u n i t y r e l a t i o n s a n d on t h e a v o i d a n c e of
d i s c r i m i n a t i o n in public e m p l o y m e n t w e r e comprehensive and
a c c e p t a b l e ? b u t h e c o n s i d e r e d t h a t t h e p r o p o s a l s of t h e W o r k i n g P a r t y
o n h o u s i n g a l l o c a t i o n - t h a t r e l i a n c e s h o u l d h e p l a c e d on t h e n e w
a l l o c a t i o n s c h e m e s a n d on the C o m m i s s i o n e r f o r C o m p l a i n t s a s a
l o n g s t o p - w o u l d n o t g o f a r enough to s a t i s f y the R.oman C a t h o l i c
m i n o r i t y that there was no discrimination.
He advocated t r a n s f e r r i n g
a i l p u b l i c a u t h o r i t y h o u s i n g to the N o r t h e r n I r e l a n d H o u s i n g T r u s t ,
which had a reputation for impartiality.
It o w n e d 4 0 , 000 h o u s e s
( i n c o m p a r i s o n w i t h t h e l o c a l a u t h o r i t i e s w h i c h o w n e d 76^,000) a n d
its o r g a n i s a t i o n could be expanded to u n d e r t a k e this e x t r a t a s k
H e did not think that e v e n the p r o p o s e d new e n l a r g e d l o c a l a u t h o r i t i e s
in N o r t h e r n I r e l a n d could be r e l i e d upon to a d m i n i s t e r housing
without d i s c r i m i n a t i o n j and he could s e e no g r o u n d s why h o u s i n g ,
a n y m o r e than e d u c a t i o n , should not be a d m i n i s t e r e d a s a c e n t r a l
s e r v i c e f o r the whole P r o v i n c e ,
R e w a s well a w a r e that his proposal
w o u l d a r o u s e o p p o s i t i o n a n d t h a t i t would, l e a v e t h e l o c a l a u t h o r i t i e s
w i t h l i m i t e d f u n c t i o n s ; b u t t h i s w a s a p r i c e w h i c h w o u l d h a v e t o be
paid to e n s u r e that the h o u s i n g p r o b l e m w a s p r o p e r l y d e a l t w i t h .
s
0
T h e e c o n o m i c m i s s i o n s r e p o r t w a s e n c o u r a g i n g f o r £he
s h o r t t e r m s b u t it c a r r i e d a w a r n i n g t h a t t h e l o n g e r t e r m e f f e c t s
were potentially very serious.
I n £he l i g h t of t h e i r r e p o r t , t h e
N o r t h e r n Ireland G o v e r n m e n t proposed immediate m e a s u r e s to
r e a s s u r e i n v e s t o r s a b o u t c o m p e n s a t i o n for f u t u r e r i c t d a m a g e and
t o r e s t o r e r e l a t i v e l e v e l s of i n d u c e m e n t ; a n d t h e y p r o p o s e d t h a t u
£?. m i l l i o n p r o g r a m m e of l a b o u r i n t e n s i v e w o r k s , d i r e c t e d i n
p a r t i c u l a r a t t h e p e a k u n e m p l o y m e n t a r e a s of t h e w e s t , s h o u l d b e
undertaken.
H e doubted w h e t h e r t h e s e p r o p o s a l s would be
s u f f i c i e n t t o s o l v e t h e u n e m p l o y m e n t p r o b l e m o r to e n s u r e a n
a c c e p t a b l e f u t u r e r a t e of e c o n o m i c p r o g r e s s ; b u t h e I n v i t e d t h e
C a b i n e t to a g r e e to t h e m in p r i n c i p l e s o that h e could b a s e h i s
forthcoming discussions upon them.
In discussion there was general agreement with the Home
Secretary ^ attitude to the reports and to his proposals for acting
upon them. It was pointed out however that his proposals for
public authority housing would make this a 100 per cent charge on
the Exchequer. There would a l s o have to be financial discussions
between the Treasury and the Northern Ireland Ministry of Finance
on the proposal to increase by £1 million the special capital
programme.
1
THE PRIME MINISTER, summing up this part of the
d i s c u s s i o n , said that the Cabinet endorsed the Home Secretary s
views on the reports of the three Working Parties and the economic
m i s s i o n . They authorised him to d i s c u s s action on them accordingly
with the Northern Ireland Government during h i 3 forthcoming v i s i t ,
subject to a full examination of the financial considerations
mentioned in discussion.
f
The Cabinet ­
(5) ; Invited the Home Secretary to proceed as proposed in C(69) 131, subject tc full consultations as appropriate on the financial points. Cabinet Office, S. W. L
9th October, 1969
DOCUMENT IS THE PROPERTY OF HER BRITANNIC MAJESTVS
GOVERNMENT
The circulation of this paper has been strictly limited.
It is issued for the personal use of
&.turlL....
,
TOP SECRET
Copy No
\
La^P
TTuPter) \ iCf^ .
a-..
CABINET
CONFIDENTIAL. ANNEX
CC(69) 48th C o n c l u s i o n s , Minute 2
T u e s d a y , 1 4 t h O c t o b e r , 1 9 6 9 a t 10,,30 a . m
t
T H E H O M E S E C R E T A R Y , r e p o r t i n g cn h i s v i s i t to
N o r t h e r n I r e l a n d , s a i d t h a t a f u l l a c c o u n t of h i s d i s c u s s i o n s w i t h
the N o r t h e r n I r e l a n d G o v e r n m e n t w a s g i v e n in the c o m m u n i q u e
i s s u e d o n 10th O c t o b e r , c o p i e s of w h i c h h e h a d c i r c u l a t e d t o t h e
Cabinet with C(69) 139.
H e w a s convinced that the N o r t h e r n I r e l a n d
G o v e r n m e n t would d o their b e s t to push the r e f o r m s through,
b e c a u s e they r e c o g n i s e d that they could not go back, a n d they
b e l i e v e d that t h e y could hold t h e i r P a r t y together,,
But he confessed
t o a n i n n e r c o n c e r n a n d i t r e m a i n e d t o b e c?een w h e t h e r t h e
d i s t u r b a n c e s would build up to a r e w peak or g r a d u a l l y die away;
the p r e v i o u s night had b e e n f a i r l y q u i e t .
Ke was however sure
t h a t t h e r e w o u l d h a v e b e e n r e a l t r o u b l e h a d fche C a b i n e t n o t d e c i d e d
to i n s t i t u t e a n e w l o c a l d e f e n c e f o r c e to r e p l a c e the U l s t e r S p e c i a l
C o n s t a b u l a r y (USC)j it w a s v e r y l i k e l y t h a t the USC w o u l d h a v e
gone underground.
A s r e g a r d s fche R o y a l U l s t e r C o n s t a b u l a r y ( R U C )
his i m p r e s s i o n w a s that the change t o a civilian police r o l e w a s
g e n e r a l l y w e l c o m e , e v e n a m o n g senior officers? and he believed
t h a t fche R U C w o u l d b e p r e p a r e d
if n e e d b e , t o a c t againsfc t h e U S C
T h e n e w I n s p e c t o r - G e n e r a l , S i r A r t h u r Y o u n g , w a s off t o a g o o d
start? and as s o o n a s he w a s w e l l e s t a b l i s h e d they should r e v i e w the
a r r a n g e m e n t s w h e r e b y t h e p o l i c e c a m e u n d e r c o n t r o l of fche G e n e r a l
O f f i c e r C o m m a n d i n g ( G O C ) , w i t h a v i e w to g i v i n g the J h c p e c t o r G e n e r a l m o r e f r e e d o m of a c t i o n , ,
H i s o p i n i o n should a l s o be g i v e n
full w e i g h t in d e c i d i n g w h e n it w a s safe t o w i t h d r a w t r o o p s f r o m t h e
various areas.
f
T H E D E F E N C E S E C R E T A R Y said that in hie j u d g m e n t t r o o p s
w e r e l i k e l y to be r e q u i r e d i n N o r t h e r n I r e l a n d f o r a c o n s i d e r a b l e
p e r i o d s l i t t l e c o n f i d e n c e w o u l d b e p?.aced i n t h e l o c a l f o r c e s b y
C a t h o l i c s u n t i l t h e y w e r e s e e n to be w o r k i n g e f f i c i e n t l y a n d f a i r l y ,
p a r t i c u l a r l y i n t h e m a t t e r of p r o m o t i o n , a n d t h a t m i g h t t a k e u n t i l t h e
e n d of n e x t y e a r
H e a g r e e d that the r e l a t i o n s h i p b e t w e e n the R U C
and the GOC should be r e v i e w e d ; indeed t h e r e w a s a need to look
again at the a r r a n g e m e n t s which had been improvised and to
0
-1­
?
I m p r o v e c o m m u n i c a t i o n s b e t w e e n the two G o v e r n m e n t s and the
a d v i s e r s stationed at S t o r m o n t and with the G O C .
I n t e l l i g e n c e of
f e e l i n g a m o n g P r o t e s t a n t s w a s s t i l l poor^, t h o u g h i t w a s i m p r o v i n g ;
b u t t h e S h a n k i l l R o a d r i o t s s h o w e d s i g n s of o r g a n i s a t i o n a n d h o h a d
l i t t l e d o u b t t h a t s o m e m e m b e r s of t h e U S C w e r e i n v o l v e d .
The risk
t h a t o r g a n i s e d e l e m e n t s of t h e U S C w o u l d g o u n d e r g r o u n d h a d f o r m e d
a l a r g e p a r t of t h e c a s e f o r e s t a b l i s h i n g t h e p r o p o s e d n e w l o c a l
d e f e n c e f o r c e ; a n d h e h o p e d t h a t it m i g h t b e p o s s i b l e t o s e t t h i s u p
a t t h e b e g i n n i n g of t h e N e w Y e a r , t h o u g h i d e a s , h a d s t i l l t o b e
clarified,
l e g i s l a t i o n of t h e U n i t e d K i n g d o m P a r l i a m e n t w o u l d b e
r e q u i r e d ? and he thought that this should be announced in
The Queen*s Speech.
I n d i s c u s s i o n t h e r e w a s g e n e r a l a p p r e c i a t i o n of t h e s k i l l
s h o w n b y the H o m e S e c r e t a r y in negotiating with the N o r t h e r n
Ireland G o v e r n m e n t , which had done much to allay fears e x p r e s s e d
b y s o m e m e m b e r s of t h e C a b i n e t d u r i n g t h e p r e v i o u s d i s c u s s i o n .
E v e r y e f f o r t s h o u l d b e m a d e t o s e t t l e p o l i c y on t h e n e w l o c a l d e f e n c e
f o r c e b e f o r e t h e D e b a t e on t h e A d d r e s s ,
T h e a i m should be t o
i n t r o d u c e l e g i s l a t i o n for this p u r p o s e and to facilitate the t r a n s f e r
a n d s e c o n d m e n t of G r e a t B r i t a i n p o l i c e d u r i n g N o v e m b e r ; t h e
O p p o s i t i o n w e r e not l i k e l y t o o b s t r u c t its p a s s a g e ^
T H E P R I M E M I N I S T E R , s u m m i n g u p the d i s c u s s i o n , s a i d
thcvt h e w i s h e d o n b e h a l f of t h e C a b i n e t t o c o n g r a t u l a t e t h e
H o m e S e c r e t a r y on h i s s u c c e s s i n a c h i e v i n g t h e o b j e c t i v e s o n w h i c h
t h e y h a d a g r e e d d u r i n g t h e d i s c u s s i o n on 7th O c t o b e r ,
The Home
a n d D e f e n c e S e c r e t a r i e s should c o n s i d e r u r g e n t l y , in c o n s u l t a t i o n
w i t h the L o r d P r e s i d e n t , w h a t p r o v i s i o n s n e e d e d to be i n c l u d e d in
the p r o p o s e d l e g i s l a t i o n and should r e p o r t b a c k to the C a b i n e t ,
The Cabinet ­
( l )
T o o k n o t e , w i t h a p p r o v a l , of t h e P r i m e M i n i s t e r s s u m m i n g u p of t h e i r discussion,
( 2 )
Invited the H o m e and D e f e n c e S e c r e t a r i e s , in c o n s u l t a t i o n w i t h the L o r d P r e s i d e n t of t h e C o u n c i l , t o c o n s i d e r u r g e n t l y t h e c o n t e n t of t h e p r o p o s e d l e g i s l a t i o n a n d t o r e p o r t to the Cabinet, C a b i n e t Office,
14th O c t o b e r ,
S.W.1.
1969
Copy No. 1
of 2 C o p i e s
N O T E of a M e e t i n g a t N o . 10 D o w n i n g S t r e e t , S . W . 1 . , on
F R I D A Y , 15th M A R C H , 1968
a t 1.15 a . m .
PRESENT
The Rt. Hon. Harold Wilson,
P r i m e Minister
MP
The R t . H o n . G e o r g e B r o w n , M P
S e c r e t a r y of S t a t e f o r F o r e i g n
Affairs
The Rt. H o n . Michael Stewart,
F i r s t S e c r e t a r y of S t a t e
The R t . H o n . R o y J e n k i n s , M P
C h a n c e l l o r of the E x c h e q u e r
T h e R t . Hon. P a t r i c k Gordon Walker, MP
S e c r e t a r y of S t a t e f o r E d u c a t i o n a n d
Science
The R t . H o n . A n t h o n y C r o s l a n d , M P
P r e s i d e n t of the B o a r d of T r a d e
The Rt. Hon. George Thomson, M P
S e c r e t a r y of S t a t e f o r C o m m o n w e a l t h
Affairs
The R t . H o n . P e t e r S h o r e , M P
S e c r e t a r y of State f o r E c o n o m i c
Affairs
The Rt. Hon. R. J. Gunter,
M i n i s t e r of L a b o u r
The R t . H o n . F r e d P e a r t ,
M i n i s t e r of A g r i c u l t u r e ,
F i s h e r i e s and F o o d
MP
*\
MP
The Rt. Hon. Richard M a r s h ,
M i n i s t e r of P o w e r
The R t . Hon. Anthony Wedgwood Benn,
M i n i s t e r of T e c h n o l o g y
SECRETARY
Sir Burke Trend
MP
MP
MP
T H E P R I M E M I N I S T E R s a i d t h a t d e v e l o p m e n t s of t h e l a s t f e w h o u r s
a s r e g a r d s the i n t e r n a t i o n a l m o n e t a r y situation and the d e c i s i o n to s e e k the
a p p r o v a l of t h e P r i v y C o u n c i l t o t h e p r o c l a m a t i o n of a b a n k h o l i d a y , w h i c h
he a n d t h e C h a n c e l l o r of t h e E x c h e q u e r h a d h a d t o t a k e a t v e r y s h o r t n o t i c e ,
h a d l e d h i m t o c a l l a m e e t i n g of t h e C a b i n e t a t 10. 30 on the f o l l o w i n g m o r n i n g
in o r d e r t h a t a l l M i n i s t e r s s h o u l d b e i n f o r m e d of the g r a v e s i t u a t i o n w h i c h
w a s now e m e r g i n g .
B u t it h a d b e e n r e p r e s e n t e d t o h i m t h a t s o m e M i n i s t e r s ,
w h o had b e e n m e e t i n g in t h e H o u s e of C o m m o n s in w h a t a p p e a r e d t o h a v e
b e e n a l m o s t a n i r r e g u l a r s e s s i o n of t h e C a b i n e t , w i s h e d t o b e b r o u g h t i n t o
m o r e f o r m a l c o n s u l t a t i o n f o r t h w i t h ; a n d he h a d t h e r e f o r e a g r e e d to r e c e i v e
i m m e d i a t e l y s u c h m e m b e r s of the C a b i n e t a s c o u l d b e c o l l e c t e d f r o m t h e H o u s
THE CHANCELLOR O F THE EXCHEQUER said that during the
e v e n i n g h e h a d l e a r n e d t h a t , a s a r e s u l t of the c o n t i n u i n g and i n c r e a s i n g
i n t e r n a t i o n a l s p e c u l a t i o n in g o l d , t h e U n i t e d S t a t e s a u t h o r i t i e s w e r e
c o n s i d e r i n g t a k i n g a c t i o n t o l i m i t t h e i r u n d e r t a k i n g t o b u y a n d s e l l gold a t
t h e fixed p r i c e of $35 p e r o u n c e to t h o s e C e n t r a l B a n k s w h i c h would u n d e r t a k e
t o c o n f i n e gold t r a n s a c t i o n s t o o t h e r C e n t r a l B a n k s w h i c h a g r e e d t o o b s e r v e
t h e s a m e r e s t r i c t i o n a n d to r e f u s e t o i n d u l g e in m a r k e t s p e c u l a t i o n .
The
i m p l i c a t i o n s of s u c h a s t e p f o r u s w o u l d b e f a r r e a c h i n g .
B u t it h a d b e e n
i m p o s s i b l e t o o b t a i n a n y c l a r i f i c a t i o n of t h e r e a l i n t e n t i o n s of t h e U n i t e d
S t a t e s u n t i l t h e S e c r e t a r y of t h e U n i t e d S t a t e s T r e a s u r y , M r . F o w l e r , h a d
got in t o u c h with h i m b y t e l e p h o n e a t a b o u t 10. 40 p . m . a n d h a d c o n v e y e d a
r e q u e s t t h a t t h e B r i t i s h G o v e r n m e n t s h o u l d c l o s e t h e L o n d o n gold m a r k e t on
15th M a r c h .
T h e r e had been a p a r a l l e l c o m m u n i c a t i o n f r o m the G o v e r n o r
of t h e F e d e r a l R e s e r v e B a n k , M r . M a r t i n , t o t h e G o v e r n o r of t h e B a n k of
England, including a s t a t e m e n t that the United States a u t h o r i t i e s proposed to
c o n v e n e a c o n f e r e n c e in W a s h i n g t o n o v e r t h e w e e k e n d , t o be a t t e n d e d by
r e p r e s e n t a t i v e s of t h e C e n t r a l B a n k s a n d F i n a n c e M i n i s t r i e s of s u c h of the
c o u n t r i e s m e m b e r s of t h e i n t e r n a t i o n a l Gold P o o l a s w e r e w i l l i n g t o a t t e n d
in a n a t t e m p t t o r e - e s t a b l i s h o r d e r l y i n t e r n a t i o n a l m o n e t a r y a r r a n g e m e n t s
b e f o r e t r a d i n g w a s r e s u m e d on M o n d a y .
v
T h e G o v e r n o r of t h e B a n k of E n g l a n d h a d a d v i s e d h i m t o a c c e p t the
p r o p o s a l t h a t t h e L o n d o n gold m a r k e t s h o u l d b e c l o s e d on 15th M a r c h .
He
h a d a l s o p r o p o s e d t h a t t h a t day s h o u l d b e d e c l a r e d a n o f f i c i a l b a n k h o l i d a y in
o r d e r t h a t w e m i g h t be a b l e t o s u s p e n d d e a l i n g s in f o r e i g n e x c h a n g e , a s w a s
e s s e n t i a l if w e w e r e t o m a i n t a i n the e x i s t i n g e x c h a n g e r a t e for s t e r l i n g .
In t h e s e c i r c u m s t a n c e s h e h a d s e e n n o a l t e r n a t i v e t o a c c e p t i n g t h i s
a d v i c e - b u t only on c o n d i t i o n t h a t , s i n c e t h e N e w Y o r k m a r k e t would r e m a i n
o p e n on 15th M a r c h a n d s t e r l i n g w o u l d t h e r e f o r e r e m a i n e x p o s e d t o p r e s s u r e ,
t h e U n i t e d S t a t e s a u t h o r i t i e s w o u l d give us a f i r m u n d e r t a k i n g t o p r o v i d e
whatever support for sterling was r e q u i r e d during the day.
In a d d i t i o n it
w o u l d b e n e c e s s a r y t o i n t e r p r e t t h e b a n k h o l i d a y in a m a n n e r w h i c h , w h i l e
i n h i b i t i n g t h e b a n k s f r o m e x c h a n g e d e a l i n g s , would a l l o w t h e m t o c o n d u c t
n o r m a l d o m e s t i c b u s i n e s s , p a r t i c u l a r l y a s r e g a r d s t h e p r o v i s i o n of c a s h f o r
t h e p a y m e n t of w a g e s .
An i m m e d i a t e d e c i s i o n h a d b e e n e s s e n t i a l if we w e r e not t o f a c e , a s
s o o n a s t h e d a y ' s b u s i n e s s b e g a n , a l o s s of r e s e r v e s on a s c a l e w h i c h c o u l d
m a k e it i m p o s s i b l e f o r us to m a i n t a i n t h e n e w p a r i t y of s t e r l i n g .
We h a d
n o t y e t s u c c e e d e d in m a k i n g good the v e r y h e a v y d r a i n on o u r r e s e r v e s a t t h e
t i m e of d e v a l u a t i o n ; a n d we c o u l d not a f f o r d t o t a k e a n y f u r t h e r r i s k s of
weakening the s t e r l i n g / d o l l a r p a r i t y .
T H E P R I M E M I N I S T E R e m p h a s i s e d t h a t the l o s s e s w h i c h the
r e s e r v e s h a d s u f f e r e d on the p r e v i o u s d a y ( T h u r s d a y , 14th M a r c h ) h a d
b e e n h e a v y ; a n d d u r i n g the F r i d a y w h i c h s t i l l l a y a h e a d w e m i g h t w e l l
s u s t a i n - u n l e s s we took p r e v e n t i v e a c t i o n - f u r t h e r l o s s e s on a s c a l e
c o m p a r a b l e w i t h the c a t a s t r o p h i c d r a i n on the d a y b e f o r e the d e v a l u a t i o n
of the p r e v i o u s N o v e m b e r .
T h e s i t u a t i o n e a r l i e r in the e v e n i n g h a d b e e n
v e r y u n c l e a r ; in p a r t i c u l a r M r . F o w l e r h a d n o t b e e n s p e c i f i c in h i s
t e l e p h o n e d i s c u s s i o n w i t h the C h a n c e l l o r of the E x c h e q u e r and the l i n e
had been bad.
B u t , w h e n h e a n d the C h a n c e l l o r of the E x c h e q u e r h a d
s u b s e q u e n t l y b e e n a b l e to c o n s i d e r the s i t u a t i o n w i t h the G o v e r n o r a n d
D e p u t y G o v e r n o r of the B a n k of E n g l a n d , it h a d b e e n c l e a r t h a t we h a d
no a l t e r n a t i v e to m e e t i n g the U n i t e d S t a t e s r e q u e s t p r o v i d e d t h a t the
U n i t e d S t a t e s a u t h o r i t i e s w o u l d u n d e r t a k e to s u p p o r t the s t e r l i n g r a t e in
New Y o r k d u r i n g 15th M a r c h .
This undertaking had been subsequently j
c o n f i r m e d in a t e l e p h o n e c o n v e r s a t i o n b e t w e e n the G o v e r n o r a n d M r . M a r t
a n d t h e r e a f t e r it h a d b e e n n e c e s s a r y to a r r a n g e f o r a m e e t i n g of the P r i v y
C o u n c i l to v a l i d a t e the b a n k h o l i d a y a s a m a t t e r of e x t r e m e u r g e n c y .
The
L o r d P r e s i d e n t , w h o w o u l d n o r m a l l y h a v e a t t e n d e d the P r i v y C o u n c i l ,
c o u l d n o t l e a v e the H o u s e of C o m m o n s ; but h e h a d b e e n i n f o r m e d of the
s i t u a t i o n a n d e f f o r t s h a d b e e n m a d e , u n s u c c e s s f u l l y , to c o n t a c t the F o r e i g i
Secretary.
T h e S e c r e t a r y of S t a t e f o r E c o n o m i c A f f a i r s , who h a p p e n e d
to b e a v a i l a b l e , h a d t h e r e f o r e a c c o m p a n i e d h i m a n d the C h a n c e l l o r of the
E x c h e q u e r to B u c k i n g h a m P a l a c e in o r d e r to e s t a b l i s h a q u o r u m f o r the
Privy Council.
T h e r e h a d b e e n n o a l t e r n a t i v e to a c t i o n on t h e s e l i n e s
and a t t h i s s p e e d .
H a d w e n o t a c t e d a s r a p i d l y , we f a c e d the p r o s p e c t
of a l o s s of r e s e r v e s w h i c h c o u l d be of the o r d e r of £3 00 o r £ 4 0 0 m i l l i o n
d u r i n g the d a y w h i c h l a y a h e a d .
T H E S E C R E T A R Y O F S T A T E F O R E D U C A T I O N AND S C I E N C E
s a i d t h a t t h e r e w a s n o q u e s t i o n t h a t the c o u r s e w h i c h h a d b e e n a d o p t e d
was n e c e s s a r y and r i g h t .
It w a s i m p o r t a n t , h o w e v e r , t h a t the g e n e r a l
p u b l i c s h o u l d u n d e r s t a n d t h a t o u r a c t i o n h a d b e e n t a k e n a t the r e q u e s t of
the U n i t e d S t a t e s a u t h o r i t i e s .
But w h a t now s h o u l d be o u r t a c t i c s a t the
f o r t h c o m i n g c o n f e r e n c e of m o n e t a r y a u t h o r i t i e s in W a s h i n g t o n ?
T H E P R I M E M I N I S T E R s a i d that t h i s w o u l d n e e d f u r t h e r
but the a c t i o n w h i c h w e h a d t a k e n w o u l d a t l e a s t h a v e m i n i m i s e d
e x t e n t to w h i c h s t e r l i n g c o u l d be t h r e a t e n e d .
T h e p r e s s u r e on
w o u l d be f u r t h e r e a s e d if, by M o n d a y , it h a d b e e n a g r e e d e i t h e r
g o l d p r i c e s h o u l d b e r a i s e d o r t h a t gold s h o u l d be d e m o n e t i s e d .
thought;
the
sterling
t h a t the
T H E P R E S I D E N T O F T H E BOARD O F T R A D E s a i d that the
e p i s o d e r a i s e d c e r t a i n i s s u e s of the m a c h i n e r y of G o v e r n m e n t .
In the
c i r c u m s t a n c e s it w o u l d c l e a r l y h a v e b e e n i m p o s s i b l e to s u m m o n the w h o l e
C a b i n e t ; b u t t h e r e w e r e c e r t a i n M i n i s t e r s w h o w o u l d h a v e w i s h e d to h a v e
the o p p o r t u n i t y to e x p r e s s t h e i r - v i e w s on a s i t u a t i o n w h i c h h a d now b e e n
d e v e l o p i n g f o r s e v e r a l d a y s a n d c o u l d , to t h a t e x t e n t , h a v e b e e n f o r e s e e n .
It w o u l d s u r e l y n o t h a v e b e e n i m p o s s i b l e to a s s e m b l e a t l e a s t a s m a l l
g r o u p of M i n i s t e r s b e f o r e the d e c i s i o n to a r r a n g e a m e e t i n g of the P r i v y
Council had been taken.
A s it w a s , the s t a t e m e n t w h i c h h e h i m s e l f h a d
m a d e in the H o u s e of C o m m o n s that a f t e r n o o n , i n d i c a t i n g that w e w o u l d
be p r e p a r e d to a c c e l e r a t e o u r i m p l e m e n t a t i o n of the K e n n e d y R o u n d
d e c i s i o n s , w o u l d now be l i a b l e to l o o k r i d i c u l o u s .
T H E F O R E I G N S E C R E T A R Y s a i d that h e a g r e e d .
Why h a d the
C a b i n e t , a t t h e i r m e e t i n g t h a t m o r n i n g , b e e n g i v e n n o h i n t that this
s i t u a t i o n w a s l i k e l y to a r i s e ?
T H E P R I M E MINISTER r e p l i e d that t h e r e had been no indication
of a n y c h a n g e i n the U n i t e d S t a t e s p o s i t i o n u n t i l 6. 00 p . m . t h a t e v e n i n g ;
a n d e v e n t h e n a l l t h a t w a s k n o w n w a s t h a t the G o v e r n o r of the F e d e r a l
R e s e r v e B a n k w a s c a l l i n g on P r e s i d e n t J o h n s o n .
In t h e s e c i r c u m s t a n c e s
h e h a d s e n t the P r e s i d e n t a m e s s a g e , w h i c h w a s n e c e s s a r i l y c o u c h e d in
g e n e r a l t e r m s b u t d i d a t l e a s t w a r n h i m t h a t s t e r l i n g a n d the d o l l a r m u s t
h o l d t o g e t h e r if we w e r e n o t t o b e d r i v e n to t a k e a c t i o n in p r o t e c t i o n of
s t e r l i n g w h i c h m i g h t be u n p a l a t a b l e to the U n i t e d S t a t e s a u t h o r i t i e s .
A t 7 . 3 0 p . m . h e h a d t r i e d to m a k e c o n t a c t w i t h the F o r e i g n S e c r e t a r y ,
b o t h a s D e p u t y L e a d e r of the P a r l i a m e n t a r y L a b o u r P a r t y a n d In h i s
D e p a r t m e n t a l c a p a c i t y in c a s e i s s u e s of o u r r e l a t i o n s w i t h the U n i t e d
States w e r e involved.
B u t h e h a d b e e n u n a b l e to find h i m .
T H E F O R E I G N S E C R E T A R Y s a i d t h a t h e h a d n e v e r b e e n out of
r e a c h of the t e l e p h o n e d u r i n g the w h o l e e v e n i n g .
T H E P R E S I D E N T O F T H E B O A R D OF T R A D E s a i d t h a t t h i s
a r g u m e n t w a s not p a r t i c u l a r l y relevant; but other economic M i n i s t e r s
w e r e involved and might have been consulted.
THE P R I M E MINISTER said that a m e s s a g e just r e c e i v e d f r o m
the L o r d P r e s i d e n t in the H o u s e of C o m m o n s s u g g e s t e d t h a t t h e r e w a s
now c o n s i d e r a b l e d i s o r d e r in the H o u s e .
THE F I R S T S E C R E T A R Y OF STATE c o m m e n t e d that in that case
it w a s f o r t u n a t e t h a t b o t h the F o r e i g n S e c r e t a r y a n d he h i m s e l f h a d h a d
a t l e a s t s o m e i n k l i n g of w h a t w a s a f o o t w h i l e t h e y w e r e in the H o u s e .
THE C H A N C E L L O R OF THE E X C H E Q U E R said that he would
h a v e w e l c o m e d a n o p p o r t u n i t y to t a k e a d v i c e f r o m o t h e r e c o n o m i c
M i n i s t e r s ; b u t t h e r e s i m p l y h a d n o t b e e n t i m e to d o s o .
As r e g a r d s
w a r n i n g t h e m e a r l i e r in the d a y , h e h a d h a d no r e a s o n to s u p p o s e , w h e n
the C a b i n e t m e t t h a t m o r n i n g , t h a t t h i s s i t u a t i o n w o u l d a r i s e .
T H E F O R E I G N S E C R E T A R Y r e p l i e d t h a t , e v e n if the s i t u a t i o n
did n o t a r i s e u n t i l the e v e n i n g , a l l t h e M i n i s t e r s c o n c e r n e d w e r e a v a i l a b l e .
The whole m a t t e r had been handled with g r e a t a r r o g a n c e .
T H E C H A N C E L L O R OF T H E E X C H E Q U E R r e p l i e d t h a t h e h a d
often w a r n e d the C a b i n e t t h a t s t e r l i n g w a s s t i l l in a n e x p o s e d a n d s e n s i t i v e
position.
B u t h e could only r e p e a t t h a t h e h a d h a d no k n o w l e d g e a t the
m o r n i n g ' s C a b i n e t t h a t it w a s now in a p a r t i c u l a r l y d a n g e r o u s s i t u a t i o n ­
i n d e e d it w a s n o t u n t i l 4 . 00 p . m . t h a t the f i r s t i n t i m a t i o n of t h i s k i n d
had reached h i m .
T H E P R I M E M I N I S T E R t h e n s p o k e on the t e l e p h o n e to the L o r d
P r e s i d e n t ; a n d t h e y d i s c u s s e d w h e t h e r the s t a t e m e n t w h i c h the C h a n c e l l o r
of the E x c h e q u e r w o u l d h a v e to m a k e i n the H o u s e of C o m m o n s a b o u t the
p r o c l a m a t i o n of a b a n k h o l i d a y a n d the c l o s i n g of the L o n d o n g o l d m a r k e t
should be m a d e forthwith r a t h e r than be held until after Q u e s t i o n s l a t e r
i n the d a y .
In a n y e v e n t h e s h o u l d m a k e it c l e a r t h a t the b a n k s w e r e
b e i n g c l o s e d , a s r e g a r d s f o r e i g n e x c h a n g e t r a n s a c t i o n s , a t the r e q u e s t
of the U n i t e d S t a t e s a u t h o r i t i e s a n d in o r d e r t o p r e v e n t d i s o r d e r in
financial m a r k e t s .
THE F O R E I G N SECRETARY o b s e r v e d that, even s o , this s t a t e m e n t
w o u l d c r e a t e a n i m p r e s s i o n t h a t s t e r l i n g w a s now in d a n g e r ; a n d it m i g h t
b e i m p o s s i b l e t o h o l d the p a r i t y .
THE CHANCELLOR OF THE EXCHEQUER replied that, however t h a t m i g h t b e , t h e r e h a d s i m p l y b e e n no t i m e t o c o n s i d e r a n y a l t e r n a t i v e course, THE P R I M E MINISTER e n d o r s e d this s t a t e m e n t .
The s i t u a t i o n
e a r l i e r i n t h e e v e n i n g h a d b e e n v e r y c o n f u s e d and u n c e r t a i n .
It h a d not
b e e n u n t i l a b o u t 4 o ' c l o c k in t h e a f t e r n o o n t h a t we h a d had any i n d i c a t i o n
of the w a y in w h i c h t h e m i n d of the U n i t e d S t a t e s a u t h o r i t i e s m i g h t b e
m o v i n g ; a n d it h a d n o t b e e n u n t i l s h o r t l y a f t e r m i d n i g h t t h a t we h a d b e e n
able to s e c u r e the United States undertaking to support s t e r l i n g , which was
e s s e n t i a l if w e w e r e t o m e e t t h e i r r e q u e s t t h a t d e a l i n g s in gold a n d f o r e i g n
exchange in London should be s u s p e n d e d .
T h e r e a f t e r it h a d b e e n n e c e s s a r y
to m o v e with the u t m o s t speed.
THE CHANCELLOR O F THE EXCHEQUER said that his colleagues
m u s t a s k t h e m s e l v e s what o t h e r c o u r s e could in fact have been adopted.
If we h a d n o t a g r e e d t o c l o s e t h e L o n d o n gold m a r k e t a n d t o s u s p e n d f o r e i g n
exchange t r a n s a c t i o n s , the s t e r l i n g p a r i t y would have collapsed within
24 h o u r s .
B u t , by t a k i n g t h e a c t i o n w h i c h t h e P r i v y C o u n c i l h a d e n d o r s e d ,
we n o w h a d a t l e a s t a c h a n c e t o d i s c u s s a t t h e f o r t h c o m i n g m o n e t a r y
c o n f e r e n c e t h e p o s s i b i l i t y of m a k i n g s o m e m o r e s a t i s f a c t o r y a r r a n g e m e n t s in
the l o n g e r t e r m .
T H E P R I M E M I N I S T E R s a i d t h a t he would c e r t a i n l y a s k t h e C a b i n e t ,
a s a whole , on t h e f o l l o w i n g d a y if t h e y s u p p o r t e d t h e a c t i o n w h i c h h a d b e e n
taken.
B u t h e a g r e e d w i t h t h e C h a n c e l l o r of t h e E x c h e q u e r t h a t t h e C a b i n e t
w o u l d h a v e to c o n s i d e r t h e p r o b a b l e c o n s e q u e n c e s if we had r e f u s e d t o a c c e d e
to the United States r e q u e s t .
T h e r e w a s a r e a l d a n g e r t h a t , if t h e U n i t e d
S t a t e s G o v e r n m e n t o b t a i n e d t h e a p p r o v a l of t h e S e n a t e t o r e l e a s e t h e gold
w h i c h w a s a t p r e s e n t e a r m a r k e d a s b a c k i n g f o r the c u r r e n c y , t h e y would be
v e r y t e m p t e d t o u s e it t o m a i n t a i n t h e e x i s t i n g g o l d / d o l l a r p a r i t y f o r a s l o n g
a period a s p o s s i b l e , during which s t e r l i n g could be overwhelmed.
T H E P R E S I D E N T OF T H E BOARD OF T R A D E r e p e a t e d t h a t , e v e n s o ,
he f e l t t h a t it s h o u l d h a v e b e e n p o s s i b l e for a few M i n i s t e r s t o d i s c u s s t h i s
g r a v e i s s u e b e f o r e any d e c i s i o n w a s t a k e n .
T H E P R I M E M I N I S T E R r e p l i e d t h a t t h e r e h a d b e e n no t i m e for t h i s .
T h e s i t u a t i o n h a d n o t b e g u n t o b e c o m e c l e a r u n t i l 1 1 . 00 p. m . ; a n d by t h e n
u r g e n t a c t i o n w a s i m p e r a t i v e if the b a n k s w e r e t o be w a r n e d of the b a n k
h o l i d a y in t i m e .
T H E F O R E I G N S E C R E T A R Y s a i d t h a t it r e m a i n e d t r u e t h a t the
P r i m e M i n i s t e r a n d the C h a n c e l l o r of t h e E x c h e q u e r h a d a c t e d by t h e m s e l v e s
a n d on t h e i r own a u t h o r i t y .
They could have consulted other M i n i s t e r s at
a n y t i m e f r o m 6. 00 p. m . o n w a r d s .
T H E P R E S I D E N T O F T H E B O A R D O F T R A D E s a i d , once a g a i n , t h a t
h e , t o o , r e s e n t e d b e i n g e x c l u d e d f r o m t h e d i s c u s s i o n of s u c h g r a v e
c o n t i n g e n c i e s.
T H E M I N I S T E R OF T E C H N O L O G Y s a i d t h a t t h e d e c i s i o n t a k e n h a d
clearly been right.
T H E F I R S T S E C R E T A R Y OF S T A T E s a i d t h a t t h e s u b s t a n c e of t h e
m a t t e r w a s t o o s e r i o u s f o r M i n i s t e r s t o w a s t e t i m e in a r g u i n g a b o u t p r o c e d u r e
N e v e r t h e l e s s , the i n c i d e n t had c e r t a i n l e s s o n s for the future.
It w a s a f a c t
t h a t f r o m 6. 00 p . m . o n w a r d s s o m e M i n i s t e r s a t l e a s t could h a v e b e e n w a r n e d ,
s i n c e f r o m t h a t h o u r the p o s s i b i l i t y of s o m e a c t i o n m u s t c l e a r l y h a v e b e e n in
t h e C h a n c e l l o r of t h e E x c h e q u e r ' s m i n d .
T
T H E C H A N C E L L O R O F T H E E X C H E Q U E R s a i d t h a t t h i s w a s not s o .
H e h a d n a t u r a l l y c o n s i d e r e d a b a n on d e a l i n g s in gold a n d f o r e i g n e x c h a n g e
a s one of a n u m b e r of a l t e r n a t i v e s t e p s w h i c h m i g h t h a v e t o be t a k e n ; b u t he
h a d no r e a s o n t o s u p p o s e t h a t t h e U n i t e d S t a t e s would a s k u s to t a k e it.
THE FIRST SECRETARY OF STATE r e p e a t e d that, even so, some
M i n i s t e r s might have been warned.
It h a d b e e n s h e e r l u c k t h a t a f e w of the
M i n i s t e r s in t h e H o u s e of C o m m o n s h a d r e a l i s e d , b e f o r e t h e P r i m e M i n i s t e r
a n d the C h a n c e l l o r of t h e E x c h e q u e r w e n t t o the P a l a c e , t h a t s o m e t h i n g w a s
a f o o t a n d h a d t h e r e f o r e not b e e n w h o l l y u n p r e p a r e d f o r " s o m e s i g n i f i c a n t
development.
B u t it w a s u n t r u e t o s a y - a s the P r i m e M i n i s t e r h a d e a r l i e r
i m p l i e d - t h a t , w h e n a few of t h e m t h e r e a f t e r m e t in t h e H o u s e to s p e c u l a t e
on w h a t w a s h a p p e n i n g , t h e i r d i s c u s s i o n a m o u n t e d to a n i r r e g u l a r m e e t i n g
of t h e C a b i n e t .
In t h e c i r c u m s t a n c e s t h e F o r e i g n S e c r e t a r y could n o t h a v e
d o n e l e s s t h a n t e l l s u c h of h i s c o l l e a g u e s a s w e r e a v a i l a b l e t h a t the P r i m e
M i n i s t e r a n d t h e C h a n c e l l o r of t h e E x c h e q u e r had gone t o s e e The Q u e e n ;
a n d it h a d b e e n n a t u r a l and i n e v i t a b l e t h a t t h o s e M i n i s t e r s s h o u l d t h e n w i s h
t o t a l k the m a t t e r o v e r .
H e d i d n o t d i s p u t e t h a t t h e r e h a d b e e n no r e a l c h o i c e
a b o u t the a c t i o n t o b e t a k e n .
B u t it r e m a i n e d t r u e t h a t t h e r e had n o t b e e n
a s m u c h p r i o r consultation b e t w e e n M i n i s t e r s as t h e r e might have b e e n ;
a n d in f u t u r e s o m e m a c h i n e r y s h o u l d be d e v i s e d t o p r e v e n t d e c i s i o n s of t h i s
k i n d b e i n g t a k e n by t h e P r i m e M i n i s t e r a l o n e o r with only one o t h e r c o l l e a g u e .
THE PRIME MINISTER asked whether this'would really have been
p o s s i b l e a t 10. m i n u t e s p a s t m i d n i g h t .
T H E F O R E I G N S E C R E T A R Y a g r e e d t h a t it w o u l d n o t ; but it w o u l d
h a v e b e e n p e r f e c t l y p o s s i b l e a t 10 m i n u t e s p a s t 6 in t h e e v e n i n g .
He
r e p e a t e d t h a t t h e r e h a d b e e n no t e l e p h o n e c a l l f r o m No. 10 t o the F o r e i g n
Office in a n a t t e m p t t o e s t a b l i s h c o n t a c t with h i m in t h o s e few h o u r s .
T H E P R I M E M I N I S T E R r e p l i e d t h a t he h a d t r i e d for o v e r a n h o u r t o
find t h e F o r e i g n S e c r e t a r y .
T H E F O R E I G N S E C R E T A R Y r e p e a t e d t h a t t h e r e h a d b e e n no t e l e p h o n e
call.
T H E F I R S T S E C R E T A R Y O F S T A T E s a i d t h a t t h e r e w a s no p o i n t in
p u r s u i n g t h i s d i s p u t e ; t h e r e m i g h t h a v e b e e n s o m e m i s u n d e r s t a n d i n g in t h e
t r a n s m i s s i o n of t h e m e s s a g e .
T H E F O R E I G N S E C R E T A R Y s a i d t h a t t h e r e had b e e n n o m i s u n d e r ­
standing.
The P r i m e M i n i s t e r was trying to cover up a m o n u m e n t a l m u d d l e ;
a n d he did n o t a c c e p t h i s v e r s i o n of t h e e p i s o d e .
At t h i s p o i n t t h e F o r e i g n S e c r e t a r y left the m e e t i n g .
T H E P R E S I D E N T OF T H E B O A R D O F T R A D E s a i d t h a t the F o r e i g n
S e c r e t a r y ' s b e h a v i o u r w a s r e g r e t t a b l e ; b u t p e r h a p s one c o u l d h a r d l y b l a m e
him.
T H E P R I M E M I N I S T E R s a i d t h a t he could n o t a c c e p t a s i t u a t i o n in
w h i c h t h e F o r e i g n S e c r e t a r y d e n i e d h i s a s s u r a n c e t h a t he h a d t r i e d t o m a k e
c o n t a c t w i t h h i m a n d a s s e r t e d t h a t he h a d d e l i b e r a t e l y d e c e i v e d o t h e r
Ministerial colleagues.
T H E P R E S I D E N T O F T H E B O A R D O F T R A D E s a i d t h a t , of c o u r s e , h e a c c e p t e d t h e P r i m e M i n i s t e r ' s w o r d on t h i s .
B u t it w a s s t i l l t r u e t h a t f r o m 6. 00 p . m . o n w a r d s t h e P r i m e M i n i s t e r would h a v e b e e n w i s e r t o b r i n g a few o t h e r M i n i s t e r s i n t o c o n s u l t a t i o n . T H E C H A N C E L L O R O F T H E E X C H E Q U E R s a i d t h a t t h e r e would h a v e
b e e n n o p o i n t in d o i n g s o , s i n c e a t t h a t p o i n t t h e r e w a s n o f i r m p r o p o s a l for
M i n i s t e r s to c o n s i d e r .
It w a s n o t u n t i l 10. 40 p. m . t h a t h e h a d r e c e i v e d t h e
A m e r i c a n r e q u e s t - a n d t h e n it h a d t a k e n a f o r m w h i c h we h a d n o t e x p e c t e d .
M o r e o v e r , it w a s n o t u n t i l he h a d s p o k e n t o t h e U n i t e d S t a t e s S e c r e t a r y of t h e
T r e a s u r y (and t h e G o v e r n o r of t h e B a n k of E n g l a n d h a d s u b s e q u e n t l y c o n f i r m e d
t h i s c o n v e r s a t i o n w i t h t h e G o v e r n o r of t h e F e d e r a l R e s e r v e B a n k ) t h a t t h e r e a l
n a t u r e of t h e U n i t e d S t a t e s p r o p o s a l w a s c l e a r .
T h i s h a d b e e n a t 1 1 . 00 p. m .
It w o u l d h a v e b e e n i m p o s s i b l e a t t h a t p o i n t t o r e f u s e t o a c t a s t h e U n i t e d
S t a t e s h a d a s k e d u s t o a c t ; b u t s p e e d w a s t h e n the e s s e n c e of t h e m a t t e r if
t h e b a n k s w e r e t o b e w a r n e d in t i m e b e f o r e b u s i n e s s b e g a n in t h e m o r n i n g .
T H E S E C R E T A R Y OF S T A T E F O R E D U C A T I O N s a i d t h a t he a g r e e d .
It w o u l d h a v e b e e n i m p o s s i b l e t o t a k e a n y m e a n i n g f u l a c t i o n a t 6. 00 p. m .
T H E P R E S I D E N T O F T H E B O A R D O F T R A D E s a i d t h a t he w a s n o t
c o n v i n c e d on t h i s p o i n t .
B u t it w a s t o o l a t e now t o d i s c u s s t h i s q u e s t i o n
profitably.
A s f a r a s he w a s c o n c e r n e d t h e r e w a s n o n e e d f o r t h e m a t t e r
to be r e p o r t e d to the Cabinet.
T H E P R I M E M I N I S T E R s a i d t h a t , on t h e c o n t r a r y , the C a b i n e t would
n e e d t o d i s c u s s t h e t a c t i c s t h a t we s h o u l d a d o p t a t t h e f o r t h c o m i n g m o n e t a r y
conference.
in p a r t i c u l a r , we m u s t e n s u r e t h a t t h e p o l i t i c a l i m p l i c a t i o n s of
the s i t u a t i o n w e r e t a k e n fully i n t o a c c o u n t in a n y t e c h n i c a l d e c i s i o n s w h i c h
might be r e a c h e d .
THE S E C R E T A R Y OF STATE F O R ECONOMIC A F F A I R S said t h a t ,
a s one w h o h a d b e c o m e i n v o l v e d in the i n c i d e n t l a r g e l y by a c c i d e n t ( b e c a u s e
he h a p p e n e d to be a v a i l a b l e when a M i n i s t e r w a s r e q u i r e d t o m a k e up a
q u o r u m f o r t h e P r i v y C o u n c i l ) , he c o u l d e n d o r s e a l l t h a t t h e P r i m e M i n i s t e r
a n d t h e C h a n c e l l o r of t h e E x c h e q u e r h a d s a i d a b o u t t h e n e e d t o a c t w i t h g r e a t
speed.
N e v e r t h e l e s s , t h e r e w a s f o r c e in t h e v i e w s w h i c h h a d b e e n e x p r e s s e d
in s o f a r a s t h e r e a l o b j e c t of ^ c r i t i c i s m w a s t h e c u r t a i n of s e c r e c y b e h i n d
w h i c h t h e T r e a s u r y c o n c e a l e d t h e i r c o n d u c t of e c o n o m i c p o l i c y .
M a n y of the
issues hidden behind this curtain needed m o r e collective consideration.
T H E P R I M E M I N I S T E R s a i d t h a t he would a s k t h e C a b i n e t l a t e r in the
d a y w h e t h e r a n y M i n i s t e r t h o u g h t t h a t h e and t h e C h a n c e l l o r of t h e E x c h e q u e r
could, or should, have acted differently.
T H E P R E S I D E N T O F T H E B O A R D O F T R A D E s a i d t h a t h e , for o n e ,
w o u l d n o t b e a b l e t o s a y t h a t he d i d n o t t h i n k t h a t t h e y c o u l d h a v e t a k e n a n y
other c o u r s e .
H a v i n g h e a r d t h e p r e s e n t d i s c u s s i o n , h e s i m p l y did not k n o w .
T H E M I N I S T E R O F L A B O U R s a i d t h a t , p e r s o n a l l y , he w a s s a t i s f i e d
t h a t t h e d e c i s i o n t a k e n h a d b e e n r i g h t a n d t h a t , in c i r c u m s t a n c e s of t h i s k i n d ,
prior consultation was impossible.
A d i s c u s s i o n had b e e n u n n e c e s s a r y ; and
M i n i s t e r s s h o u l d n e v e r h a v e t a k e n it on t h e m s e l v e s t o c o m e t o N o . 10 a t t h a t
h o u r in t h e m o r n i n g if t h e i r only p u r p o s e w a s t o m a k e s o m e of t h e s t a t e m e n t s
which had been m a d e .
T h e m a t t e r w o u l d n o w b e b e t t e r left u n t i l t h e C a b i n e t
m e t l a t e r in the d a y .
Cabinet Office,
17th M a r c h ,
S.W.I.
1968
S DOCUMENT IS THE PROPERTY OF HER BRITANNIC MAJESTVS
!TH1£,B
GOVERNMENT
The circulation of this paper has been strictly limited.
It is issued for the personal use of..$.ffr7*.!(^. wr*.*£..
,
^ -.
TOP SECRET
Copy N o .11.
CABINET
CPJiFIDEJ^TJA^A^NEX
CC(68) 2 1 s t C o n c l u s i o n s
F r i d a y , 15th M a r c h , 1 9 6 8 a t 1 0 . 3 0 a. m .
kternational
Monetary
TUATION
T H E P R I M E M I N I S T E R s a i d t h a t h e h a d t h o u g h t it
r i g h t t o a r r a n g e a m e e t i n g of t h e C a b i n e t a t v e r y ^short n o t i c e
in o r d e r t h a t M i n i s t e r s m i g h t be fully i n f o r m e d a b o u t t h e
m o s t r e c e n t d e v e l o p m e n t s in t h e i n t e r n a t i o n a l m o n e t a r y
s i t u a t i o n , w h i c h it h a d b e e n n e c e s s a r y t o c o n f r o n t d u r i n g
the p r e v i o u s night,
THE CHANCELLOR O F THE EXCHEQUER said that
in r e c e n t d a y s t h e d e m a n d f o r gold h a d r e a c h e d u n p r e c e d e n t e d
h e i g h t s ; a n d t h e p r e s s u r e on s t e r l i n g r e s u l t i n g f r o m t h e
d e m a n d f o r d o l l a r s a s a m e a n s of p u r c h a s i n g g o l d , h a d n o w
r e a c h e d a d a n g e r o u s l e v e l a t a m o m e n t w h e n o u r r e s e r v e s of
f o r e i g n e x c h a n g e w e r e s t i l l f a r t o o low t o w i t h s t a n d a
continued drain.
A b o u t m i d - d a y on t h e p r e v i o u s d a y we h a d
r e c e i v e d an indication that the United States a u t h o r i t i e s w e r e
b e g i n n i n g t o t h i n k t h a t s o m e a c t i o n would b e r e q u i r e d t o s t e m
t h e d e m a n d f o r g o l d ; a n d , a l t h o u g h it w a s f a r f r o m c l e a r
w h a t f o r m t h i s a c t i o n m i g h t t a k e , a r a p i d e x a m i n a t i o n of i t s
v a r i o u s possible f o r m s had shown that t h e i r implications
It w a s n o t
could n o t b e o t h e r than v e r y u n w e l c o m e to u s .
u n t i l l a t e in t h e e v e n i n g , h o w e v e r , t h a t t h e S e c r e t a r y of t h e
U n i t e d S t a t e s T r e a s u r y , M r . F o w l e r , h a d i n f o r m e d h i m by
telephone that the United States Government intended to
convene in Washington during the forthcoming weekend a
c o n f e r e n c e of r e p r e s e n t a t i v e s of t h e C e n t r a l B a n k s of t h e
c o u n t r i e s m e m b e r s of t h e G o l d P o o l in a n e n d e a v o u r t o
r e s t o r e s t a b i l i t y in t h e i n t e r n a t i o n a l m o n e t a r y s i t u a t i o n ; a n d
that, a s a n e s s e n t i a l p r e l i m i n a r y they m u s t a s k u s to close
This r e q u e s t had been reinforced
t h e gold m a r k e t in L o n d o n .
by a p a r a l l e l d i s c u s s i o n at a b o u t t h e s a m e t i m e b e t w e e n t h e
G o v e r n o r of t h e F e d e r a l R e s e r v e B a n k , M r . M a r t i n , a n d t h e
G o v e r n o r of t h e B a n k of E n g l a n d .
It w a s c l e a r t h a t , if we
t o o k a c t i o n of t h i s k i n d , it w o u l d b e n e c e s s a r y t o a r r a n g e t h a t
15th M a r c h s h o u l d b e a b a n k h o l i d a y , s i n c e , if we c o n t i n u e d t o
a l l o w f o r e i g n e x c h a n g e d e a l i n g s , p r e s s u r e on s t e r l i n g c o u l d
d e v e l o p on a s c a l e w h i c h w o u l d m a k e it i m p o s s i b l e f o r u s t o
maintain the parity.
But ordinary domestic banking business
c o u l d b e p e r m i t t e d ; in p a r t i c u l a r , c a s h f o r t h e p a y m e n t of
w a g e s would continue t o be a v a i l a b l e .
The Stock E x c h a n g e ,
h o w e v e r , should be c l o s e d .
In t h e c i r c u m s t a n c e s we h a d h a d no a l t e r n a t i v e t o
a c c e d i n g t o t h e U n i t e d S t a t e s r e q u e s t t o c l o s e t h e L o n d o n gold
market.
H a d we not d o n e s o , we c o u l d not h a v e f a c e d the d r a i n
o n o u r r e s e r v e s w h i c h would h a v e d e v e l o p e d t h a t d a y , m o r e
p a r t i c u l a r l y if we h a d a l i e n a t e d t h e s y m p a t h y of t h e U n i t e d S t a t e s
w h o a l o n e w e r e in a p o s i t i o n t o h e l p u s t o s u p p o r t t h e s t e r l i n g
parity.
On t h e o t h e r h a n d , it h a d b e e n e s s e n t i a l t o o b t a i n f r o m
t h e U n i t e d S t a t e s a u t h o r i t i e s an a s s u r a n c e t h a t , in r e t u r n f o r a u r
a g r e e m e n t t o c l o s e t h e gold m a r k e t in L o n d o n w h i l e t h e m a r k e t s
e l s e w h e r e r e m a i n e d o p e n , t h e y would p r o v i d e w h a t e v e r s u p p o r t
f o r s t e r l i n g w a s r e q u i r e d in New Y o r k t o e n a b l e us t o m a i n t a i n
the parity.
O n c e we had o b t a i n e d t h i s a s s u r a n c e , b y m e a n s of a
f u r t h e r telephone c o n v e r s a t i o n b e t w e e n M r . M a r t i n and the
G o v e r n o r of t h e B a n k of E n g l a n d , it w a s n e c e s s a r y t o t a k e t h e
m o s t u r g e n t a c t i o n t o o b t a i n t h e a p p r o v a l of T h e Q u e e n in C o u n c i l
t o a p r o c l a m a t i o n of a b a n k h o l i d a y if i n s t r u c t i o n s w e r e t o b e
i s s u e d t o t h e bar-thing s y s t e m in t i m e t o b e e f f e c t i v e a t t h e o p e n i n g
of b u s i n e s s .
The P r i v y Council had t h e r e f o r e b e e n a r r a n g e d
a t 12. 30 a. m . j a n d he h i m s e l f h a d e x p l a i n e d t h e s i t u a t i o n t o t h e
H o u s e of C o m m o n s in a s t a t e m e n t a t 3. 3 0 a. m .
In d i s c u s s i o n s o m e M i n i s t e r s e x p r e s s e d c o n c e r n t h a t
d e c i s i o n s of t h i s i m p o r t a n c e h a d b e e n t a k e n w i t h o u t c o l l e c t i v e
Ministerial consideration.
T h i s w a s m e r e l y t h e l a t e s t of s e v e r a l
o c c a s i o n s on w h i c h i s s u e s of m o n e t a r y p o l i c y h a d b e e n j u d g e d t o
b e of s u c h s e c r e c y a n d c o m p l e x i t y t h a t d e c i s i o n s h a d b e e n
r e s e r v e d v i r t u a l l y t o t h e P r i m e M i n i s t e r a n d t h e C h a n c e l l o r of
t h e E x c h e q u e r of t h e d a y .
T h e d e f l a t i o n a r y p o l i c y a d o p t e d in
J u l y , 1 9 6 6 ; t h e a c t of d e v a l u a t i o n d e c i d e d in N o v e m b e r , 1 9 6 7 ;
a n d n o w t h e a c t i o n w h i c h we h a d b e e n c o m p e l l e d t o t a k e on t h e
p r e v i o u s n i g h t - t h e s e w e r e s u c c e s s i v e e x a m p l e s of d e c i s i o n s
which the Cabinet had been forced to take at v e r y s h o r t notice
a n d w i t h o u t t h e b e n e f i t of a n y p r e l i m i n a r y d i s c u s s i o n on t h e b a s i s
of c o n s i d e r e d a p p r e c i a t i o n s of a l t e r n a t i v e c o u r s e s of p o l i c y a n d
their implications.
In e a c h c a s e , h o w e v e r , i t h a d b e e n
sufficiently c l e a r for s o m e t i m e before the c r i t i c a l m o m e n t that
a d a n g e r o u s s i t u a t i o n m i g h t d e v e l o p ; and t h e r e had b e e n a m p l e
o p p o r t u n i t y for the C a b i n e t t o d i s c u s s the i s s u e s involved while
t h e r e w a s s t i l l t i m e t o e x a m i n e t h e m in d e t a i l a n d t o r e a c h a
deliberate judgment.
T h i s w a s l e s s t h a n s a t i s f a c t o r y if t h e
c o n c e p t of c o l l e c t i v e r e s p o n s i b i l i t y w a s t o r e t a i n i t s m e a n i n g ;
a n d a l t e r n a t i v e a r r a n g e m e n t s s h o u l d b e m a d e t o e n s u r e t h a t in
f u t u r e t h e Cabinet would be given an opportunity t o d i s c u s s i s s u e s
of t h i s g r a v i t y b e f o r e t h e y w o r e o v e r t a k e n by e v e n t s .
Their
r e c e n t p r o l o n g e d e x a m i n a t i o n of f u t u r e p o l i c y on p r i c e s and
i n c o m e s i l l u s t r a t e d t h e v a l u e t o b e o b t a i n e d f r o m full c o l l e c t i v e
d i s c u s s i o n of m a j o r i s s u e s of e c o n o m i c p o l i c y .
On the other hand the p r i c e s and i n c o m e s policy was a
m a t t e r which lay e s s e n t i a l l y within the G o v e r n m e n t s c o n t r o l ,
w h e r e a s t h e p o s s i b i l i t y of a c h a n g e in t h e p r i c e of gold and t h e
p r o b a b l e a t t i t u d e of t h e U n i t e d S t a t e s A d m i n i s t r a t i o n t o t h i s
q u e s t i o n w e r e m a t t e r s w h i c h t h e G o v e r n m e n t h a d l i t t l e , if a n y ,
power t o influence.
N o r w a s t h e r e any r e a s o n t o s u p p o s e t h a t
e v e n t h e m o s t p r o t r a c t e d d i s c u s s i o n of t h e c o m p l e x i s s u e s i n v o l v e d
would have enabled M i n i s t e r s to r e a c h any d e c i s i o n o t h e r than t h a t
w h i c h t h e P r i m e M i n i s t e r a n d t h e C h a n c e l l o r of t h e E x c h e q u e r
h a d b e e n c o m p e l l e d t o t a k e on t h e i r own r e s p o n s i b i l i t y d u r i n g
the previous night.
In f a c t , i t h a d only b e e n at a v e r y l a t e
h o u r t h a t t h e U n i t e d S t a t e s i n t e n t i o n s had b e e n e s t a b l i s h e d w i t h
sufficient c e r t a i n t y to m a k e it r e a l i s t i c to c o n t e m p l a t e taking
a n y d e c i s i o n a t a l l ; a n d by t h a t t i m e t h e n e e d t o t a k e a c t i o n a s
r e g a r d s t h e c l o s i n g of t h e gold m a r k e t a n d t h e p r o c l a m a t i o n of
a b a n k h o l i d a y w a s s o u r g e n t t h a t it would h a v e b e e n i m p o s s i b l e
f o r M i n i s t e r s t o b e g a t h e r e d t o g e t h e r in t i m e t o d e b a t e t h e e e
issues.
In f u r t h e r d i s c u s s i o n t h e r e was g e n e r a l a g r e e m e n t that
the d e c i s i o n s w h i c h t h e P r i m e M i n i s t e r and t h e C h a n c e l l o r of
t h e E x c h e q u e r h a d t a k e n in t h e s m a l l h o u r s of the m o r n i n g
had b e e n right beyond any question.
I n d e e d , if t h o s e d e c i s i o n s
had not b e e n t a k e n , the C a b i n e t m i g h t be m e e t i n g t h a t m o r n i n g
in v e r y d i f f e r e n t c i r c u m s t a n c e s to d e a l w i t h a f a r g r a v e r
situation.
N e v e r t h e l e s s , it r e m a i n e d d e s i r a b l e i n p r i n c i p l e
t h a t for the future s o m e r a t h e r m o r e effective a r r a n g e m e n t
s h o u l d b e m a d e t o e n s u r e t h a t , e v e n on the m o s t s e n s i t i v e
i s s u e s of e c o n o m i c a n d f i n a n c i a l p o l i c y , a s u f f i c i e n t l y r e p r e s e n t a
t i v e b o d y of M i n i s t e r s s h o u l d b e b r o u g h t i n t o c o n s u l t a t i o n t o
s a f e g u a r d t h e c o n c e p t of c o l l e c t i v e r e s p o n s i b i l i t y .
A n d . if the
p r i c e of s u c h a n a r r a n g e m e n t w a s t h e r i s k of p r e m a t u r e a n d
u n a u t h o r i s e d d i s c l o s u r e of h i g h l y s e c r e t i n f o r m a t i o n , t h a t
r i s k m u s t be accepted,
T H E P R I M E M I N I S T E R , , s u m m i n g u p t h i s p a r t of t h e
d i s c u s s i o n , s a i d t h a t he r e c o g n i s e d t h e f o r c e of t h e v i e w s w h i c h
h a d b e e n e x p r e s s e d a n d w o u l d give f u r t h e r c o n s i d e r a t i o n t o the
p o s s i b i l i t y of m e e t i n g t h e w i s h e s of the C a b i n e t in t h i s r e s p e c t .
He h a d r e g r e t t e d t h a t it h a d n o t b e e n p o s s i b l e t o a r r a n g e f o r
c o l l e c t i v e d i s c u s s i o n of t h e i s s u e s w h i c h he a n d t h e C h a n c e l l o r
of t h e E x c h e q u e r h a d h a d t o c o n f r o n t on the p r e v i o u s e v e n i n g ;
but h e h a d in fact b e e n able t o i n f o r m about half the C a b i n e t ,
who h a d b e e n a s s e m b l e d b y t h e F o r e i g n S e c r e t a r y a t the H o u s e
of C o m m o n s and h a d b e e n b r o u g h t t o s e e h i m a t No. 10.
In t h e
a b s e n c e of t h e F o r e i g n S e c r e t a r y f r o m the C a b i n e t it would not
be r i g h t or profitable to d i s c u s s the attitude which the F o r e i g n
S e c r e t a r y h a d a d o p t e d d u r i n g a n d a f t e r t h a t d i s c u s s i o n ; b u t he
a p p r e c i a t e d t h a t s o m e M i n i s t e r s t o o k e x c e p t i o n t o it,, T h e C a b i n e t s h o u l d now c o n s i d e r the p o l i c y w h i c h we
s h o u l d a d o p t h e n c e f o r w a r d in d e a l i n g w i t h p r o b a b l e f u r t h e r
d e v e l o p m e n t s in t h e i n t e r n a t i o n a l m o n e t a r y s i t u a t i o n .
T H E CHANCELLOR OF THE EXCHEQUER said that,
a l t h o u g h it w a s t h e d o l l a r w h i c h w a s c u r r e n t l y u n d e r p r e s s u r e ,
c i r c u m s t a n c e s m i g h t w e l l d e v e l o p in which t h e d o l l a r could
n e v e r t h e l e s s survive at its p r e s e n t exchange value for some
t i m e l o n g e r but it m i g h t b e c o m e i m p o s s i b l e to m a i n t a i n the
p a r i t y of s t e r l i n g .
Our m a i n p u r p o s e , t h e r e f o r e , m u s t b e t o
o r g a n i s e sufficient additional s u p p o r t for s t e r l i n g , p r e f e r a b l y
i n t h e f o r m of a n o p e n - e n d e d l i n e of c r e d i t , t o e n a b l e u s t o
-3­
m a i n t a i n t h e p a r i t y d u r i n g t h e n e x t few w e e k s .
T h e r e was little
d o u b t t h a t t h o s e w e e k s w o u l d s e e a v e r y p r o f o u n d c h a n g e in t h e
i n t e r n a t i o n a l m o n e t a r y s i t u a t i o n , a c h a n g e w h i c h m i g h t in e f f e c t
b r i n g t h e s t e r l i n g a r e a t o a v i r t u a l e n d in v i e w of t h e r a p i d
d i v e r s i f i c a t i o n of s t e r l i n g b a l a n c e s w h i c h w a s a l m o s t i n e v i t a b l e
a s soon as n o r m a l trading was r e s u m e d .
T h i s p r o c e s s could be
e f f e c t e d in a n o r d e r l y w a y , in w h i c h c a s e it w o u l d b e t o o u r l o n g
t e r m advantage,,
B u t , if it w a s c a r r i e d o u t i n c i r c u m s t a n c e s of
i n t e r n a t i o n a l c o n f u s i o n a n d c h a o s t h e e f f e c t s on t h e B r i t i s h
e c o n o m y could be v e r y d a m a g i n g indeed.
t
M u c h w o u l d d e p e n d on t h e p o l i c y w h i c h t h e U n i t e d S t a t e s
a u t h o r i t i e s a d o p t e d t o w a r d s the continuing d e m a n d for gold.
They
m i g h t d e c i d e t o i n c r e a s e t h e p r i c e of g o l d ; a n d in c e r t a i n
c i r c u m s t a n c e s this could be helpful to u s .
On t h e o t h e r h a n d
e x p e r t o p i n i o n w a s i n c l i n e d t o b e l i e v e t h a t t h e d e m a n d f o r gold
w a s n o w of s u c h i n t e n s i t y t h a t e v e n a d o u b l i n g of t h e p r i c e m i g h t
n o t suffice t o c h e c k it.
M o r e o v e r , the United States G o v e r n m e n t
w e r e so heavily c o m m i t t e d politically to m a i n t a i n i n g the p r i c e at
i t s p r e s e n t l e v e l t h a t it w a s v e r y u n l i k e l y t h a t t h e y w o u l d a d o p t a n
i n c r e a s e in t h e p r i c e a s a d e l i b e r a t e p o l i c y .
In p r a c t i c e , t h e r e f o r e ,
w e c o u l d e x p e c t l i t t l e h e l p in t h i s r e s p e c t ,
A l t e r n a t i v e l y , the United States a u t h o r i t i e s m i g h t
d e m o n e t i s e gold by u n i l a t e r a l l y s u s p e n d i n g t h e i r s a l e a n d p u r c h a s e
of t h e m e t a h
T h e e x c h a n g e v a l u e of t h e d o l l a r w o u l d t h e n b e l e f t ,
in e f f e c t , t o f l o a t .
We s h o u l d s t i l l n e e d t o s e e k t o l i n k s t e r l i n g
t o t h e d o l l a r a t t h e p r e s e n t p a r i t y ; b u t , if we w e r e t o s u c c e e d , we
should need v e r y s u b s t a n t i a l United S t a t e s s u p p o r t for s t e r l i n g .
A t h i r d c o u r s e open to the United S t a t e s would b e to adopt
a d u a l s y s t e m of gold t r a n s a c t i o n s , w h e r e b y t h e y w o u l d m a i n t a i n
t h e gold p r i c e a t t h e p r e s e n t r a t e of $35 p e r o u n c e f o r t h e p u r p o s e s
of e x c h a n g e w i t h a l i m i t e d n u m b e r of C e n t r a l B a n k s w h o would
u n d e r t a k e n o t t o m a r k e t it o r t o m a k e it a v a i l a b l e f o r s p e c u l a t i o n ;
b u t in t h e o p e n m a r k e t t h e y would a l l o w t h e p r i c e of gold t o find
i t s own l e v e l , w h i c h w o u l d i n e v i t a b l y be h i g h e r t h a n $ 3 5 .
A system
of t h i s k i n d , h o w e v e r , w o u l d b e i n h e r e n t l y u n s t a b l e ; a n d , if s t e r l i n g
w a s t o a c c o m m o d a t e i t s e l f t o a n a r r a n g e m e n t of t h i s n a t u r e , it
would n e e d s u p p o r t on a n e x t e n s i v e s c a l e .
F i n a l l y , the United States authorities might seek to
m a i n t a i n t h e p r e s e n t s y s t e m , p o s s i b l y w i t h t h e m o d i f i c a t i o n of t h e
i n t r o d u c t i o n of a gold c e r t i f i c a t e a s a m e a n s of g i v i n g t h e h o l d e r s
of d o l l a r b a l a n c e s a n i n s u r a n c e a g a i n s t a n y s u b s e q u e n t c h a n g e i n t h e
d o l l a r v a l u e of g o l d .
O n b a l a n c e , t h i s w a s the c o u r s e w h i c h t h e y
w e r e m o s t l i k e l y to a d o p t ; a n d , if t h e y w e r e u n a b l e t o c o m m a n d
sufficient s u p p o r t to m a i n t a i n the p r e s e n t s y s t e m , d e m o n e t i s a t i o n
would p r o b a b l y b e t h e i r s e c o n d c h o i c e .
N e i t h e r c o u r s e would b e
a s a t t r a c t i v e t o u s a s a n i n c r e a s e in t h e p r i c e of g o l d ; b u t t h e
United States a u t h o r i t i e s w e r e v e r y unlikely to e m b r a c e this policy.
We m u s t t h e r e f o r e c o n c e n t r a t e a l l o u r e f f o r t s , p a r t i c u l a r l y a t t h e
f o r t h c o m i n g c o n f e r e n c e of t h e r e p r e s e n t a t i v e s of t h e C e n t r a l B a n k s
of t h e G o l d P o o l c o u n t r i e s , on s e c u r i n g , p a r t l y f r o m E u r o p e a n d
p a r t l y f r o m t h e U n i t e d S t a t e s , a f u r t h e r s u b s t a n t i a l line of c r e d i t a s
a m e a n s of o n s m r i n g t h e s u p p o r t w h i c h s t e r l i n g w o u l d c e r t a i n l y
n e e d in t h e w e e k s a h e a d , w h i c h e v e r c o u r s e t h e U n i t e d S t a t e s
adopted.
In a d d i t i o n , we m u s t p r e p a r e a s a m a t t e r of u r g e n c y
a c o n t i n g e n c y p l a n f o r e m e r g e n c y a c t i o n if, by t h e f o l l o w i n g
M o n d a y , it w a s c l e a r t h a t t h i s c o n f e r e n c e h a d f a i l e d a n d t h a t
r e n e w e d d i s o r d e r in f i n a n c i a l m a r k e t s m u s t b e e x p e c t e d .
If in
t h o s e c i r c u m s t a n c e s we t o o k n o a c t i o n t o p r o t e c t o u r i n t e r e s t s
( e . g, b y b l o c k i n g t h e s t e r l i n g b a l a n c e s ) , we s h o u l d p r o b a b l y b e
d r i v e n to allow the s t e r l i n g r a t e t o float.
B u t we n o l o n g e r h a d
s u f f i c i e n t r e s e r v e s t o s u p p o r t i t ; p a r t i c u l a r l y s i n c e we s h o u l d
be in default t o the I n t e r n a t i o n a l M o n e t a r y F u n d (IMF) and
s h o u l d t h e r e f o r e f o r f e i t o u r d r a w i n g r i g h t s on t h e F u n d .
As a
r e s u l t a floating r a t e would fall t o s u c c e s s i v e l y l o w e r l e v e l s ;
a n d we s h o u l d f a c e t h e p r o s p e c t of a r e n e w a l of t h e c o n d i t i o n s
w h i c h h a d d e v e l o p e d i n t h e 1 9 3 0 s , w h e n a f a i l u r e of c o n f i d e n c e
on a w o r l d - w i d e s c a l e had p r e c i p i t a t e d a c o n t r a c t i o n of i n t e r ­
n a t i o n a l t r a d e a n d h a d d i s l o c a t e d t h e w h o l e s y s t e m of i n t e r n a t i o n a l
payments.
On t h e o t h e r h a n d , if we c o u l d s e c u r e f u r t h e r s u p p o r t
for s t e r l i n g in the w e e k s a h e a d and could e n s u r e that the f o r t h ­
c o m i n g m o n e t a r y c o n f e r e n c e w a s c o n d u c t e d , on p o s i t i v e a n d
c o n s t r u c t i v e l i n e s , it m i g h t t h e r e a f t e r b e p o s s i b l e t o d e v i s e a
p o l i t i c a l b a s i s on w h i c h t o r e o r g a n i s e t h e i n t e r n a t i o n a l m o n e t a r y
s y s t e m and t o i n c r e a s e i n t e r n a t i o n a l liquidity by a c t i v a t i n g the
s p e c i a l d r a w i n g r i g h t s w h i c h h a d b e e n a g r e e d in p r i n c i p l e at t h e
m e e t i n g of t h e I M F a t R i o d e J a n e i r o in t h e p r e v i o u s a u t u m n .
r
T H E P R I M E M I N I S T E R i n f o r m e d t h e C a b i n e t of t h e
m e s s a g e s w h i c h h e h a d e x c h a n g e d w i t h t h e P r e s i d e n t of t h e U n i t e d
S t a t e s , P r e s i d e n t J o h n s o n , during the p r e v i o u s night.
He had
w a r n e d t h e P r e s i d e n t t h a t s o m e of t h e p o s s i b l e c o u r s e s o p e n t o t h e
United States authorities might t e m p o r a r i l y relieve their
e m b a r r a s s m e n t b u t a t t h e a l m o s t c e r t a i n c o s t of i n t r i n s i c d a m a g e
t o s t e r l i n g ; a n d t h a t , if t h i s w e r e t o h a p p e n , t h e d o l l a r t o o w o u l d
u l t i m a t e l y be at r i s k .
H e h a d t h e r e f o r e m a d e it c l e a r t h a t , if
t h e United S t a t e s A d m i n i s t r a t i o n took a d e c i s i o n which put s t e r l i n g
i n d a n g e r , it w a s e s s e n t i a l t h a t t h e y s h o u l d s u p p o r t s t e r l i n g
d u r i n g the d a y s i m m e d i a t e l y a h e a d ; o t h e r w i s e , e i t h e r both
c u r r e n c i e s w o u l d b e d e v a l u e d o r we o u r s e l v e s s h o u l d h a v e t o t a k e
u r g e n t a c t i o n t o p r o t e c t s t e r l i n g , w h i c h would t r a n s f e r t h e whole
of t h e s p e c u l a t i v e p r e s s u r e t o t h e d o l l a r .
In h i s r e p l y P r e s i d e n t
J o h n s o n h a d e m p h a s i s e d t h a t he h o p e d t o d e a l w i t h the p r e s e n t
s i t u a t i o n in a w a y w h i c h would c o n t r i b u t e t o t h e d e v e l o p m e n t of
a m o r e stable and s a t i s f a c t o r y i n t e r n a t i o n a l m o n e t a r y m e c h a n i s m .
He had s t r e s s e d the i m p o r t a n c e which he attached to the
m a i n t e n a n c e of a v e r y c l o s e l i n k b e t w e e n t h e B r i t i s h a n d U n i t e d
S t a t e s a u t h o r i t i e s i n t h i s m a t t e r b u t had m a d e i t c l e a r t h a t he
w o u l d p e r s o n a l l y f i n d a n y c h a n g e in t h e p r i c e of gold u n a c c e p t a b l e .
In d i s c u s s i o n t h e r e w a s g e n e r a l e n d o r s e m a t of t h e l i n e s
on w h i c h t h e P r i m e M i n i s t e r h a d a p p r o a c h e d P r e s i d e n t
Johnson.
In p a r t i c u l a r , the i m p l i e d w a r n i n g t h a t i n c e r t a i n
c i r c u m s t a n c e s we m i g h t h a v e to c o n t e m p l a t e a s e c e n d d e v a l u a t i o n
of s t e r l i n g m i g h t be o u r m o s t e f f e c t i v e m e a n s of p e r s u a d i n g t h e
United States A d m i n i s t r a t i o n that they had no alternative to
p r o m o t i n g f u r t h e r i n t e r n a t i o n a l c r e d i t to s u p p o r t it.
N o n e of t h e
p o s s i b l e c o u r s e s of a c t i o n w h i c h t h e y m i g h t a d o p t w o u l d b e
-5­
d e m ens t r ably to our a d v a n t a g e in the s h o r t t e r m .
In p a r t i c u l a r ,
t h e d u a l s y s t e m w o u l d b e u n w o r k a b l e , s i n c e it would b e
i m p o s s i b l e t o m a i n t a i n two gold p r i c e s in s i m u l t a n e o u s b u t
s e p a r a t e o p e r a t i o n f o r v e r y l o n g ; w h i l e a n i n c r e a s e in t h e p r i c e
of gold w o u l d b e n e f i t c o u n t r i e s w h i c h , o n t h e w h o l e , w e r e h o s t i l e
t o u s a n d , b y i m p l y i n g t h a t f u r t h e r i n c r e a s e s in p r i c e w e r e
p o s s i b l e , might r e d u c e , r a t h e r than i n c r e a s e , international
liquidity.
T h e p r i n c i p a l d a n g e r , h o w e v e r , w a s t h a t the U n i t e d
S t a t e s w o u l d a d o p t t h e e a s i e s t c o u r s e b y s e e k i n g i n effect t o
m a i n t a i n t h e p r e s e n t s y s t e m a n d r e f u s i n g t o c o n t e m p l a t e any­
d r a s t i c or f u n d a m e n t a l c h a n g e in i n t e r n a t i o n a l m o n e t a r y a r r a n g e ­
m e n t s - w h e r e a s it m i g h t b e t o o u r l o n g t e r m a d v a n t a g e t o s e e k
t o m o v e i n t h e d i r e c t i o n of t h e d e m o n e t i s a t i o n of g o l d , w h i l e
m a i n t a i n i n g t h e l i n k b e t w e e n t h e s t e r l i n g and d o l l a r p a r i t i e s .
T h i s , h o w e v e r , w a s e n t i r e l y d e p e n d e n t on o u r s e c u r i n g a d d i t i o n a l
s u p p o r t f o r s t e r l i n g on a n a d e q u a t e s c a l e .
U l t i m a t e l y we h a d m o s t t o f e a r if t h e s h o r t t e r m s o l u t i o n
w h i c h w a s a d o p t e d d i d n o t h i n g t o r e d u c e or t o e l i m i n a t e t h e
e s s e n t i a l instability in the p r e s e n t m o n e t a r y s y s t e m .
This was
a p o l i t i c a l , r a t h e r than a t e c h n i c a l , i s s u e j and what was
r e q u i r e d w a s e s s e n t i a l l y a n a c t of p o l i t i c a l w i l l d i r e c t e d t o
b r i n g i n g i n t o f o r c e t h e s y s t e m of s p e c i a l d r a w i n g r i g h t s .
H i t h e r t o a l l a t t e m p t s t o a c h i e v e this had b e e n f r u s t r a t e d by the
r e f u s a l of t h e F r e n c h G o v e r n m e n t t o a l l o w t h e m o n e t a r y
a u t h o r i t i e s of t h e E u r o p e a n E c o n o m i c C o m m u n i t y ( E E C ) t o
c o - o p e r a t e in activating t h e s e drawing r i g h t s .
B u t we m u s t
m a i n t a i n o u r e f f o r t s t o o v e r c o m e t h i s o b s t r u c t i o n ; a n d we
s h o u l d s e e k t o p r o m o t e a s e r i e s of i n t e r n a t i o n a l c o n f e r e n c e s ,
both p o l i t i c a l and t e c h n i c a l , d i r e c t e d t o w a r d s a thorough-going
r e f o r m a n d r e o r g a n i s a t i o n of t h e i n t e r n a t i o n a l m o n e t a r y s y s t e m .
In f u r t h e r d i s c u s s i o n it w a s s u g g e s t e d t h a t t h e G o v e r n m e n t
should be c o n c e r n e d t o e n s u r e , so far as p o s s i b l e , that public
opinion was a d e q u a t e l y i n f o r m e d about the r e a l i s s u e s at s t a k e in
this highly complex m a t t e r .
P r o p e r l y p r e s e n t e d , the m o n e t a r y
c r i s i s c o u l d p r o v i d e a f a v o u r a b l e c o n t e x t for t h e f o r t h c o m i n g
B u d g e t , which could now b e s e e n as e s s e n t i a l l y the B r i t i s h
c o n t r i b u t i o n t o the s o l u t i o n of a p r o b l e m w h i c h w a s w o r l d - w i d e
in i t s s c o p e .
T h i s , h o w e v e r , would d e p e n d on a c o n s c i o u s a n d
c o n c e r t e d e f f o r t t o e x p l a i n t o t h e p u b l i c t h e n a t u r e of t h e
p r o b l e m w h i c h now c o n f r o n t e d u s , the r e a s o n s f o r i t s s u d d e n
e m e r g e n c e a n d t h e m e a n s by w h i c h we m i g h t b e s t s e e k t o g r a p p l e
w i t h it.
T h e s e q u e s t i o n s w o u l d n e e d t o b e d e a l t w i t h a s p a r t of
t h e p r e s e n t a t i o n of t h e B u d g e t in t h e w e e k s a h e a d .
The Cabinet ­
(1)
Took n o t e , with a p p r o v a l , that the P r i m e M i n i s t e r w o u l d a r r a n g e t o c o n s t i t u t e a s m a l l g r o u p of M i n i s t e r s who would k e e p the situation under c o n s t a n t r e v i e w d u r i n g t h e w e e k e n d a n d would r e p o r t t o a n e a r l y m e e t i n g of the C a b i n e t . (2)
A g r e e d t h a t , if it b e c a m e n e c e s s a r y t o
extend the b a n k holiday which had b e e n
a r r a n g e d f o r t h a t d a y , t h e C h a n c e l l o r of
t h e E x c h e q u e r s h o u l d m a k e the n e c e s s a r y
arrangements.
(3)
A g r e e d t h a t t h e p u r p o s e of o u r r e p r e s e n t a t i v e s
a t the f o r t h c o m i n g m e e t i n g of C e n t r a l B a n k s of
t h e c o u n t r i e s m e m b e r s of t h e Gold P o o l s h o u l d
be to s e c u r e the m a x i m u m additional support
for sterling in the weeks ahead.
C a b i n e t O f f i c e , S W . 1.
c
16th M a r c h ,
1968
-7 THIS DOCUMEN
DOCUMENT
T IS THE PROPERTY OF HER
—im
BRITANNIC
MAJESTVS
GOVERNMENT
The circulation of this paper has been strictly limited.
It is issued for the personal use of..$pr^..y.?£rr^..4\.^.- -' ' .
c
2 3
TOP SECRET
Copy No..!.Q.
CABINET
CONFIDENTIAL ANNEX
CC(68) 22nd C o n c l u s i o n s , M i n u t e I
M o n d a y . 18th M a r c h , 1968 a t 10. 0 0 a. ra,
NATIONAL
T H E P R I M E M I N I S T E R s a i d t h a t , in a c c o r d a n c e w i t h the
?ARY
d e c i s i o n a t the C a b i n e f s l a s t m e e t i n g , a s m a l l g r o u p of o e n i o r M i n i s t e r s
TON
u n d e r h i s own c h a i r m a n s h i p h a d m e t s e v e r a l t i m e s d u r i n g the
w e e k e n d i n o r d e r t o k e e p u n d e r r e v i e w the d e v e l o p m e n t of die
i n t e r n a t i o n a l m o n e t a r y s i t u a t i o n in the l i g h t of fche W a s h i n g t o n
c o n f e r e n c e of r e p r e s e n t a t i v e s of c e r t a i n C e n t r a l B a n k s m e m b e r s
of the i n t e r n a t i o n a l Gold P o o l .
In the e v e n t the o u t c o m e of t h a t
c o n f e r e n c e , a s r e c o r d e d i n trie c o m m u n i q u e i s s u e d on fche p r e v i o u s
e v e n i n g , h a d b e e n noi; w h o l l y u n c a t i s f a c t o r y f r o m o u r p o i n t of v i e w ;
a n d t h e r e h a d b e e n n o p o i n t a t w h i c h ; by p r e s s i n g a p a r t i c u l a r
poinfc of v i e w , we c o u l d h a v e d e c i s i v e l y i n f l u e n c e d t h e c o u r s e of the
proceedings.
T h e g r o u p of M i n i s t e r s h a d t h e r e f o r e d e c i d e d that
t h e r e w a s n o n e e d to s u m m o n the C a b i n e t aft s h o r t n o t i c e d u r i n g
S u n d a y e v e n i n g ; b u t M i n i s t e r s w o u l d n o w w i s h to c o n s i d e r the
situation and its i m p l i c a t i o n s at r e l a t i v e l e i s u r e
u
T H E C H A N C E L L O R OF T H E E X C H E Q U E R s a i d t h a t it h a d
b e c o m e c l e a r a t a n e a r l y stage in the i n t e r n a t i o n a l c o n f e r e n c e that,
d e s p i t e t h e i n t e n s e s p e c u l a t i o n i n gold d u r i n g the p r e v i o u s w e e k ,
the U n i t e d S t a t e s a u t h o r i t i e s w e r e ^ s t i l l n o t p r e p a r e d e i t h e r to
i n c r e a s e t h e p r i c e of gold o r to a d o p t a p o l i c y of d e m o n s 11 c a t i o n .
T h e y h a d p r e f e r r e d to s p o n s o r a d u a l p r i c e s y s t e m ? a n d , s i n c e
t h e o t h e r c o u n t r i e s r e p r e s e n t e d a t the c o n f e r e n c e h a d b e e n r e a d y
to a c c e p t t h i s , we o u r s e l v e s h a d c o n c e n t r a t e d on s e c u r i n g the
m a x i m u m a d d i t i o n a l s u p p o r t f o r s t e r l i n g , w h i c h w o u l d be e x p o s e d
t o f r e s h p r e s s u r e a s soon a s o p e r a t i o n s on t h e b a s i c of a dv.al
p r i c e s y s t e m b e g a n i n the w o r l d e x c h a n g e m a r k e t s .
We h a d
s e c u r e d a s s u r a n c e s w h i c h w o u l d b r i n g the t o t a l of s u c h s u p p o r t
to a f i g u r e of $ 4 , 000 millicc-..
Of t h i s f i g u r e - h o w e v e r .
$1,400 m i l l i o n r e p r e s e n t e d . , o u r own r e s o u r c e s ; a. f u r t h e r
$ l 4 0 0 m i l l i o n w a s c o n s t i t u t e d b y t h e s t a n d - b y f a c i i i t i e s w h i c h the
Lifeer n a t i o n a l M o n e t a r y F u n d ( I M F ) h a d e a r l i e r p u t a t o u r d i s p o s a l ;
a n d only $1, 200 m i l l i o n t h e r e f o r e r e p r e s e n t e d g e n u i n e l y n e w
support,,
N e v e r t h e l e s s ; t h i s m a r g i n of a d d i t i o n a l r e s o u r c e s ,
c o u p l e d w i t h t h e f a c t that the I M F s t a n d - b y f a c i l i t y w o u l d now b e
s
1
r e l e a s e d f r o m the s o - c a l l e d " n e g a t i v e p l e d g e s " a n d w o u l d
t h e r e f o r e b e m o r e e a s i l y a n d r a p i d l y a v a i l a b l e if r e q u i r e d , s h o u l d
be s u f f i c i e n t t o s a f e g u a r d s t e r l i n g a g a i n s t a n u n a c c e p t a b l e s t r a i n
in the d a y s a h e a d .
A n a d d i t i o n a l m e a s u r e of s t a b i l i t y s h o u l d be
p r o v i d e d b y t h e a g r e e m e n t b e t w e e n the C e n t r a l B a r i c r e p r e s e n t e d
a t the i n t e r n a t i o n a l c o n f e r e n c e "to c o - o p e r a t e e v e n m o r e c l o s e l y
t h a n i n the p a s t to m i n i m i s e f l o w s of funds c o n t r i b u t i n g t o
i n s t a b i l i t y i n e x c h a n g e m a r k e t s a n d t o offset, if n e c e s s a r y , a n y
s u c h f l o w s t h a t m a y a r i s e i n v i e w of the i m p o r t a n c e of t h e d o l l a r /
s t e r l i n g in the i n t e r n a t i o n a l m o n e t a r y s y s t e m . " H e and h i s
c o l l e a g u e s i n the M i n i s t e r i a l g r o u p h a d t h e r e f o r e j u d g e d t h a t it
w a s p r e f e r a b l e to a c c e p t a s e t t l e m e n t on t h i s b a s i s t h a n to e m b a r k
on e i t h e r of t h e v e r y g r a v e a l t e r n a t i v e c o u r s e s of b l o c k i n g the
s t e r l i n g b a l a n c e s o r a l l o w i n g t h e e x c h a n g e r a t e f o r s t e r l i n g to
float.
N e v e r t h e l e s s , a s i t u a t i o n m i g h t develop in which we should
be f o r c e d t o c o n t e m p l a t e a c t i o n on one or o t h e r of t h e s e h y p o t h e s e s ;
and t h e i r i m p l i c a t i o n s should now be studied a s r a p i d l y a n d
intensively as possible.
T h e M i n i s t e r i a l g r o u p h a d a l s o h a d to c o n s i d e r w h e t h e r t h e
b a n on d e a l i n g s in f o r e i g n e x c h a n g e w h i c h h a d o p e r a t e d o n the
p r e v i o u s F r i d a y a n d S a t u r d a y s h o u l d b e m a i n t a i n e d on M o n d a y a n d
T u e s d a y , a c o u r s e which would h a v e involved p r o c l a i m i n g
a d d i t i o n a l b a n k h o l i d a y s on t h o s e d a y s .
T o do so, hov/ever, would
be l i a b l e to be i n t e r p r e t e d b y i n t e r n a t i o n a l opinion a s implying
t h a t the B u d g e t on the f o l l o w i n g d a y would i n c l u d e c o m e d r a s t i c
m e a s u r e s of a m o n e t a r y k i n d ? a n d , if this i m p r e s s i o n o n c e took
r o o t , t h e i m p a c t on s t e r l i n g in o t h e r e x c h a n g e m a r k e t s , w h i c h
w o u l d r e m a i n o p e n e v e n t h o u g h the m a r k e t in L o n d o n v/as c l o s e d ,
could b e v e r y d a n g e r o u s .
On b a l a n c e , t h e r e f o r e , it h a d b e e n
j u d g e d r i g h t to a l l o w n o r m a l b a n k i n g b u s i n e s s to b e r e s u m e d .
T h e L o n d o n g o l d m a r k e t , h o w e v e r , would r e m a i n c l o s e d f or a
f u r t h e r two w e e k s s i n c e , a l t h o u g h t h i s w o u l d i n v o l v e u s i n s o m e
l o s s of f o r e i g n e x c h a n g e e a r n i n g s , it s h o u l d d o m u c h to r e s t o r e
s t a b i l i t y to t r a n s a c t i o n s in g o l d a n d s h o u l d t h e r e f o r e r e i n f o r c e the
n e w g o l d p o l i c y w h i c h the i n t e r n a t i o n a l c o n f e r e n c e h a d e n d o r s e d .
In d i s c u s s i o n s o m e d o u b t v/as e x p r e s s e d w h e t h e r a d u a l
p r i c e s y s t e m f o r g o l d c o u l d b e e x p e c t e d to e n d u r e f o r v e r y l o n g .
It w a s a g r e e d t h a t f u r t h e r p r e s s u r e on gold m i g h t d e v e l o p q u i t e
r a p i d l y a n d t h a t in t h o s e c i r c u m s t a n c e s our own i n t e r e s t s w o u l d b e
b e s t s e r v e d if the U n i t e d S t a t e s a u t h o r i t i e s m o v e d t o w a r d s a p o l i c y
of d e m o n e t i s a t i o n .
T h i s , h o v / e v e r , would h a v e m a j o r i m p l i c a t i o n s
i n t e r m s of t h e p o l i t i c a l a l i g n m e n t of the w o r l d P o w e r s , ' a n d the
C a b i n e t 3hould t h e r e f o r e t a k e a n e a r l y o p p o r t u n i t y t o c o n s i d e r h o w
o u r own e x t e r n a l p o l i c y m i g h t b e a f f e c t e d , p a r t i c u l a r l y ?.s r e g a r d s
o u r r e l a t i o n s h i p w i t h the U n i t e d S t a t e s and w i t h E u r o p e r e s p e e f c i v e l y .
It w o u l d be i m p o r t a n t to t r y t o e s t a b l i s h how f a r the e v e n t s of
r e c e n t m o n t h s , w h i c h h a d b r o u g h t the i n t e r n a t i o n a l m o n e t a r y
s t r u c t u r e t o the v e r g e of c o l l a p s e , h a d r e s u l t e d f r o m d e l i b e r a t e
a c t i o n t o t h i s e n d b y the F r e n c h G o v e r n m e n t a n d h o w b o t h the
F r e n c h a n d G e r m a n G o v e r n m e n t s w e r e l i k e l y t o r e a c t in t h e w e e k s
-2­
a h e a d t o t h e n e w s i t u a t i o n w h i c h w o u l d d e v e l o p a s a r e s u l t of the
i n t r o d u c t i o n of a d u a l p r i c e gold s y s t e m .
Meanwhile it would
r e m a i n e s s e n t i a l t h a t both t h e U n i t e d S t a t e s a n d w e o u r s e l v e s
s h o u l d a d o p t d o m e s t i c p o l i c i e s w h i c h w o u l d p u t the e c o n o m y
a n d the b a l a n c e of p a y m e n t s of b o t h c o u n t r i e s on a m o r e s t a b l e
b a s i s , a l b e i t w i t h o u t p r o v o k i n g d e f l a t i o n on a s c a l e w h i c h ,
p a r t i c u l a r l y a s r e g a r d s the U n i t e d S t a t e s , m i g h t p r e c i p i t a t e a
contraction in international t r a d e .
In o u r c a s e t h i s c o n s i d e r a t i o n
u n d e r l i n e d t h e i m p o r t a n c e of the f o r t h c o m i n g Budget,,
The Cabinet T o o k note that the P r i m e M i n i s t e r would a r r a n g e f o r f u r t h e r s t u d y to be g i v e n to:­
(a)
the p o l i t i c a l i m p l i c a t i o n s of
r e c e n t d e v e l o p m e n t s in t h e
international monetary situation;
(b)
the a c t i o n w h i c h m i g h t be r e q u i r e d
if w e w e r e c o m p e l l e d in t h e n e a r
f u t u r e e i t h e r to b l o c k the s t e r l i n g
b a l a n c e s o r to a l l o w the e x c h a n g e
r a t e for s t e r l i n g to float.
C a b i n e t Office,
S.W.I.
18th M a r c h , 1968
-3­
The circulation of this paper has been strictly limited. It is issued for the personal use
ot..$Tt?&..yrfx.rx..£.- '^-*'''-
:U
TOP SECRET
Copy
No....^.g.
CABINET
CONFIDENTIAL, ANNEX
CC(66) 4 7 t h C o n c l u s i o n s , M i n u t e 1
F r i d a y , 22nd N o v e m b e r , 1968 a t 9 . 30 a. m ,
NATIONAL
ITARY
iTION
Mitial
T H E P R I M E M I N I S T E R i n f o r m e d t h e C a b i n e t of d e v e l o p m e n t s
in the international m o n e t a r y situation since the F r e n c h r e p r e s e n ­
t a t i v e a t t h e r e c e n t m e e t i n g of c e n t r a l b a n k e r s in B a s l e had d i s c l o s e s
t h e i n t e n t i o n of t h e F r e n c h G o v e r n m e n t to d e v a l u e t h e f r a n c .
The
F e d e r a l G e r m a n G o v e r n m e n t had s u b s e q u e n t l y announced their
i n t e n t i o n to a d j u s t t h e i r t u r n o v e r t a x e s so a s t o i n c r e a s e the t a x
o n e x p o r t s a n d r e d u c e t h e t a x o n i m p o r t s b y 4 p e r c e n t in e a c h c a s e .
T h e G e r m a n s c l a i m e d t h a t t h i s w a s e q u i v a l e n t to a 4 p e r c e n t
r e v a l u a t i o n of t h e D e u t s c h m a r k (DM) i n v i s i b l e t r a d e .
Subsequently
a m e e t i n g of t h e G r o u p of T e n had b e e n c a l l e d i n B o n n and v/as s t i l l
in session.
C o n c e r t e d p r e s s u r e b y t h e U n i t e d K i n g d o m and m o s t
o t h e r G o v e r n m e n t s o n t h e F e d e r a l G e r m a n G o v e r n m e n t to i n c r e a s e
t h e e x t e n t of t h e i r " r e v a l u a t i o n " h a d so f a r p r o v e d u n s u c c e s s f u l .
T h e l a t e s t p o s i t i o n w a s t h a t the F e d e r a l G e r m a n G o v e r n m e n t h a d
o f f e r e d , i n a d d i t i o n , to i m p o s e a 100 p e r c e n t r e s e r v e r e q u i r e m e n t
i n r e s p e c t of f o r e i g n d e p o s i t s h e l d b y G e r m a n b a n k s .
The F r e n c h
F i n a n c e M i n i s t e r h a d i n d i c a t e d t h a t if h i s G o v e r n m e n t d e v a l u e d t h e
f r a n c i t w o u l d b e by 11,11 p e r c e n t a n d i t s e e m e d h i g h l y p r o b a b l e t h a t
a d e v a l u a t i o n to t h i s e x t e n t w o u l d b e a n n o u n c e d b y t h e F r e n c h
G o v e r n m e n t s o m e t i m e on 2 3 r d N o v e m b e r .
The communique
f r o m t h e G r o u p of T e n i n B o n n w a s e x p e c t e d e a r l y t h a t a f t e r n o o n
a n d i t w a s h o p e d t h a t i t w o u l d a n n o u n c e a s u f f i c i e n t p a c k a g e of
m e a s u r e s - b y s u r p l u s a n d d e f i c i t c o u n t r i e s a l i k e - to s t a b i l i s e
t h e m o n e t a r y position at l e a s t for s o m e t i m e .
T h e B r i t i s h G o v e r n m e n t would b e a n n o u n c i n g i t s own p a c k a g e
of m e a s u r e s i m m e d i a t e l y a f t e r t h e B o n n c o m m u n i q u e .
The
m e a s u r e s p r o p o s e d h a d b e e n c o n s i d e r e d by t h e s m a l l g r o u p of
M i n i s t e r s which had b e e n established under his c h a i r m a n s h i p ,
a f t e r t h e g o l d c r i s i s l a s t M a r c h , to k e e p the e c o n o m i c a n d m o n e t a r y
situation u n d e r r e v i e w and m a k e contingency plans a s n e c e s s a r y .
T h e p r o p o s e d m e a s u r e s w o u l d i n any c a s e h a v e b e e n r e q u i r e d , a t
l e a s t i n p a r t , to d e a l w i t h t h e c o n t i n u i n g e x c e s s of h o m e d e m a n d
a n d of i m p o r t s o v e r t h e l e v e l s f o r e c a s t a t t h e t i m e of t h e B u d g e t ,
The p r e s e n t international monetary c r i s i s made t h e m easier to
e x p l a i n to p u b l i c o p i n i o n a n d u r g e n t l y n e c e s s a r y - b o t h to m a k e
good t h e a d v e r s e c o n s e q u e n c e s for o u r b a l a n c e of p a y m e n t s of t h e
f r a n c d e v a l u a t i o n a n d to h e l p , w i t h t h e o t h e r m e a s u r e s t o b e t a k e n
by o t h e r c o u n t r i e s , t o r e s t o r e i n t e r n a t i o n a l c o n f i d e n c e .
The p r o p o s e d m e a s u r e s w e r e , f i r s t , a further tightening
of c r e d i t by b a n k s a n d o t h e r f i n a n c i a l i n s t i t u t i o n s .
T h e effect
w o u l d b e e q u i v a l e n t to a r e d u c t i o n of b a n k c r e d i t f r o m 104 p e r
c e n t of t h e N o v e m b e r , 1967, l e v e l to 102 p e r c e n t b y M a r c h , 1969.
S e c o n d l y , i m m e d i a t e a c t i v a t i o n of t h e C u s t o m s and E x c i s e
r e g u l a t o r in o r d e r to p u t a s u r c h a r g e of 10 p e r c e n t o n a l c o h o l i c
d r i n k s ; p e t r o l and o t h e r h y d r o c a r b o n o i l s ; a n d on a l l r a t e s of
p u r c h a s e tax.
T h i r d l y , t h e i n t r o d u c t i o n of a n i m p o r t d e p o s i t
s c h e m e r e q u i r i n g i m p o r t e r s to d e p o s i t w i t h C u s t o m s 50 p e r c e n t
of t h e v a l u e of t h e i r i m p o r t s on i m p o r t a t i o n for a p e r i o d of s i x
months.
This s c h e m e would extend b r o a d l y to all i m p o r t s except
f o o d , r a w m a t e r i a l s a n d f u e l , a n d a l i m i t e d r a n g e of g o o d s i m p o r t e d
mainly f r o m developing c o u n t r i e s .
The P a r l i a m e n t a r y Committee
h a d c o n s i d e r e d whether s o m e goods - p a r t i c u l a r l y c a r s and c o n ­
s u m e r d u r a b l e s - s h o u l d b e e x c l u d e d f r o m t h e s c o p e of t h e
r e g u l a t o r but h a d c o n c l u d e d t h a t t h e y s h o u l d n o t , on t h e a d v i c e
of t h e C h a n c e l l o r of t h e E x c h e q u e r a n d i n v i e w of t h e l a t t e r ' s
u n d e r t a k i n g t h a t h e w o u l d b e p r e p a r e d to r e v i e w the e f f e c t on
t h e s e p a r t i c u l a r i n d u s t r i e s of t h e c u r r e n t h i r e p u r c h a s e r e s t r i c t i o n s
in J a n u a r y or F e b r u a r y n e x t ,
T h e e f f e c t of t h e r e g u l a t o r would b e
t o a d d a b o u t o n e p o i n t to t h e c o s t of l i v i n g i n d e x .
T h e M i n i s t e r of
P o w e r m i g h t c o n s i d e r w h e t h e r t h e r e s u l t a n t i n c r e a s e of 4 d , on a
g a l l o n of p e t r o l c o u l d b e o f f s e t b y w i t h d r a w a l of a l l o r p a r t of the
p r e s e n t Sues; s u r c h a r g e of t h r e e - q u a r t e r s of a p e n n y a g a l l o n .
The
i m p o r t d e p o s i t s c h e m e was an e n t i r e l y new d e p a r t u r e , and c o n s e ­
q u e n t l y i t s e f f e c t s c o u l d n o t be g a u g e d w i t h a n y c e r t a i n t y .
B u t it
w o u l d of c o u r s e g r e a t l y i n c r e a s e t h e c r e d i t s q u e e z e : if i t s
e f f e c t s o n i n d u s t r i a l l i q u i d i t y b e c a m e t o o s e v e r e it w o u l d b e
p o s s i b l e to e a s e the r e s t r i c t i o n s on bank c r e d i t .
It w a s p r o p o s e d to a n n o u n c e t h e s e m e a s u r e s a s s o o n
a s t h e B o n n c o m m u n i q u e , r e p o r t i n g t h e o u t c o m e of t h e m e e t i n g
of t h e G r o u p of T e n , w a s i s s u e d .
The p r e c i s e timing was still
u n c e r t a i n but would a l m o s t c e r t a i n l y b e that d a y .
The Chancellor
of t h e E x c h e q u e r w o u l d n o t i n f o r m t h e G r o u p of T e n a b o u t t h e i m p o r t
d e p o s i t s c h e m e u n t i l t h e end of t h e m e e t i n g , a n d t h e r e m u s t t h e r e ­
f o r e be s o m e r i s k t h a t t h e G r o u p of T e n would t h e n s e e k to r e o p e n
t h e i r d i s c u s s i o n s a n d t h e t e r m s a n d t i m i n g of t h e c o m m u n i q u e .
If
the Bonn c o m m u n i q u e w e r e i s s u e d t h a t d a y but t h e C h a n c e l l o r h a d
n o t s r e t u r n c d h e (the P r i m e M i n i s t e r ) w o u l d p r o b a b l y m a k e t h e s t a t e m e n t
to t h e H o u s e ,
But the P a r l i a m e n t a r y C o m m i t t e e had f i r m l y taken
t h e v i e w t h a t t h e B r i t i s h m e a s u r e s s h o u l d n o t be a n n o u n c e d in
a d v a n c e of t h e B o n n c o m m u n i q u e .
He a p o l o g i s e d for t h e v e r y
s h o r t n o t i c e a t w h i c h t h e s e m a j o r i s s u e s had b e e n p u t to t h e m for
d e c i s i o n b u t i n v i e w of t h e e x c e p t i o n a l d e g r e e of s e c u r i t y r e q u i r e d
t h e p l a n n i n g h a d h a d n e c e s s a r i l y t o b e r e s t r i c t e d to a v e r y s m a l l
g r o u p of t h o s e M i n i s t e r s d i r e c t l y i n v o l v e d .
He i n v i t e d a p p r o v a l
for t h e a n n o u n c e m e n t of t h e m e a s u r e s w h i c h h e h a d o u t l i n e d a s
soon as t h e Bonn c o m m u n i q u e had b e e n i s s u e d .
I n d i s c u s s i o n , the f o l l o w i n g p o i n t s w e r e m a d e
­
(a)
It w a s a r g u e d t h a t t h e l e v e l of d o m e s t i c d e m a n d a n d i m p o r t s
in r e c e n t m o n t h s j u s t i f i e d t h e i n t r o d u c t i o n of t h e i m p o r t d e p o s i t
s c h e m e a n d t h e i n t e n s i f i e d s q u e e z e on c r e d i t , b u t not t h e u s e of
the r e g u l a t o r , which had o r i g i n a l l y b e e n c o n s i d e r e d a s an
a l t e r n a t i v e to the tighter h i r e p u r c h a s e r e g u l a t i o n s which had
recently been introduced.
The l a t e s t economic f o r e c a s t showed
only a v e r y s m a l l f u r t h e r e x p e c t e d i n c r e a s e in t h e l e v e l of d o m e s t i c
d e m a n d o v e r the n e x t 12 m o n t h s in t h e a b s e n c e of n e w m e a s u r e s .
T h e u s e n o w of t h e r e g u l a t o r c o u l d b e j u s t i f i e d o n l y a s a m e a s u r e
t o o f f s e t t h e d e t e r i o r a t i o n in o u r b a l a n c e of p a y m e n t s c o n s e q u e n t
on d e v a l u a t i o n of t h e f r a n c a n d in o r d e r t o b o l s t e r i n t e r n a t i o n a l
confidence.
On t h e o t h e r h a n d , it w a s a r g u e d t h a t t h e m e a s u r e s
p r o p o s e d w e r e p r o b a b l y i n s u f f i c i e n t to d e f l a t e d o m e s t i c d e m a n d to
t h e l e v e l r e q u i r e d to g e t t h e e c o n o m y b a c k o n to t h e c o u r s e c h a r t e d
a t t h e t i m e of t h e B u d g e t : e v e n if t h e r e h a d b e e n n o i n t e r n a t i o n a l
m o n e t a r y d i s t u r b a n c e , it w a s doubtful w h e t h e r t h e m e a s u r e s
p r o p o s e d w e r e a d e q u a t e t o p r o v i d e the b a l a n c e of p a y m e n t s s u r p l u s
w h i c h we u r g e n t l y r e q u i r e d a n d h a d b e e n a i m i n g f o r .
Moreover,
t h e r e h a d b e e n a v e r y s u b s t a n t i a l f a l l in the s e a s o n a l l y a d j u s t e d
u n e m p l o y m e n t f i g u r e s a n d a r i s e in t h o s e f o r u n f i l l e d v a c a n c i e s
over the l a s t t h r e e m o n t h s .
There were other economic
i n d i c a t o r s which pointed to a g a t h e r i n g m o m e n t u m in the r a t e
of g r o w t h of t h e e c o n o m y , s t i m u l a t e d in l a r g e p a r t b y a h i g h
l e v e l of d o m e s t i c d e m a n d .
In p u b l i c l y p r e s e n t i n g t h e m e a s u r e s
n o w p r o p o s e d it w o u l d , in a n y e v e n t , b e n e c e s s a r y to r e l a t e t h e m
to the e c o n o m i c situation at h o m e a s well as a b r o a d .
(b)
A c t i o n to s t e m t h e c a p i t a l outflow to t h e r e s t of the S t e r l i n g
A r e a s h o u l d h a v e b e e n i n c l u d e d in t h e m e a s u r e s .
It w a s p o i n t e d
o u t t h a t , w h e r e a s o n l y a f r a c t i o n Of a r e d u c t i o n i n i n t e r n a l d e m a n d
w a s r e f l e c t e d in r e d u c e d i m p o r t s , t h e w h o l e of t h e e f f e c t of a n y
r e s t r i c t i o n o n c a p i t a l w a s r e f l e c t e d i n full i n o u r b a l a n c e of
payments.
On t h e o t h e r h a n d , i t w a s p o i n t e d out t h a t if w e
s t o p p e d t h e c a p i t a l o u t f l o w t o , s a y , A u s t r a l i a , t h e l a t t e r would
n o l o n g e r b e b o u n d by t h e B a s l e A g r e e m e n t , on w h i c h t h e f u t u r e
of s t e r l i n g d e p e n d e d .
H o w e v e r , the S t e e r i n g C o m m i t t e e o n
E c o n o m i c P o l i c y would s h o r t l y be r e v i e w i n g e c o n o m i c s t r a t e g y
a s a w h o l e a n d i n t h i s c o n t e x t t h e p r o b l e m of c a p i t a l o u t f l o w s
would be e x a m i n e d ,
(c)
T h e e x c l u s i o n of food a.nd f e e d i n g s t u f f s f r o m t h e s c o p e
of t h e i m p o r t d e p o s i t s c h e m e w a s m i s t a k e n a n d w o u l d c a u s e t h e
Government considerable embarrassment,
V/c h a d b e e n s e e k i n g
f o r s o m e t i m e to r e s t r i c t i m p o r t s of c h e e s e i n o r d e r to e a s e t h e
p o s i t i o n f o r o u r d a i r y f a r m e r s a n d i n the i n t e r e s t s of i n c r e a s e d
i m p o r t substitution it w a s highly d e s i r a b l e to extend the i m p o r t
d e p o s i t s c h e m e t o c o v e r a w i d e r a n g e of a g r i c u l t u r a l p r o d u c t s .
On t h e o t h e r h a n d , i t w a s p o i n t e d o u t t h a t the p u r p o s e of t h e
i m p o r t d e p o s i t s c h e m e w a s n o t to g i v e a d d i t i o n a l d i r e c t p r o t e c t i o n
to i n d i v i d u a l i n d u s t r i e s ; a n d if t h i s b e c a m e t h e o b v i o u s p u r p o s e it
would g r e a t l y i n c r e a s e t h e r i s k of r e t a l i a t i o n a n d of s i m i l a r
m e a s u r e s by the United States A d m i n i s t r a t i o n .
Moreover,
t h e a p p l i c a t i o n of t h e i m p o r t d e p o s i t s c h e m e t o food a n d f e e d i n g
stuffs w o u l d h a v e a s u b s t a n t i a l effect on the c o s t of food a n d
t h e r e f o r e t h e c o s t of l i v i n g .
N e v e r t h e l e s s , if t h e B r i t i s h
m a r k e t s u f f e r e d f r o m i n c r e a s e d i m p o r t s of d u m p e d o r s u b s i d i s e d
E u r o p e a n a g r i c u l t u r a l p r o d u c e , the G o v e r n m e n t should consider
whether countervailing measu r es were needed.
The p r e s e n t
s c o p e of t h e i m p o r t d e p o s i t s c h e m e c o u l d n o t b e e x t e n d e d a f t e r
i t s i n t r o d u c t i o n b e c a u s e a n y s u c h e x t e n s i o n w o u l d l e a d to i n c r e a s e d
s p e c u l a t i v e a n d a n t i c i p a t o r y i m p o r t s of c o m m o d i t i e s w h i c h s t i l l
remained outside its scope.
(d)
It w a s s u g g e s t e d t h a t t h e a n n o u n c e m e n t of t h e m e a s u r e s
s h o u l d i n d i c a t e f i r m l y t h a t t h e r e w a s no j u s t i f i c a t i o n f o r a n y
i n c r e a s e i n the p r i c e of g o o d s a l r e a d y i n the s h o p s a s a r e s u l t
of t h e i n t r o d u c t i o n of t h e i m p o r t d e p o s i t s c h e m e .
On t h e o t h e r
hand, it w a s a r g u e d that any s t a t e m e n t to this effect would
e n c o u r a g e the public to buy i m p o r t e d goods a s swiftly a s
p o s s i b l e in o r d e r to a v o i d t h e f o r t h c o m i n g i n c r e a s e s i n
prices.
T h e r e was general a g r e e m e n t that public p r e s e n t a t i o n
of t h i s a s p e c t of t h e s c h e m e s h o u l d b e u r g e n t l y c o n s i d e r e d .
T H E P R I M E MINISTER, s u m m i n g up t h e d i s c u s s i o n , said
t h a t the C a b i n e t a g r e e d t h e p r o p o s e d m e a s u r e s to b e t a k e n w h i c h
he had outlined.
T h e s e m e a s u r e s w o u l d b e a n n o u n c e d , if p o s s i b l e
b y t h e C h a n c e l l o r of t h e E x c h e q u e r to t h e H o u s e of C o m m o n s t h a t
a f t e r n o o n , a s s o o n a s t h e c o m m u n i q u e f r o m t h e G r o u p of Ten
meeting had been i s s u e d .
He would, h o w e v e r , i n f o r m the
C h a n c e l l o r of t h e C a b i n e t ' s v i e w t h a t i t s e e m e d d e s i r a b l e for h i m
t o r e m a i n i n B o n n u n t i l t h e e n d of t h e c o n f e r e n c e a n d u n t i l a g r e e r n e
on the c o m m u n i q u e had b e e n r e a c h e d .
If t h i s r e s u l t e d in d e l a y i n g
the C h a n c e l l o r s r e t u r n until after the House had adjourned, he
would d i s c u s s with the Chancellor the m o s t a p p r o p r i a t e method
of i s s u i n g a s t a t e m e n t of t h e B r i t i s h m e a s u r e s .
The Steering
C o m m i t t e e on E c o n o m i c P o l i c y w o u l d s h o r t l y b e c o n s i d e r i n g
e c o n o m i c s t r a t e g y a s a w h o l e a n d t h e p r o b l e m of c a p i t a l outflows
would be e x a m i n e d in this c o n t e x t .
T h e Chief S e c r e t a r y ,
T r e a s u r y , should a r r a n g e , in c o n s u l t a t i o n with the F i r s t
S e c r e t a r y of S t a t e , f o r o f f i c i a l s f r o m t h e i r D e p a r t m e n t s
a n d f r o m t h e B o a r d of T r a d e t o a d v i s e u r g e n t l y on p r e s e n t a t i o n
of t h e e f f e c t on p r i c e s of c o n s u m e r g o o d s of t h e i n t r o d u c t i o n of
the i m p o r t deposit s c h e m e .
M i n i s t e r s s h o u l d s e e k to a v o i d
d i s c u s s i n g publicly the p r e s e n t m o n e t a r y situation and the B r i t i s h
m e a s u r e s b e f o r e they had b r i e f i n g m a t e r i a l which w a s being
p r e p a r e d by the T r e a s u r y .
If, h o w e v e r , d i s c u s s i o n of t h e s e
t o p i c s could not be avoided b e f o r e official b r i e f i n g w a s a v a i l a b l e ,
t h e M i n i s t e r s c o n c e r n e d s h o u l d c l e a r the l i n e t h e y p r o p o s e d to t a k e
w i t h t h e C h i e f S e c r e t a r y , T r e a s u r y , and t h e P a y m a s t e r G e n e r a l ,
The Cabinet ­
(l)
A p p r o v e d the e c o n o m i c m e a s u r e s which the P r i m e M i n i s t e r h a d o u t l i n e d to t h e m . (2)
T o o k n o t e , w i t h a p p r o v a l , of t h e s u m m i n g u p of t h e i r d i s c u s s i o n by the P r i m e M i n i s t e r . (3)
I n v i t e d t h e M i n i s t e r of P o v / e r to e x a m i n e u r g e n t l y the
p o s s i b i l i t y of w i t h d r a w i n g t h e p r e s e n t S u e z s u r c h a r g e
s o a s to o f f s e t , to s o m e e x t e n t , t h e i n c r e a s e i n the
p r i c e of p e t r o l w h i c h w o u l d r e s u l t f r o m the 10 p e r
c e n t s u r c h a r g e a p p l i e d by t h e r e g u l a t o r ,
(4)
Invited the Chief S e c r e t a r y , T r e a s u r y , i n c o n s u l t a t i o n
w i t h the F i r s t S e c r e t a r y of S t a t e , to m a k e a r r a n g e ­
m e n t s f o r o f f i c i a l s to a d v i s e u r g e n t l y o n p u b l i c
p r e s e n t a t i o n of the e f f e c t on p r i c e s of c o n s u m e r
g o o d s of t h e i n t r o d u c t i o n of t h e i m p o r t d e p o s i t s c h e m e .
C a b i n e t O f f i c e , S . W , 1,
22nd N o v e m b e r ,
1968
The circulation of this paper has been strictly limited. It is issued for the personal use oL&ftwfc./?!^..^. k-o-2*. TOP
SECRET
CABINET
Copy N o .
.3
CONFIDENTIAL, ANNEX
CC(68) 48th C o n c l u s i o n s
T u e s d ^ y ^ ^ b j ^ N j ^ j r i b e r ^ ^ ^ 6 8 ^ J t J J ^ j^oon^
TERNATIONAL
ONETARY
JATION
eviou s
:erence:
(68) 47th
^elusions,
pute 1
pnfidential
i*x))
T H E C H A N C E L L O R O F T H E E X C H E Q U E R s a i d t h a t in
the p r e v i o u s w e e k the i n t e r n a t i o n a l m o n e t a r y s y s t e m had b e e n
subjected to heavy s t r a i n s .
C o n d i t i o n s in t h e f o r e i g n e x c h a n g e
m a r k e t s w e r e s t i l l u n c e r t a i n t h o u g h t h e r e a c t i o n in t h e l a s t
twenty-four h o u r s had b e e n r a t h e r b e t t e r than m i g h t have b e e n
expected.
He was m o s t grateful to his c o l l e a g u e s for t h e i r
r e a d i n e s s t o e n d o r s e in h i s a b s e n c e t h e d o m e s t i c e c o n o m i c
m e a s u r e s w h i c h h e h a d a n n o u n c e d on 22nd N o v e m b e r w i t h o u t
w h i c h t h e p r e s s u r e on s t e r l i n g m i g h t h a v e b e e n v e r y s e v e r e .
In t h e l i g h t of t h e d i s c u s s i o n s in t h e G r o u p of T e n at B o n n t h e
F r e n c h G o v e r n m e n t s d e c i s i o n to m a i n t a i n the e x t e r n a l value
of t h e f r a n c w a s a s u r p r i s i n g o n e .
The F r e n c h F i n a n c e
M i n i s t e r h a d r e s e r v e d h i s G o v e r n m e n t s p o s i t i o n a t the
c o n f e r e n c e ; a n d t h e r e w a s n o q u e s t i o n of the $2 b i l l i o n i n t e r ­
n a t i o n a l c r e d i t b e i n g t i e d t o a d e v a l u a t i o n of t h e f r a n c , w h i c h
the A m e r i c a n and G e r m a n G o v e r n m e n t s had wanted to avoid.
N e v e r t h e l e s s t h e c o n f e r e n c e h a d s p e n t a good d e a l of t i m e
d i s c u s s i n g t h e p r e c i s e a m o u n t b y w h i c h t h e f r a n c c o u l d be
devalued without unduly d i s t u r b i n g the i n t e r n a t i o n a l m o n e t a r y
s i t u a t i o n ; a n d t h e v i e w p u t f o r w a r d by t h e M a n a g i n g D i r e c t o r
of t h e I n t e r n a t i o n a l M o n e t a r y F u n d t h a t a d e v a l u a t i o n of
1 1 . 11 p e r c e n t w o u l d b e t o l e r a b l e h a d b e e n g e n e r a l l y a c c e p t e d .
We w o u l d h a v e l i k e d t h e G e r m a n s t o r e v a l u e t h e m a r k , t h o u g h
it m u s t b e r e c o g n i s e d t h a t t h i s w o u l d h a v e b r o u g h t g r e a t p r o f i t
t o t h e s p e c u l a t o r s who h a d c a u s e d t h e c r i s i s .
W h e n it b e c a m e
c l e a r t h a t t h e y w e r e n o t p r e p a r e d t o r e v a l u e we h a d p r e s s e d t h e m
h a r d , though u n s u c c e s s f u l l y , t o m a k e f u r t h e r c h a n g e s in t h e i r
border taxes.
T h e final o u t c o m e would h a v e a m i x e d e f f e c t
on s t e r l i n g .
A d e v a l u a t i o n of t h e f r a n c of a r o u n d 10 p e r c e n t
would h a v e c o s t u s a b o u t £ 8 0 m i l l i o n on t h e b a l a n c e of p a y m e n t s
w h i c h w e s h o u l d n o t now h a v e t o m e e t : b u t t o t h e e x t e n t t h a t
d o u b t s r e m a i n e d a b o u t the s t a b i l i t y of the c u r r e n t p a r i t i e s
s t e r l i n g would s t i l l b e s u b j e c t t o p r e s s u r e .
It w a s t h e r e f o r e
v e r y m u c h t o our i n t e r e s t that the decisions taken by the F r e n c h
and G e r m a n G o v e r n m e n t s in the p r e v i o u s w e e k should be
maintained.
In t h e l o n g e r t e r m it would b e d e s i r a b l e t o i m p o r t
g r e a t e r f l e x i b i l i t y i n t o the i n t e r n a t i o n a l m o n e t a r y s y s t e m .
It
w a s , h o w e v e r , h a r d to see how an i n t e r n a t i o n a l c o n f e r e n c e could
be arranged to consider l o n g - t e r m monetary problems until
the new United S t a t e s A d m i n i s t r a t i o n was i n s t a l l e d ; and a
B r i t i s h initiative t o this end m i g h t well be c o u n t e r - p r o d u c t i v e .
H e i n t e n d e d , h o w e v e r , t o c o n s u l t c l o s e l y on t h e s e m a t t e r s w i t h
the new S e c r e t a r y to the United States T r e a s u r y when he was
appointed.
-1.
TOP SECRET
T h e f o l l o w i n g p o i n t s w e r e m a d e in d i s c u s s i o n ­
(a)
The G e r m a n Government had been warned through their
A m b a s s a d o r i n L o n d o n t h a t if a s a r e s u l t of t h e i r f a i l u r e to r e v a l u e
t h e m a r k t h e B o n n c o n f e r e n c e f a i l e d and w e w e r e f o r c e d t o a l l o w
s t e r l i n g t o f l o a t , we should not be able to m e e t the r e s u l t i n g
i n c r e a s e i n t h e s t e r l i n g c o s t of m a i n t a i n i n g t r o o p s i n G e r m a n y .
It m u s t h o w e v e r b e r e c o g n i s e d t h a t a r e v a u l a t i o n of t h e m a r k
w o u l d h a v e l e d t o a s i m i l a r i n c r e a s e a n d it w a s i m p o r t a n t t h a t
t h e l i n e we t o o k w i t h t h e G e r m a n G o v e r n m e n t in m o n e t a r y m a t t e r s
s h o u l d b e c o n s i s t e n t w i t h o u r a t t i t u d e in N A T O .
S i m i l a r l y we
should c o n s i d e r whether t h e r e was scope for c l o s e r c o - o p e r a t i o n
with E u r o p e on m o n e t a r y m a t t e r s t o c o m p l e m e n t our efforts to
s t r e n g t h e n c o - o p e r a t i o n on defence a n d f o r e i g n policy.
(b)
The international m o n e t a r y situation was likely to r e m a i n
uncertain for s e v e r a l m o n t h s .
It m i g h t b e u s e f u l t o a r r a n g e
r e g u l a r m e e t i n g s of t h e G r o u p of T e n t o s u p p l e m e n t the m o n t h l y
m e e t i n g s of t h e c e n t r a l b a n k e r s a t B a s l e ,
The t i m i n g a n d
p r e s e n t a t i o n of a n y s u c h m e e t i n g s w o u l d , h o w e v e r , n e e d t o b e
c o n s i d e r e d c a r e f u l l y in o r d e r to avoid provoking f u r t h e r s p e c u l a ­
tion in the f o r e i g n e x c h a n g e m a r k e t s .
The Cabinet T o o k n o t e of t h e s t a t e m e n t b y t h e C h a n c e l l o r of
the E x c h e q u e r .
C a b i n e t O f f i c e , S. W . 1.
26th N o v e m b e r ,
1968
CC(66) 32nd C o n c l u s i o n s ,
Minute 2
R e f o r m of the House of L o r d s
(CA)
CC(66) 37th C o n c l u s i o n s
The E c o n o m i c Situation
(CA)
CC(66) 4 1 s t C o n c l u s i o n s ,
Minute 4
The P r i m e M i n i s t e r s Visit
to W a s h i n g t o n
(CA)
CC(66) 42nd C o n c l u s i o n s ,
Minute 3
E c o n o m i c Situation
(CA)
CC(66) 50th C o n c l u s i o n s
Rhodesia:
(MCR)
The Use of F o r c e
IS
The circulation of this paper has been strictly limited.
It is issued for the personal use ol..^*v^..4d
TOP SECRET
Copy No
1o
J-..Q
CABINET
C O N F I D E N T I A L ANNEX ­
CC(66) 32nd C o n c l u s i o n s , M i n u t e 2
T u e s d a y , 28th J u n e , 1966 a t 10. 30 a. ra.
REFORM OF
THE HOUSE
OF LORDS
The Cabinet c o n s i d e r e d a r i e m o r a n d u i n by the
L o r d C h a n c e l l o r a n d the L o r d P r i v y Seal (C(66) 87) on t h e
r e f o r m of the H o u s e of L o r d s .
T H E LORD CHANCELLOR r e c a l l e d that the G o v e r n m e n t
had u n d e r t a k e n in t h e i r E l e c t i o n M a n i f e s t o to i n t r o d u c e
l e g i s l a t i o n to s a f e g u a r d m e a s u r e s a p p r o v e d by the H o u s e of
C o m m o n s f r o m d e l a y o r defeat i n t h e House of L o r d s .
It
would b e i m p o r t a n t to c o n s i d e r t h e content and t i m i n g of t h i s
l e g i s l a t i o n e a r l y in the l i f e t i m e of t h e P a r l i a m e n t ; and a
f o r t h c o m i n g debate in t h e House of L o r d s on a Motion by
L o r d A l p o r t for the a p p o i n t m e n t of a Select C o m m i t t e e t o
c o n s i d e r how, by c h a n g e s in its p r o c e d u r e s or by o t h e r
m e a n s within i t s p o v / e r s , the H o u s e of L o r d s could m a k e a m o r e
s u b s t a n t i a l c o n t r i b u t i o n to t h e efficient w o r k i n g of P a r l i a m e n t a r y
g o v e r n m e n t , w o u l d afford an o c c a s i o n for a d e b a t e which m i g h t
r a n g e o v e r wider i s s u e s on which it was d e s i r a b l e t h a t the
G o v e r n m e n t s p o k e s m a n in t h e H o u s e of L o r d s should b e a w a r e
^
of t h e C a b i n e t ' s v i e w s .
The m a j o r i s s u e s w e r e t h o s e of t h e p o w e r s of t h e H o u s e
T h e H o u s e of L o r d s h a d p o w e r ,
of L o r d s and i t s c o m p o s i t i o n .
not s u b j e c t to the P a r l i a m e n t A c t , t o d e c l i n e t o a p p r o v e an O r d e r
or Ste.tutory I n s t r u m e n t subject t o a f f i r m a t i v e p r o c e d u r e , or to
d i s a p p r o v e one s u b j e c t t o n e g a t i v e p r o c e d u r e , and p o w e r u n d e r
the P a r l i a m e n t A c t t o d e l a y the p a s s a g e of B i l l s for one S e s s i o n .
A B i l l r e j e c t e d by t h e H o u s e of L o r d s could be p a s s e d u n d e r the
A c t if t h e i d e n t i c a l B i i l w a s r e i n t r o d u c e d in the following
S e s s i o n , b u t at l e a s t a y e a r m u s t e l a p s e b e t w e e n the Second
R e a d i n g of the f i r s t B i l l in t h e H o u s e of C o m m o n s and t h e
p a s s i n g by that H o u s e of t h e Second Bill.
T h e s e p o w e r s could
b e u s e a to*e*tBE*SII G o v e r n m e n t p o l i c y i n the l a t t e r y e a r s of a
P a r l i a m e n t ; and t h e G o v e r n m e n t s f r e e d o m to m a n a g e p u b l i c
b u s i n e s s m i g h t a l s o be j e o p a r d i s e d a s a r e s u l t of the a b s e n c e
of f i r m r u l e s of p r o c e d u r e and of any m e a n s of c o n t r o l l i n g
It w a s p r o p o s e d t h a t a
b a c k - b e n c h and c r o s s - b e n c h p e e r s .
B i l l should be i n t r o d u c e d in the 1967-68 S e s s i o n to p r o v i d e
t h a t d e l e g a t e d l e g i s l a t i o n should b e subject to a f f i r m a t i v e or
n e g a t i v e p r o c e d u r e only in t h e H o u s e of C o m m o n s ; t h a t a
G o v e r n m e n t B i l l m i g h t on a r e s o l u t i o n of the House of C o m m o n s
r e c e i v e R o y a l A s s e n t t h r e e m o n t h s a f t e r it had b e e n s e n t to t h e
H o u s e of L o r d s , with s u c h L o r d s ' a m e n d m e n t s a s the H o u s e of
C o m m o n s m i g h t a c c e p t ; t h a t B i l l s i n t r o d u c e d in the H o u s e of
L o r d s should be p a s s e d within t h r e e m o n t h s ; and t h a t C o m m o n s
-1­
a m e n d m e n t s should not be subject to the a g r e e m e n t of the
H o u s e of L o r d s .
Once the p o w e r s of the House of L o r d s
w e r e r e d u c e d , the p r o b l e m of i t s c o m p o s i t i o n b e c a m e e a s i e r .
A p o s s i b l e c o u r s e would be to a d o p t a s y s t e m of voting w r i t s
which would e n a b l e any p e e r to a t t e n d and s p e a k , but only
t h o s e holding voting w r i t s to v o t e .
The w r i t s m i g h t b e i s s u e d
to a l l p e e r s of f i r s t c r e a t i o n and life p e e r s , and p o s s i b l y t o
some outstanding hereditary p e e r s .
T h i s would give the
G o v e r n m e n t a good c h a n c e of s e c u r i n g a m a j o r i t y in divisions
in n o r m a l c i r c u m s t a n c e s , though not in a l l d i v i s i o n s .
There
w e r e , h o w e v e r , a l t e r n a t i v e p o s s i b i l i t i e s which should be
examined.
It would be convenient to r e m i t to a C a b i n e t
C o m m i t t e e for c o n s i d e r a t i o n the p r o b l e m s of the c o m p o s i t i o n
of t h e House and r e l a t e d m a t t e r s , i n c l u d i n g how far p r o p o s a l s
could be i m p l e m e n t e d by a m e n d m e n t s in the Standing O r d e r s
of t h e House and the q u e s t i o n of the t i m i n g of l e g i s l a t i o n .
In d i s c u s s i o n it w a s g e n e r a l l y a g r e e d that l e g i s l a t i o n
should be i n t r o d u c e d to d e p r i v e the H o u s e of L o r d s of i t s
p o w e r to f r u s t r a t e s u b o r d i n a t e l e g i s l a t i o n and to delay B i l l s .
As t o i t s t i m i n g , it was pointed out t h a t t h e r e was a good
p r o s p e c t that the Opposition in the H o u s e of L o r d s would
c o - o p e r a t e in s e c u r i n g the p a s s a g e of t h e G o v e r n m e n t B i l l s
r e q u i r e d b e f o r e the S u m m e r R e c e s s , and it was not c e r t a i n
t h a t t h e H o u s e would r e j e c t or s u b s t a n t i a l l y a m e n d the I r o n
and S t e e l B i l l and the Land C o m m i s s i o n B i l l ; but t h i s
c o - o p e r a t i o n m i g h t be p r e j u d i c e d if it w e r e known t h a t the
G o v e r n m e n t intended to i n t r o d u c e l e g i s l a t i o n t o c u r t a i l the
p o w e r s of the H o u s e in the 1967-6G S e s s i o n .
If the H o u s e of
L o r d s a t t e m p t e d t o i m p e d e the p a s s a g e of t h e I r o n and S t e e l
o r L a n d C o m m i s s i o n B i l l s , the G o v e r n m e n t should i m m e d i a t e l y
a n n o u n c e i t s i n t e n t i o n to l e g i s l a t e t o r e d u c e t h e i r p o v / e r s ; if
they did not, h o w e v e r , it was a r g u a b l e t h a t it would not be
n e c e s s a r y to l e g i s l a t e in the 1 9 6 7 - 6 8 S e s s i o n , when t h e r e
would be c o n s i d e r a b l e p r e s s u r e on t h e P a r l i a m e n t a r y t i m e t a b l e .
On t h e o t h e r h a n d , it m i g h t be d e s i r a b l e to l e g i s l a t e e a r l y in
the P a r l i a m e n t a s a m e a n s of d e m o n s t r a t i n g the G o v e r n m e n t s
i n t e n t i o n t o c a r r y t h r o u g h r a d i c a l r e f o r m s and of avoiding t h e
p o s s i b i l i t y of e m b a r r a s s m e n t if, t o w a r d s the end of the
P a r l i a m e n t , the G o v e r n m e n t found it n e c e s s a r y to i n t r o d u c e
u r g e n t and u n p o p u l a r e c o n o m i c m e a s u r e s which the H o u s e of
L o r d s m i g h t s e e a d v a n t a g e in r e j e c t i n g .
A Cabinet C o m m i t t e e
should t h e r e f o r e c o n s i d e r the d e t a i l s of l e g i s l a t i o n on t h e
p o w e r s of the H o u s e of L o r d s and a r r a n g e for a Bill to b e m a d e
ready.
T h e t i m i n g of i t s i n t r o d u c t i o n should b e c o n s i d e r e d in
t h e l i g h t of the p r o g r e s s m a d e with t h e c u r r e n t S e s s i o n ' c
l e g i s l a t i o n , and in the m e a n t i m e no i n d i c a t i o n of the
G o v e r n m e n t s i n t e n t i o n s should be given.
On the q u e s t i o n of the c o m p o s i t i o n of the House of
L o r d s , it was s u g g e s t e d t h a t c o n s i d e r a t i o n of the c o m p o s i t i o n
of the H o u s e could not be d i v o r c e d f r o m t h a t of i t s p o w e r s .
T h e L a b o u r P a r t y had a.dhered in p r i n c i p l e t o a b i - c a m e r a l
s y s t e m of g o v e r n m e n t , and it was a r g u a b l e t h a t , if a Second
Cham-ber was t o b e r e t a i n e d , it could not continue to be b a s e d
on h e r e d i t a r y m e m b e r s h i p , but should be r e f o r m e d on a b a s i s
-2­
a p p r o p r i a t e to i t s m o d e r n f u n c t i o n s .
On the o t h e r h a n d , it
w a s a r g u e d t h a t , once the p o w e r s of the H o u s e of Lc '.a w e r e
c u r t a i l e d , t h e c o n t r o v e r s i a l q u e s t i o n of its c o m p o : . ' . jn would
b e c o m e l e s s i m p o r t a n t , and on b a l a n c e it s e e m e d p r e f e r a b l e
not t o r e o p e n d i s c u s s i o n of it.
The C a b i n e t then c o n s i d e r e d the attitude which the
G o v e r n m e n t s p o k e s m a n should a d o p t in the d e b a t e on
L o r d A l p o r t ' s Motion.
It was s u g g e s t e d that a S e l e c t
C o m m i t t e e , which m i g h t be c o m p o s e d of four L a b o u r , four
C o n s e r v a t i v e , one L i b e r a l and t h r e e c r o s s - b e n c h p e e r s ,
m i g h t well h a v e a m a j o r i t y of m e n b e r s i n t e r e s t e d in r e f o r m
and m i g h t be p e r s u a d e d to m a k e r e c o m m e n d a t i o n s for the '
v o l u n t a r y r e f o r m of the House of L o r d s , not only in m a t t e r s
of p r o c e d u r e , but a l s o of c o m p o s i t i o n and even of p o w e r s .
It w a s a r g u a b l e t h a t it v/as within the c o m p e t e n c e of t h e H o u s e
of L o r d s t o d e t e r m i n e i t s own c o m p o s i t i o n by R e s o l u t i o n , and
if it w a s willing t o r e f o r m itself on t h e s e points it would b e
e m b a r r a s s i n g for the G o v e r n m e n t to a p p e a r to be opposed to
its doing s o .
On t h e o t h e r h a n d , viiile t h e r e was no o b j e c t i o n
to a S e l e c t C o m m i t t e to c o n s i d e r p r o c e d u r e , c o n s t i t u t i o n a l
c h a n g e s going beyond t h i s w e r e p r o p e r l y a m a t t e r for b o t h
H o u s e s of P a r l i a m e n t .
THE P R I M E M I N I S T E R , s u m m i n g up the d i s c u s s i o n ,
said t h a t the C a b i n e t w e r e a g r e e d t h a t l e g i s l a t i o n should b e
i n t r o d u c e d at a c o n v e n i e n t j u n c t u r e t o c u r t a i l the p o w e r s of t h e
H o u s e of L o r d s on the l i n e s p r o p o s e d in C(66) 87.
They w e r e
d i s p o s e d to t h i n k t h a t the l e g i s l a t i o n should be u n d e r t a k e n in the
1 9 6 7 - 6 8 S e s s i o n , b u t f u r t h e r c o n s i d e r a t i o n should be given to
its t i m i n g in the light of the m a n n e r in which the H o u s e of L o r d s
d e a l t with i m p o r t a n t G o v e r n m e n t m e a s u r e s in the p r e s e n t
Session.
In the m e a n t i m e no i n d i c a t i o n should be given t h a t
the G o v e r n m e n t w e r e c o n t e m p l a t i n g the i n t r o d u c t i o n of a B i l l
in t h e 1967-68 S e s s i o n .
He would a r r a n g e for the appoint ­
m e n t of a C o m m i t t e e of M i n i s t e r s to d r a w up d e t a i l e d p r o p o s a l s
for a B i l l , and to a r r a n g e for it t o be held in r e a d i n e s s .
The
C a b i n e t c o n s i d e r e d , on b a l a n c e , t h a t the c o n t r o v e r s i a l q u e s t i o n
of t h e c o m p o s i t i o n of the House of L o r d s should not be r e o p e n e d
in t h i s c o n n e c t i o n .
In the f o r t h c o m i n g d e b a t e on L o r d A l p o r t ' s
M o t i o n , the G o v e r n m e n t s p o k e s m a n should offer no objection
t o t h e a p p o i n t m e n t of a S e l e c t C o m m i t t e e on P r o c e d u r e , b u t ,
if t h e q u e s t i o n of p o w e r s w e r e r a i s e d , he should confine
h i m s e l f to a s t a t e m e n t of t h e p o l i c y t o which the G o v e r n m e n t
w e r e a l r e a d y p l e d g e d of i n t r o d u c i n g l e g i s l a t i o n to e n s u r e t h a t
m e a s u r e s a p p r o v e d by the H o u s e of C o m m o n s w e r e not d e l a y e d
or d e f e a t e d in the H o u s e of L o r d s .
He should, if n e c e s s a r y ,
i n d i c a t e the G o v e r n m e n t ^ view t h a t t h e c o m p o s i t i o n of the
H o u s e of L o r d s w a s a c o n s t i t u t i o n a l m a t t e r which should not
b e d e a l t with by t h a t H o u s e a l o n e .
-3­
The C a b i n e t ­
(1)
A g r e e d t h a t l e g i s l a t i o n should be i n t r o d u c e d a.t
a c o n v e n i e n t t i m e to a b o l i s h the p o w e r s of t h e
H o u s e of L o r d s to p r e v e n t or delay l e g i s l a t i o n
b u t n o t to a l t e r t h e c o m p o s i t i o n of the H o u s e .
(2)
Took note t h a t the P r i m e M i n i s t e r , would a r r a n g e
for t h e c o n s t i t u t i o n of a C o m m i t t e e of M i n i s t e r s
to c o n s i d e r the d e t a i l s of the l e g i s l a t i o n .
(3)
Invited the L o r d P r i v y S e a l to be guided, in
r e p l y i n g t o the d e b a t e on L o r d A l p o r t ' s
M o t i o n , by the P r i m e M i n i s t e r ' s s u m m i n g upy
' (4)
A g r e e d to c o n s i d e r the t i m i n g of the i n t r o d u c t i o n
of the p r o p o s e d Bill in t h e light of the p r o g r e s s
m a d e with G o v e r n m e n t l e g i s l a t i o n in the c u r r e n t
Session,
C a b i n e t Office, S. W. 1.
28th J u n e , 1966
-4­
The circulation of this paper has been strictly limited. It is issued for the personal use o f . . . $ . * r * ^ . . v ( ^ r - * - ^
T O P
M.c.£
SECRET
Copy No..
CABINET
C O N F I D E N T I A L ANNEX­
CC(66) 37th C o n c l u s i o n s
T u e s d a y , 19th J u l y , 1966 at 5. 00 p. m .
THE ECONOMIC
SITUATION
(Previous
Reference:
CC(66) 36th
Conclusions,
Minute 3)
The C a b i n e t c o n s i d e r e d Notes by the S e c r e t a r y of the
C a b i n e t (C(66) 1 0 6 , 107, 1 0 3 , 109, 110, 1 1 1 , 112, 113, 114
and 115), c o v e r i n g n e m o r a n d a , p r e p a r e d by o f f i c i a l s , on
m e a s u r e s which m i g h t be t a k e n to d e a l with t h e e c o n o m i c
situation.
T H E H E U M E MINISTER said that the s i t u a t i o n with
which the Govern^-ient w e r e faced was due to the p r e s s u r e on
s t e r l i n g which had d e v e l o p e d o v e r the p a s t t e n d a y s .
This was
l a r g e l y i r r a t i o n a l ; and a n u m b e r of f a c t o r s had c o n t r i b u t e d to
it.
The s e a m e n ' s s t r i k e had h a d an a d v e r s e effect on
confidence i n s t e r l i n g ; and t h i s had b e e n i n c r e a s e d when the
l o s s e s in the r e s e r v e s for the m o n t h of June, which w e r e
l a r g e l y due t o the s t r i k e , had b e e n p u b l i s h e d .
The intensifies­
tion of t h e w a r i n V i e t n a m had a l s o affected c o n f i d e n c e ; and
r e p o r t s following t h e v i s i t t o London by the F r e n c h P r i m e
M i n i s t e r and F o r e i g n M i n i s t e r had s u g g e s t e d that in t h e i r view
the United K i n g d o m G o v e r n m e n t should c o n s i d e r d e v a l u a t i o n . s.
T h e r e h a d b e e n a g e n e r a l b r e a k d o w n of confidence in s t e r l i n g ;
and the r a t e of d e t e r i o r a t i o n w a s now such t h a t a s t a t e m e n t of
the G o v e r n m e n t ^ policy m u 3 t b e m a d e without delay and could
rest wait u n t i l a f t e r hie f o r t h c o m i n g v i s i t to Washington.
The
p a p e r s now b e f o r e the C a b i n e t had b e e n p r e p a r e d by officials in
the light of t h e C a b i n e t ' s d i s c u s s i o n on 14th J u l y and c o v e r e d the
v a r i o u s m e a s u r e s which w e r e o p e n to the G o v e r n m e n t .
These
i n c l u d e d a s h a r p r e d u c t i o n in p r i v a t e c o n s u m p t i o n t h r o u g h the
u s e of h i r e p u r c h a s e r e s t r i c t i o n s and. the e c o n o m i c r e g u l a t o r ;
r e s t r i c t i o n s on c o n s t r u c t i o n both in the p r i v a t e and public
s e c t o r s ; and r e d u c t i o n s in i n v e s t m e n t , p a r t i c u l a r l y by the
nationalised industries.
They did not s u g g e s t significant
r e d u c t i o n s in c u r r e n t G o v e r n m e n t e x p e n d i t u r e ; and the
p r i o r i t y p r o g r a m m e s of c a p i t a l e x p e n d i t u r e f o r h o u s i n g ,
h o s p i t a l s and s c h o o l s would be l a r g e l y e x e m p t .
The m e a s u r e s
which w e r e s e l e c t e d and the r a t e at which they w e r e applied
would affect t h e s i z e and s e v e r i t y of the d i s i n f l a t i o n a r y i m p e t u s .
The m e m o r a n d a a l s o c o v e r e d r e d u c t i o n s in o v e r s e a e x p e n d i t u r e ,
both g o v e r n m e n t a l and p r i v a t e ; and they included s t u d i e s of
i m p o r t q u o t a s and e x p o r t i n c e n t i v e s a s well a s of a p o s s i b l e
s t a n d s t i l l on p r i c e s and i n c o m e s .
-1­
(972*141
It h a d b e e n s u g g e s t e d t h a t d e v a l u a t i o n m i g h t b e an
a l t e r n a t i v e to d i s i n f l a t i o n ; b u t , even if s t e r l i n g w e r e d e v a l u e d ,
it would r e m a i n no l e s s e s s e n t i a l to f r e e r e s o u r c e s for e x p o r t s
and for i m p o r t s u b s t i t u t i o n .
It could be a r g u e d t h a t t h e d i s i n f l a ­
t i o n a r y m e a s u r e s should b e c o m b i n e d with i m m e d i a t e devaluation
in o r d e r to p r o d u c e t h e n e c e s s a r y shift in the e c o n o m y and to
p r o v i d e a d i r e c t i n c e n t i v e to e x p o r t s .
But t h e r e w e r e s e r i o u s
objections t o d e v a l u a t i o n , c e r t a i n l y at t h i s s t a g e , w h e t h e r it took
the f o r m of a c h a n g e t o a new fixed r a t e or the adoption of a
floating r a t e .
In the f i r s t c a s e other c o u n t r i e s m i g h t v/ell follow
our e x a m p l e and we should v e r y s h o r t l y find o u r s e l v e s in the s a m e
r e l a t i v e p o s i t i o n , h a v i n g m e a n w h i l e i n c u r r e d the odium of d i s ­
l o c a t i n g world t r a d e .
.0evaluation to a fixed r a t e would a l s o shake
the confidence of the holdei-s of s t e r l i n g b a l a n c e s ; and, if t h e r e
w e r e a g e n e r a l :move to -withdraw t h e s e b a l a n c e s , a f u r t h e r
d e v a l u a t i o n m i g h t w e l l b e i n e v i t a b l e within a s h o r t p e r i o d .
The
adoption of a floating r a t e m i g h t be l e s s open to o b j e c t i o n ,
p a r t i c u l a r l y if t h i s s t e p was t a k e n when s t e r l i n g was in a s t r o n g
p o s i t i o n and the r a t e would t h e r e f o r e tend to r i c e r a t h e r than to
fall.
The a d o p t i o n of a floating r a t e could, h o v / e v e r , e n c o u r a g e
o t h e r c o u n t r i e s to a c t s i m i l a r l y when faced with e c o n o m i c
d i f f i c u l t i e s ; and t h i s could e n g e n d e r a condition of u n c e r t a i n t y
which would affect w o r l d t r a d e .
T h e need for s t a b i l i t y of e x p o r t
p r i c e s had b e e n r e g a r d e d in the p a s t a s a d e c i s i v e a r g u m e n t
a g a i n s t the a d o p t i o n of a floating r a t e for s t e r l i n g ; and this
a r g u m e n t s t i l l had f o r c e today.
It did not follow that d e v a l u a t i o n
need be r u l e d out for a l l t i m e ; if the d i s i n f l a t i o n a r y m e a s u r e s
which the G o v e r n m e n t m i g h t now adopt p r o v e d i n e f f e c t i v e , t h e r e
m i g h t be no a l t e r n a t i v e but to d e v a l u e .
If, h o w e v e r , t h e s e
m e a s u r e s p r o v e d r e a s o n a b l y e f f e c t i v e , the p o s i t i o n m i g h t be
e x p e c t e d to i m p r o v e c o n s i d e r a b l y ; and the s i t u a t i o n could then
be r e v i e w e d a g a i n after h i s f o r t h c o m i n g v i s i t to Washington.
The United S t a t e s G o v e r n m e n t would p r o b a b l y be s t r o n g l y opposed
to a u n i l a t e r a l d e v a l u a t i o n by t h e United Kingdom^ p a r t i c u l a r l y
b e f o r e t h e i r own e l e c t i o n s in N o v e m b e r , since t h e y m i g h t then be
f o r c e d to d e v a l u e the d o l l a r and this would c o m p e l t h e m to
i n c r e a s e the p r i c e of gold, to which t h e r e w e r e s t r o n g e m o t i o n a l
objections i n the United S t a t e s , T h e r e was oo::ne e v i d e n c e ,
h o w e v e r , t h a t , owing t o the o b s t r u c t i o n of the E u r o p e a n c o u n t r i e s ,
p a r t i c u l a r l y F r a n c e , t o c u r r e n t p r o p o s a l s for i n c r e a s i n g world
l i q u i d i t y , t h e United S t a t e s G o v e r n m e n t w e r e now p r e p a r e d to
c o n s i d e r new m e a s u r e s for this p u r p o s e , p o s s i b l y including a
link b e t w e e n s t e r l i n g and the d o l l a r and the adoption of a
floating r a t e for t h e two c u r r e n c i e s .
T h i s c o n c e p t had m a n y
a t t r a c t i o n s , since it would c o n s t i t u t e a joint o p e r a t i o n with the
United S t a t e s , which could b e l a u n c h e d f r o m s t r e n g t h r a t h e r
than weakness.
If t h e c h o i c e lay simply b e t w e e n d e v a l u a t i o n and the
m a i n t e n a n c e of full e m p l o y m e n t , he would p r e f e r to d e v a l u e .
In f a c t , h o w e v e r , i t did not a p p e a r t h a t we had r e a c h e d the point
at which d e v a l u a t i o n w a s i n e v i t a b l e .
M o r e o v e r , while the
s t u d i e s by officials s u g g e s t e d t h a t the d i s i n f l a t i o n a r y m e a s u r e s
now p r o p o s e d would l e a d to s o m e i n c r e a s e in u n e m p l o y m e n t ,
t h i s could p r o v i d e a p o s i t i v e m e a n s of c o r r e c t i n g the b a l a n c e of
-2TOP
SECRET
the e c o n o m y and d i r e c t i n g the n a t i o n a l effort into e c o n o m i c a l l y
m o r e p r o d u c t i v e and s o c i a l l y m o r e v a l u a b l e c h a n n e l s .
Moreover,
if t h e s e m e a s u r e s led t o a h i g h e r l e v e l of u n e m p l o y m e n t than h a d
b e e n e s t i m a t e d , it would be open to the G o v e r n m e n t to c o r r e c t
t h i s t e n d e n c y by m e a s u r e s of r e f l a t i o n .
F i n a l l y , public opinion
would w e l c o m e f i r m a c t i o n ; and the m e a s u r e s now adopted m u s t
c a r r y c o n v i c t i o n and d e m o n s t r a t e the G o v e r n m e n t s d e t e r m i n a t i o n
to d e a l with the s i t u a t i o n .
T h e y should i n c l u d e a s u b s t a n t i a l
r e d u c t i o n in i n t e r n a l d e m a n d , which m u s t b e b a l a n c e d by a
r e d u c t i o n of e x p e n d i t u r e o v e r s e a s , both g o v e r n m e n t a l and p r i v a t e .
In o r d e r to be c r e d i b l e t h e m e a s u r e s should i n c l u d e a c t i o n to
s t a b i l i s e p r i c e s and i n c o m e s .
T h e C a b i n e t should now d i s c u s s the G o v e r n m e n t s b a s i c
e c o n o m i c s t r a t e g y and should t h e n c o n s i d e r in m o r e d e t a i l the
m e m o r a n d a b e f o r e t h e m and the v a r i o u s d i s i n f l a t i o n a r y m e a s u r e s
which m i g h t be a d o p t e d .
All m e a s u r e s , i n c l u d i n g d e v a l u a t i o n ,
would b e open t o e x a m i n a t i o n ; but it was of the u t m o s t i m p o r t a n c e
t h a t c o m p l e t e s e c r e c y about t h e c o u r s e of t h e d i s c u s s i o n should be
maintained.
In d i s c u s s i o n it w a s u r g e d that a change in the G o v e r n m e n t s
fundamental economic policies was needed.
The p r o p o s a l s
b e f o r e the C a b i n e t contained no new f e a t u r e s ; s.nd this would
By
b e c o m e a p p a r e n t in any p u b l i c istatwicrot be.De4 upon it.
c o n t r a s t d e v a l u a t i o n would add a new d i m e n s i o n to e c o n o m i c
p o l i c y , which would give the G o v e r n m e n t a w i d e r r a n g e of
choice of o b j e c t i v e s .
The m e a s u r e s r e q u i r e d t o support a
floating r a t e for s t e r l i n g would not b e , in kind, d i f f e r e n t f r o m
t h o s e n e e d e d to defend t h e p r e s e n t r a t e , the e s s e n t i a l r e q u i r e ­
m e n t s b e i n g that r e a l s t a n d a r d s of living should be r e d u c e d , t h a t
p r i c e s and i n c o m e s should b e f r o a e n , and t h a t e x p e n d i t u r e o v e r ­
s e a s should be c u r t a i l e d .
But the m e a s u r e s n e c e s s a r y to defend
the p r e s e n t p a r i t y would h a v e to b e m o r e s e v e r e l y d e f l a t i o n a r y t h a n
t h o s e r e q u i r e d t o m a k e the b e s t u s e of the a d d i t i o n a l s c o p e
afforded by a d e v a l u a t i o n . If d e v a l u a t i o n c a r r i e d an i n h e r e n t r i c k
of f u r t h e r d e v a l u a t i o n s , the s a m e was t r u e of t h e a l t e r n a t i v e
policy of deflation.
In r e c e n t y e a r s t h e r e had b e e n a s e r i e s of
d e f l a t i o n a r y m e a s u r e s ; and s o o n e r or l a t e r it h a d a l w a y s b e e n
n e c e s s a r y t o t a k e f u r t h e r a c t i o n of the s a m e land.
Given
d e v a l u a t i o n , h o w e v e r , t h e r i s k of a s u c c e s s i o n of s i m i l a r m o v e s
w a s m u c h l e s s ; and the objective of devadueing by m e a n s of a
floating r a t e would b e to r e s t o r e the s t r e n g t h and the p a r i t y of t h e
pound o n c e the a c c o m p a n y i n g d e f l a t i o n a r y m e a s u r e s had o v e r c o m e
the i m m e d i a t e d i f f i c u l t i e s .
The c o m b i n a t i o n of d e v a l u a t i o n with
r e l a t i v e l y m o d e r a t e d e f l a t i o n a r y m e a s u r e s should p e r m i t e c o n o m i c
r e c o v e r y within a y e a r , w h e r e a s two y e a r s or m o r e would be
r e q u i r e d for a policy of deflation alone to a c h i e v e its effect.
M o r e o v e r , a d r a m a t i c d e c i s i o n to d e v a l u e s t e r l i n g would have a
g r e a t e r p s y c h o l o g i c a l effect t h a n a s u c c e s s i o n of d i s i n f l a t i o n a r y
m e a s u r e s i n a w a k e n i n g p u b l i c opinion both t o the g r a v i t y of the
p r e s e n t s i t u a t i o n and to i t s p r o b a b l e r e s u l t s if n o effective
r e m e d i a l a c t i o n was t a k e n .
It was a r g u a b l e that we should not
r e s o r t t o d e v a l u a t i o n while the e c o n o m y was weak; but the
o p p o r t u n i t y to d e v a l u e when the e c o n o m y w a s s t r o n g would n e v e r
-3­
i n fact m a t e r i a l i s e .
It was a l s o a r g u a b l e t h a t the G o v e r n m e n t
should have d e v a l u e d s t e r l i n g on taking office in O c t o b e r , 1964;
b u t , t h a t o c c a s i o n h a v i n g b e e n m i s s e d , the opportunity of the
p r e s e n t c r i s i s should be t a k e n t o d e v a l u e to a floating r a t e and
s i m u l t a n e o u s l y to i n t r o d u c e the n e c e s s a r y m e a s u r e s of
disinflation.
In s u p p o r t of t h e s e a r g u m e n t s it was f u r t h e r u r g e d that
t h e p a r i t y of 2. 80 d o l l a r s to the pound; which the G o v e r n m e n t ,
on a s s u m i n g office, had u n d e r t a k e n to d c f s n d , had p r o v e d to b e
i n c o m p a t i b l e with t h e i r two m a j o r o b j e c t i v e s of i m p r o v i n g the
r a t e of growth of the e c o n o m y and of shifting r e s o u r c e s f r o m the
p r i v a t e t o the public s e c t o r .
The m e a s u r e s now before the
C a b i n e t w e r e not only not n e w but offered no g u a r a n t e e t h a t
r e f l a t i o n a f t e r 1967 could be u n d e r t a k e n from any s t r o n g e r
p o s i t i o n than t h a t now p r e v a i l i n g .
M o r e o v e r , to e m b a r k upon
a d e f l a t i o n a r y policy now would be likely to p r o v e e m b a r r a s s i n g
p o l i t i c a l l y , e s p e c i a l l y if the r e f l a t i o n e n v i s a g e d in 1968 w e r e to
p r o d u c e , a s on p a c t e x p e r i e n c e it m i g h t , a r e n e w e d s t e r l i n g
c r i s i s at a p o l i t i c a l l y i n c o n v e n i e n t t i m e .
If the G o v e r n m e n t
r e c o g n i s e d in the P r i r a e M i n i s t e r ' s s t a t e m e n t on the following
d a y t h a t they had b e e n t r y i n g to m a i n t a i n an u n r e a l p a r i t y and a n
u n r e a l i s t i c r o l e in the world - a r e d u c t i o n of £100 m i l l i o n in
o v e r s e a e x p e n d i t u r e w a s the m i n i m u m r e q u i r e d to d e m o n s t r a t e
s u c h r e c o g n i t i o n - t h i s would have the m a x i m u m i m p a c t .
It h a d
b e e n a r g u e d that a d e c i s i o n on d e v a l u a t i o n snould be delayed u n t i l
a f t e r the P r i m e M i n i s t e r ' s v i s i t to W a s h i n g t o n ; but the United
S t a t e s G o v e r n m e n t w e r e not likely to give us more than t e m p o r a r y
h e l p b e f o r e t h e i r e l e c t i o n s i n N o v e m b e r ; and even this would bo
l i k e l y t o involve u s s t i l l m o r e deeply in l o n g - t e r m c o m m i t m e n t s
i n the F a r E a s t and e l s e w h e r e and to inhibit the d e v e l o p m e n t ot
t h e n e w e c o n o m i c s t r a t e g y for which d e v a l u a t i o n would open the
way.
T h e w o r s t of a l l c o u r s e s would be to adopt a s e r i e s of
"*
s t r i n g e n t d i s i n f l a t i o n a r y m e a s u r e s now and t h e n to be c o m p e l l e d
t o d e v a l u e s t e r l i n g a few m o n t h s l a t e r .
T h e e x p e r i e n c e of the l a s t tv/o y e a r s or m o r e s u g g e s t e d
t h a t it w a s i m p o s s i b l e t o c o m b i n e a policy of full e m p l o y m e n t
with a h e a l t h y b a l a n c e of p a y m e n t s at the p r e s e n t p a r i t y .
T h e o r e t i c a l l y it would b e p o s s i b l e to m a i n t a i n that p a r i t y by a
c o m b i n a t i o n of q u a n t i t a t i v e r e s t r i c t i o n s and e x p o r t s u b s i d i e s ;
b u t t h e s e m e r e l y c o n s t i t u t e d a d i s g u i s e d d e v a l u a t i o n , which m i g h t
well provoke international retaliation.
The c h o i c e , t h e r e f o r e ,
l a y b e t w e e n d e v a l u a t i o n and t r u e deflation; and in the l a t t e r c a s e
t h e d e f l a t i o n would p r o b a b l y h a v e to be c o n s i d e r a b l y m o r e s e v e r e
t h a n would be n e c e s s a r y if it w e r e a c c o m p a n i e d by d e v a l u a t i o n .
B u t d e f l a t i o n on t h i s scsde would d i s r u p t i n t e r n a l confidence,
p a r t i c u l a r l y a s r e g a r d s i n v e s t m e n t , and would v i r t u a l l y p r e c l u d e
t h e p o s s i b i l i t y of any s t i c c e s s for the G o v e r n m e n t s l o n g - t a r m
e c o n o m i c policies for r e m o v i n g r e s t r i c t i v a p r a c t i c e s and
p r o m o t i n g growth.
An a n n o u n c e m e n t of f u r t h e r deflation on the
following day would b e a c o n f e s s i o n tha.t the G o v e r n m e n t s
p r e v i o u s policy had f a i l e d ; and it would have to be followed by a
f u r t h e r a d m i s s i o n of the s a m e kind after a r e l a t i v e l y s h o r t
interval.
-4­
A f u n d a m e n t a l w e a k n e s s in the G o v e r n m e n t s p r e s e n t
policy w a s the fact t h a t we w e r e s e e k i n g t o m a i n t a i n a position
in the world which our e c o n o m y could not s u p p o r t .
This weak­
n e s s could not b e r e m e d i e d m e r e l y be d e c l a r i n g an intention t o
a c h i e v e a m o d e s t saving' on t h e G o v e r n m e n t s o v e r s e a e x p e n d i t u r e .
T h e only p r a c t i c a l c o u r s e w a s to abandon a v e r y s u b s t a n t i a l p a r t
of our o v e r s e a c o m m i t m e n t s .
Action of t h i s kind, a c c o m p a n i e d
by d e v a l u a t i o n , would f r e e u s f r o m our m p n e t a r y and p o l i t i c a l
o b l i g a t i o n s t o c o u n t r i e s who at p r e s e n t sought to e n a c t p o l i t i c a l
s u p p o r t in r e t u r n for t h e i r a s s i s t a n c e to s t e r l i n g .
We should
a l s o r e f u s e to be bound by i n t e r n a t i o n a l obligations which
p r e v e n t e d u s f r o m p r o v i d i n g e x p o r t i n c e n t i v e s or i m p o s i n g
r e s t r i c t i o n s on i m p o r t s when we judged t h e s e s t e p s to be
necessary.
T h e r e was a d m i t t e d l y no e a s y s o l u t i o n for our p r e s e n t
economic problems,
C t e r n m e a s u r e s of d i s i n f l a t i o n ,
a c c o m p a n i e d by d e v a l u a t i o n , would be a c c e p t e d by the country
a s d e m o n s t r a t i n g our i n d e p e n d e n c e of p u r p o s e and our d e t e r ­
m i n a t i o n to m a i n t a i n e c o n o m i c growth.
But if the G o v e r n m e n t
did not t a k e t h i s o p p o r t u n i t y t o d e v a l u e and a d o p t e d , i n s t e a d , a
s e r i e s of h a r s h e r d e f l a t i o n a r y m e a s u r e s ap evidence of t h e i r
d e t e r m i n a t i o n to m a i n t a i n the p a r i t y , d e v a l u a t i o n m i g h t s t i l l be
f o r c e d on u s at a l a t e r d a t e but it would t h a n be no l o n g e r
p o s s i b l e to take p o l i t i c a l c r e d i t for it a s a d e l i b e r a t e act of policy,
b a s e d on a c o n s i d e r e d e c o n o m i c j u d g m e n t .
/e should h a v e to
a d m i t t h a t we had t r i e d t o m a i n t a i n the p a r i t y and had failed.
And t h i s f a i l u r e would h a v e m e r e than m e r e l y e c o n o m i c
implications.
On t h e o t h e r h a n d it w a s a r g u e d that it would be a
m i s t a k e ' t o d e v a l u e t h e pound or to allow the r a t e of e x c h a n g e to
float a.t the p r e s e n t t i m e .
The i s s u e could not f a i r l y be
p r e s e n t e d in t e r m s m e r e l y of p r o v i d i n g r e a s s u r a n c e to foreign
b a n k e r s at a p a r t i c u l a r m o m e n t of t i m e , T h e p r e v a i l i n g l a c k of
confidence in the B r i t i s h e c o n o m y was due t o a p e r s i s t i n g doubt
about o u r ability to pay our way and to m e e t our obligations in
the l o n g e r t e r m , a s i l l u s t r a t e d by the s u b s t a n t i a l d e t e r i o r a t i o n
in t h e f o r e c a s t s of our b a l a n c e of p a y m e n t s yaboap&cte a s
c o m p a r e d with t h o s e on which the Budget had been b a s e d in A p r i l .
F o r t h i s continuing i m b a l a n c e d e v a l u a t i o n would p r o v i d e no s i m p l e
or r a p i d r e m e d y .
M o r e o v e r , i t s e f f e c t s , both e c o n o m i c and p o l i t i c a l , w e r e
unpredictable.
The r e s u l t m i g h t w e l l b e so g r e a t l y to i n c r e a s e
the r e l u c t a n c e to hold s t e r l i n g , e v e n on the p a r t of t h o s e who had
h i t h e r t o continued to do s o , t h a t we should quickly be f o r c e d to
p e r m i t the e x c h a n g e r a t e t o f a l l to a v e r y d a m a g i n g e x t e n t ; and
the i n i t i a l d e v a l u a t i o n , if t o a new fixed r a t e , m i g h t then h a v e
t o b e followed by f u r t h e r d e v a l u a t i o n s .
A l t e r n a t i v e l y , if we
allowed s t e r l i n g t o floa.t and to find its own l e v e l , we could not
c o m m a n d t h e r e s e r v e s to p r e v e n t it f r o m sinking t o an u n a c c e p t ­
ably low r a t e .
Nor could it b e a r g u e d i n s u p p o r t of d e v a l u a t i o n
t h a t s t e r l i n g was o v e r - v a l u e d a t the p r e s e n t p a r i t y .
The
-5­
i n c r e a s e in e x p o r t s of 6 p e r cent in v o l u m e and 9 p e r cent in
v a l u e in the f i r s t five m o n t h s of 1966, c o m p a r e d with the
c o r r e s p o n d i n g p e r i o d of 1965, i n d i c a t e d t h a t v/e v/ere not failing
t o b e c o m p e t i t i v e in w o r l d m a r k e t s in t e r m s of our p r i c e s .
The d e t e r i o r a t i o n of the b a l a n c e of v i s i b l e t r a d e in J u n e was
i m m e d i a t e l y a t t r i b u t a b l e to the effects of t h e s e a m e n ' s s t r i k e ;
but b a s i c a l l y our b a l a n c e of p a y m e n t s d i f f i c u l t i e s v/ere due to
a n inflow of i m p o r t s which w a s g e n e r a t e d by the e x c e s s i v e
p r e s s u r e of d o m e s t i c d e m a n d .
D e s p i t e t h e s e r i o u s objections
t o i m p o r t r e s t r i c t i o n s w h i c h w e r e s u m m a r i s e d in the m e m o r a n d a
b e f o r e the C a b i n e t , i t m i g h t be d e s i r a b l e t o c o n s i d e r l a t e r ,
but not at p r e s e n t , t h e i n t r o d u c t i o n of a s y s t e m of s e l e c t i v e
import controls.
M o r e o v e r , d e v a l u a t i o n would not r e m o v e the n e e d for
disinflationary m e a s u r e s .
That need would be a s g r e a t , or
e v e n g r e a t e r , if we d e v a l u e d , s i n c e , u n l e s s c a p a c i t y for e x p o r t
p r o d u c t i o n w e r e i n c r e a s e d by the r e s t r a i n t of d o m e s t i c d e m a n d ,
we should l o s e the b e n e f i t of the c o m p e t i t i v e a d v a n t a g e which
d e v a l u a t i o n should afford our e x p o r t s .
The m e a s u r e s before
the Cc.binet would r e d u c e d e m a n d by s o m e t h i n g of the o r d e r of
£ 5 0 0 m i l l i o n or m o r e .
But this was m a r g i n a l in c o m p a r i s o n
with the g r o s s d o m e s t i c p r o d u c t ( G D P ) , now r u n n i n g at over
£ 3 0 , 000 m i l l i o n ; a n d it could h a r d l y b e a r g u e d , t h e r e f o r e , t h a t
the effects of t h e s e m e a s u r e s on the d o m e s t i c e c o n o m y would be
disastrous.
On the o t h e r . h a n d they should be sufficient to b r i n g
about the m a r g i n a l shift of r e s o u r c e s which w a s a l l that was
r e q u i r e d , without l e a d i n g to an u n a c c e p t a b l e l e v e l of u n e m p l o y ­
ment.
E v e n if, c o n t r a r y t o e x p e c t a t i o n , they p r o v e d to have
m o r e s e v e r e effects t h a n w e r e e i t h e r n e e d e d or i n t e n d e d ,
m e a s u r e s such a s t h e r e g u l a t o r o r h i r e p u r c h a s e r e s t r i c t i o n s
could b e r e v e r s e d a t s h o r t n o t i c e .
It had b e e n a.rgued t h a t d e v a l u a t i o n would r e p r e s e n t a
new s t r a t e g y , p a r t i c u l a r l y in the s e n s e of a r e l e a s e f r o m the
e c o n o m i c c o n s t r a i n t s which at p r e s e n t inhibited the G o v e r n m e n t
in t h e p u r s u i t of t h e i r p o l i t i c a l o b j e c t i v e s .
But e x p e r i e n c e
a f t e r the l a s t d e v a l u a t i o n in 1949 did not s u p p o r t the t h e s i s t h a t
d e v a l u a t i o n v/as l i k e l y t o m a k e it e a s i e r for u s to b r e a k out of
the c y c l e of " s t o p a n d g o " which had c h a r a c t e r i s e d the e c o n o m y
s i n c e the end of t h e war in 1945.
D e v a l u a t i o n would c o n t r i b u t e
n o t h i n g t o the o v e r r i d i n g r e q u i r e m e n t of our l o n g e r - t e r m
e c o n o m i c p o l i c y , which v/as the i m p r o v e m e n t of p r o d u c t i v i t y .
It w a s c o r r e s p o n d i n g l y i m p o r t a n t , t h e r e f o r e , t h a t any c o m b i n a ­
tion of d i s i n f l a t i o n a r y m e a s u r e s should i n c l u d e action which would
c o n t r i b u t e to the p o s i t i v e a i m s of t h i s p o l i c y ; and it m i g h t be
n e c e s s a r y to c o n t e m p l a t e m o r e d r a s t i c m e a s u r e s to d i v e r t
m a n - p o w e r and r e s o u r c e s f r o m i n e s s e n t i a l and s e c o n d a r y
i n d u s t r i e s to i n d u s t r i e s which could m a k e a s u b s t a n t i a l
c o n t r i b u t i o n to e x p o r t s .
-6­
D e v a l u a t i o n would i n c r e a s e both the coot and the
difficulty of m e e t i n g our obligations in f o r e i g n c u r r e n c i e s .
M o r e o v e r , to d e v a l u e , or to let the e x c h a n g e r a t e float, would
b e t a n t a m o u n t to d e f a u l t i n g on t h o s e who had continued to hold
s t e r l i n g in t h e f a i t h , in which they had b e e n e n c o u r a g e d by
s u c c e s s i v e G o v e r n m e n t s t a t e m e n t s , t h a t the e x c h a n g e p a r i t y
would be m a i n t a i n e d .
It would b e d i s h o n o u r a b l e for the United
Kingdom G o v e r n m e n t t o take this couro e u n l e s s it was f o r c e d
on them.; and f o r e i g n opinion would not be r e a d y to a c c e p t the
i n e v i t a b i l i t y of a d e v a l u a t i o n u n l e s s the G o v e r n m e n t had shown a
r e a d i n e s s to f a c e t h e i r r e s p o n s i b i l i t i e s and t o take a l l p o s s i b l e
a c t i o n to avoid s u c h a s t e p .
T h a t point h a d not yet b e e n
reached.
The G o v e r n m e n t m u s t a l s o weigh the p o l i t i c a l
c o n s e q u e n c e s of d e v a l u a t i o n for our r e l a t i o n s h i p s with o t h e r
countries.
T h e s e c o n s e q u e n c e s w e r e i n c a l c u l a b l e ; but they
m i g h t be g r a v e l y d a m a g i n g to our i n t e r e s t s .
M o r e o v e r , in
c o n s i d e r i n g t h e m e a s u r e s n e c e s s a r y to avoid d e v a l u a t i o n it
would be u n w i s e t o a t t a c h too m u c h i m p o r t a n c e to r e d u c t i o n s in
Government expenditure overseas.
This expenditure constituted
only s o m e 12 pvv cent of t o t a l United Kingdom e x p e n d i t u r e
o v e r s e a s , which would t h e r e f o r e be r e d u c e d by only 2. p e r cent
if the r e d u c t i o n s now p r o p o s e d w e r e a p p r o v e d .
3ut these
r e d u c t i o n s , once m a d e , would be i r r e v o c a b l e , and the s u r r e n d e r
of c o m m i t m e n t s w h i c h they would imply would b e l i a b l e to involve
u s in g r e a t d i f f i c u l t i e s which would b e not m e r e l y p o l i t i c a l but
e c o n o m i c a s well.
F o r e i g n opinion would b e m o r e i m p r e s s e d
b y r e s o l u t e d o m e s t i c m e a s u r e s t h a n by d r a s t i c r e d u c t i o n s in
o v e r s e a s e x p e n d i t u r e which weakened our influence a b r o a d .
But
i t would a l s o b e influenced by the c h a r a c t e r of the d i s i n f l a t i o n a r y
m e a s u r e s w h i c h w e r e i n t r o d u c e d ; and f r o m t h i s point of v i e w
i t w a s p o s s i b l e to m a i n t a i n that t h e p r o p o s a l s b e f o r e the C a b i n e t
l a i d insufficient e m p h a s i s on the need to r e d u c e u n p r o d u c t i v e
e x p e n d i t u r e , i n c l u d i n g u n p r o d u c t i v e G o v e r n m e n t e x p e n d i t u r e , in
t h e United K i n g d o m .
It might be thought p r e f e r a b l e to lay
g r e a t e r e m p h a s i s on t h e need to e n c o u r a g e the s e c t o r s of the
e c o n o m y c o n c e r n e d with e c o n o m i c growth and to m a k e r e d u c t i o n s ,
if n e c e s s a r y , i n e x p e n d i t u r e on e. g. s o c i a l b e n e f i t s , h e a l t h and
h o u s i n g until o u r r a t e of e c o n o m i c growth w a s a d e q u a t e to
s u p p o r t t h e b u r d e n of t h e s o c i a l e x p e n d i t u r e which we wished to
undertake.
M o r e o v e r , the i n c r e a s e in the h o u s i n g p r o g r a m m e ,
w h e t h e r by public or by p r i v a t e e n t e r p r i s e , logically r e q u i r e d
fmxtfeer s u b s t a n t i a l i n v e s t m e n t in the p u b l i c utility i n d u s t r i e s in
o r d e r t o p r o v i d e t h e n e c e s s a r y s e r v i c e s for new h o u s e s .
R e d u c t i o n s in capita.! e x p e n d i t u r e on e. g. e l e c t r i c i t y supply and
14
d i s t r i b u t i o n , should t h e r e f o r e be c o n s i d e r e d in t h e c o n t e x t of the
d e m a n d for t h e s e s e r v i c e s g e n e r a t e d by o t h e r i n v e s t m e n t .
On
t h e other hand r e d u c t i o n s in s o c i a l e x p e n d i t u r e would not only
r e p r e s e n t t h e n e g a t i o n of p o l i c i e s t o which t h e G o v e r n m e n t w e r e
c o m m i t t e d b u t would b e widely r e g a r d e d a s i n c o m p a t i b l e with a
s t a n d s t i l l in r e s p e c t of i n c r e a s e s in p r i c e s and w a g e s .
B u t the o v e r r i d i n g p o l i t i c a l c o n s i d e r a t i o n w a s the fact
t h a t the G o v e r n m e n t ^ s u p p o r t e r s and the c o u n t r y a s a whole
w e r e looking to t h e G o v e r n m e n t to p r o v i d e f i r m and u n i t e d
l e a d e r s h i p in t h e s i t u a t i o n . w h i c h faced the::;.; a n d the a c t i o n
t a k e n m u s t b e a n a d e q u a t e r e s p o n s e to t h i s c h a l l e n g e .
In
p a r t i c u l a r the G o v e r n m e n t v/ould b e e x p e c t e d to adopt a f i r m
a t t i t u d e t o w a r d s t h e l e a d e r s of both s i d e s of i n d u s t r y whose
p e r f o r m a n c e e. g. a s r e g a r d s i m p r o v e m e n t in p r o d u c t i v i t y , had
not m a t c h e d t h e i r p r o f e s s i o n s .
T h e c o u n t r y would be p r e p a r e d
t o s u p p o r t a G o v e r n m e n t which showed a c l e a r d e t e r m i n a t i o n to
d e a l with the p r o b l e m s confronting them., r e g e . r d l e s s of s e c t i o n a l
interests.
M e a n w h i l e , although e v e n d i s i n f l a t i o n a r y m e a s u r e s
a s s e v e r e a s t h o s e now under c o n s i d e r a t i o n m i g h t be insufficient
t o r e s t o r e confidence in s t e r l i n g and we m i g h t t h e r e f o r e b e
f o r c e d to c o n s i d e r a n a l t e r a t i o n in t h e p a r i t y at a. l a t e r d a t e , it
would none the l e s s bo p r e m a t u r e t o t a k e ah insufficiently
c o n s i d e r e d d e c i s i o n on this v i t a l q u e s t i o n b e f o r e the P r i m e
M i n i s t e r ' s f o r t h c o m i n g v i s i t to W a s h i n g t o n .
T H E PRIIV..E MINISTER, s u m m i n g up the d i s c u s s i o n ,
said that it w a s i m p o r t a n t to d i s t i n g u i s h c l e a r l y between
p r o b l e m s of reality'' and p r o b l e m s of c o n f i d e n c e .
The
r e a l i t i e s of the s i t u a t i o n w e r e that our e x p o r t a c h i e v e m e n t s
w e r e good; our e x p o r t s w e r e r i s i n g a h e a d of t a r g e t but our
effort w a s being i m p e d e d by s h o r t a g e s of l a b o u r which could
only be s o l v e d by r e d e p l o y m e n t .
On the o t h e r s i d e of the
a c c o u n t , h o w e v e r , our p o s i t i o n was being p r e j u d i c e d by
e x c e s s i v e d e m a n d for i m p o r t s ; and s o o n e r or l a t e r we m i g h t
h a v e to r e c o g n i s e that a solution could only be found by
introducing selective i m p o r t controls.
A s r e g a r d s the p r o b l e m of confidence, in so far as
it h a d a r a t i o n a l o r i g i n this w a s to be found in the i n c r e a s e
in w o r l d p r i c e s , which i t s e l f r e s u l t e d f r o m the fact that the
w a r in V i e t n a m had n e w c r e a t e d a situation n e t u n l i k e that
p r e v a i l i n g at the t i m e of the K o r e a n war in 1951. The V i e t n a m
conflict h a d a l s o e x a c e r b a t e d the a d v e r s e b a l a n c e of p a y m e n t s
of t h e United S t a t e s ; and t h e i r c o u n t e r - m e a s u r e s , by r e d u c i n g
the w o r l d supply of d o l l a r s , had i n c r e a s e d our own diffi­
culties.
M o r e o v e r t h e s e s p e c i a l f a c t o r s w e r e o p e r a t i n g in
the w i d e r context of a w o r l d s h o r t a g e of l i q u i d i t y ; and ail
a t t e m p t s to find a r e m e d y for this l o n g e r - t e r m p r o b l e m had
so f a r failed in the f a c e of opposition f r o m E u r o p e a n i n t e r e s t s ,
p a r t i c u l a r l y the F r e n c h G o v e r n m e n t .
S i n c e s t e r l i n g w a s a r e s e r v e c u r r e n c y we inevitably
found o u r s e l v e s e x p o s e d to the full b r u n t of die r e s u l t i n g
p r e s s u r e s ; and s t e r l i n g , r a t h e r than the d o l l a r , had to
w i t h s t a n d the i n i t i a l a t t a c k which we had b e e n e x p e r i e n c i n g
d u r i n g t h e l a s t 18 m o n t h s and w e r e now c o n f r o n t i n g in i t s
full i n t e n s i t y .
At s o m e point it m i g h t be n e c e s s a r y to
r e c o n s i d e r our p o s i t i o n as t h e b a n k e r of the s t e r l i n g a r e a .
It w a s c l e a r , h o w e v e r , that the b a l a n c e of opinion in the
Cabinet w a s opposed to any i m m e d i a t e a l t e r a t i o n of the
s t e r l i n g p a r i t y ; and, although it would be u n r e a l i s t i c to
r e j e c t d e v a l u a t i o n in a n y c i r c u m s t a n c e s , it w a s v i r t u a l l y
c e r t a i n t h a t , if the G o v e r n m e n t took p r i o r d e c i s i o n to d e v a l u e
s t e r l i n g , h i s s u b s e q u e n t v i s i t to Y7ashington in the following
week m i g h t b e l a r g e l y f r u s t r a t e d in a d v a n c e by an a c t which
could h a v e a v e r y s e r i o u s effect on our r e l a t i o n s with the
United S t a t e s .
In t h e s e c i r c u m s t a n c e s it would be r i g h t for h i m to
m a k e on the following day a s t a t e m e n t in the Piouse of
C o m m o n s which would i n d i c a t e the G o v e r n m e n t s f i r m
d e t e r m i n a t i o n to put t h e e c o n o m y to r i g h t s by m e a n s of a
p r o g r a m m e of d i s i n f l a t i o n a r y m e a s u r e s .
But if, t h e r e a f t e r ,
s t e r l i n g did not m a k e a sufficient r e c o v e r y and no p o s i t i v e
r e s u l t s e m e r g e d f r o m h i s f o r t h c o m i n g d i s c u s s i o n with the
United S t a t e s P r e s i d e n t of the p o s s i b i l i t i e s which he had
i n d i c a t e d in h i s opening s t a t e m e n t , it would be n e c e s s a r y to
c o n s i d e r the whole s i t u a t i o n a f r e s h .
-9­
His s t a t e m e n t in the House of C o m m o n s should b e of
a n a t u r e to give the c o u n t r y the s e n s e of r e n e w e d p u r p o s e for
w h i c h it v/as now c a l l i n g .
At the s a m e t i m e it m u s t m a k e it
c l e a r t h a t the policy of the G o v e r n m e n t v/as different f r o m
t h a t of i t s p r e d e c e s s o r s in t h a t , f i r s t , t h e r e would be no
r e d u c t i o n in e x p e n d i t u r e on s o c i a l p r i o r i t i e s s u c h as h o u s i n g ,
s c h o o l s and h o s p i t a l s and, second, while the G o v e r n m e n t
w e r e d e t e r m i n e d to e l i m i n a t e the wastdful u s e of labour by
r e d e p l o y i n g it in the m o r e p r o d u c t i v e s e c t o r s of the e c o n o m y ,
p a r t i c u l a r l y e x p o r t s , it would a l s o be t h e i r p u r p o s e to avoid
e x c e s s i v e l e v e l s of u n e m p l o y m e n t , b o t h n a t i o n a l l y and
regionally,
THE F I R S T S E C R E T A R Y OF S T A T E i n d i c a t e d t h a t
h e w a s not c o n v i n c e d t h a t t h i s policy would suffice and t h a t
a n i m m e d i a t e d e v a l u a t i o n m i g h t not be the w i s e r c o u r s e .
H e t h e r e f o r e w i s h e d to r e s e r v e h i s p o s i t i o n for f u r t h e r
consideration.
The Cabinet Took n o t e , with a p p r o v a l , of t h e P r i m e
M i n i s t e r ' s s u m m i n g up of t h e i r d i s c u s s i o n .
THE P R I M E MINISTER s u g g e s t e d that the Cabinet
should now p r o c e e d to an i n i t i a l d i s c u s s i o n of s o m e of the
e c o n o m i c m e a s u r e s to be announced in h i s P a r l i a m e n t a r y
s t a t e m e n t on the following d a y .
In d i s c u s s i o n the following m a i n points w e r e m a d e ­
(a)
While h i r e p u r c h a s e r e s t r i c t i o n s had s o m e
a d v a n t a g e s over the u s e of the r e g u l a t o r , n o t a b l y that they
d i d not affect the r e t a i l p r i c e index, t h e i r i m p a c t on
p u r c h a s i n g power w a s only t e m p o r a r y .
The i n c l u s i o n of
t h e r e g u l a t o r in the m e a s u r e s was t h e r e f o r e e s s e n t i a l tc
e s t a b l i s h i t s c r e d i b i l i t y in the eyes of o v e r s e a s opinion.
T h e r e w a s a w i d e s p r e a d m e a s u r e of a g r e e m e n t , h o w e v e r ,
t h a t the r e g u l a t o r should not be applied to the t o b a c c o duty;
t h e e v i d e n c e s u g g e s t e d t h a t t o b a c c o h a d r e a c h e d the l i m i t of
t a x a b l e c a p a c i t y and a f u r t h e r i n c r e a s e m i g h t r e d u c e c o n ­
s u m p t i o n to the p o i n t w h e r e t h e r e v/as n o n e t i n c r e a s e in
revenue.
M o r e o v e r the i n c r e a s e in t o b a c c o duty would
r a i s e t h e r e t a i l p r i c e index by n e a r l y one p o i n t .
The
i n c r e a s e in p u r c h a s e tax would r a i s e t h e index by l e s s t h a n
one-fifth of a point and the i n c r e a s e in t h e d u t i e s on
a l c o h o l i c liquor by about o n e - t h i r d of a point.
The
i n c r e a s e in the h y d r o c a r b o n oil duty would a l s o affect the
c o s t of living u l t i m a t e l y ; but the a d d i t i o n a l duty would be
r e b a t e d to e x p o r t i n g i n d u s t r y through t h e e::port r e b a t e
a r r a n g e m e n t s and c o u l d be r e p a i d to public p a s s e n g e r t r a n s ­
p o r t o p e r a t o r s by a r r a n g e m e n t s s i m i l a r to t h o s e adopted
in the p r e v i o u s y e a r .
-10­
(b) It was p o i n t e d out that the a v e r a g e d o w n p a y m e n t
a c t u a l l y paid o n m o t o r c a r s bought on h i r e p u r c h a s e w a s at
p r e s e n t 38 per c e n t .
In t h e s e c i r c u m s t a n c e s to r a i s e the
m i n i m u m d e p o s i t to 40 per c e n t m i g h t not c o n s t i t u t e a v e r y
s u b s t a n t i a l d i s i n c e n t i v e ; and it m i g h t be p r e f e r a b l e to r a i s e
t h e f i g u r e to 50 p e r c e n t .
On the other hand a t a t i m e when
the m o t o r car i n d u s t r y was r u n n i n g a t 90 per cent of
c a p a c i t y the c o m b i n a t i o n of a 50 p e r cent m i n i m u m d e p o s i t
and an i n c r e a s e of p u r c h a s e tax could have s e r i o u s c o n s e ­
q u e n c e s for e m p l o y m e n t in the i n d u s t r y .
(c)
In g e n e r a l i t would not b e p o s s i b l e to i n c r e a s e d i r e c t
t a x a t i o n a t this j u n c t u r e in the light of the difficulty of
i n t r o d u c i n g a n e w F i n a n c e Bill a t the p r e s e n t point in the
Parliamentary Session.
The C a b i n e t would h o w e v e r , be
invited to c o n s i d e r a p r o p o s a l for a s u r c h a r g e of 10 p e r c e n t
on s u r t a x for 1 9 6 5 - 6 6 .
This p r o p o s a l , which would yield an
additional £26 m i l l i o n , could b e given s t a t u t o r y s a n c t i o n in
the following y e a r ' s F i n a n c e B i l l .
T i i e r e would b e p o l i t i c a l
a d v a n t a g e s in s u c h a p r o p o s a l , although i t might b e a r g u e d
that i t would b e a r h a r d l y on s o m e of the younger e x e c u t i v e s
in i n d u s t r y , on w h o s e e n e r g y and w i l l i n g n e s s i n c r e a s e s in
efficiency d e p e n d e d .
(d)
T h e r e w a s g e n e r a l a g r e e m e n t with the p r o p o s a l to
extend the c o n t r o l of office building and to lower t h e l i m i t
for the p u r p o s e of building l i c e n s i n g .
(e)
T h e r e w a s g e n e r a l a g r e e m e n t that a l i m i t should be
i m p o s e d on the t o u r i s t t r a v e l a l l o w a n c e s .
Although s o m e
m e m b e r s of t h e C a b i n e t fa.voured an allowance of £ 6 0 , it
w a s pointed out that an a l l o w a n c e of £50 would be h i g h e r
than the p r e s e n t a v e r a g e level of e x p e n d i t u r e (excluding
fares).
It v/as s u g g e s t e d that the t r a v e l a l l o w a n c e should
be fixed at £60 but should be applied to t r a v e l within a s well
a s o u t s i d e the s t e r l i n g a r e a .
The C h a n c e l l o r of t h e
E x c h e q u e r u n d e r t o o k to c o n s i d e r whether the G o v e r n m e n t
h a d p o w e r to i m p o s e a t r a v e l a l l o w a n c e for t r a v e l i n t h e
s t e r l i n g a r e a and w h e t h e r , if s o , s u c h an a l l o w a n c e could
t e c h n i c a l l y be a d m i n i s t e r e d .
(f)
T h e r e w a s g e n e r a l a g r e e m e n t that the p r o p o s e d
a l t e r a t i o n s in a r r a n g e m e n t s for e m i g r a n t s a l l o w a n c e s w e r e
justifiable.
1
(g)
It was r e - e r n p h a s i s e d t h a t the level of i n v e s t m e n t
in the e l e c t r i c i t y and gas supply i n d u s t r i e s v/as d i r e c t l y
r e l a t e d to the l e v e l of h o u s e b u i l d i n g and that it would t h e r e ­
f o r e be difficult to m a k e major r e d u c t i o n s in the i n v e s t m e n t
p r o g r a m m e s of t h e s e i n d u s t r i e s if the h o u s e b u i l d i n g
p r o g r a m m e w a s not to be c u r t a i l e d .
It was s u g g e s t e d that
the ban on a d v e r t i s i n g by the e l e c t r i c i t y and g a s B o a r d s
should be extended for a f u r t h e r p e r i o d , although t h i s m i g h t
h a v e the d i s a d v a n t a g e of r e d u c i n g s a l e s of off-peak s t o r a g e
h e a t e r s which h e l p e d to s p r e a d the load on the e l e c t r i c i t y
supply i n d u s t r y .
-11­
THE PPv.II/lE MINISTER, s u m m i n g up t h i s p a r t of the
d i s c u s s i o n , s a i d t h a t a t t h i s s t a g e the Cabinet w e r e e x p r e s s i n g
i n i t i a l v i e w s and t h a t f i r m d e c i s i o n s would need to be taken at
their next meeting.
If the C a b i n e t decided to i n t r o d u c e h i r e
p u r c h a s e r e s t r i c t i o n s at t h e lower cf the l e v e l s p r o p o s e d , to
i m p o s e t h e r e g u l a t o r and to m a k e the p r o p o s e d r e d u c t i o n s in
public s e c t o r i n v e s t m e n t , t h e t o t a l a m o u n t by which demand would
be r e d u c e d would a p p r o a c h £500 m i l l i o n .
The G o v e r n m e n t
could a l s o t a k e c r e d i t for t h e £26 m i l l i o n in r e s p e c t cf the
s u r t a x s u r c h a r g e p r o p o s e d by the C h a n c e l l o r of the E x c h e q u e r
and the £20 m i l l i o n i n c r e a s e in p o s t a l t a r i f f s , which had a l r e a d y
b e e n a p p r o v e d by the C a b i n e t and could well be included in h i s
s t a t e m e n t on the e c o n o m i c m e a s u r e s .
\7ith t h e s e additions
t h e total r e d u c t i o n in d e m a n d would a m o u n t to r a t h e r m o r e than
£500 m i l l i o n , although to the e x t e n t that o v e r s e a s e x p e n d i t u r e
( p a r t i c u l a r l y on t o u r i s m ) w a s r e d u c e d t h e r e would be s e m e
i n c r e a s e in t h e l e v e l of d o m e s t i c d e m a n d which would need to
b e offset.
The C a b i n e t A g r e e d to r e s u m e t h e i r d i s c u s s i o n of t h e
e c o n o m i c s i t u a t i o n at a m e e t i n g to be held
on Y/ednesday, 20th J u l y , at 9. 00 a. m .
C a b i n e t Office, S . 17.1.
22nd J u l y , 1966
-12­
1^ The circulation of this paper has been strictly limited. :
It is issued for the personal use of.;$s**r&Jtfi*!&: £
TOP
^-c.&.
SECRET
7
Copy No
.(.
CABINET
CONFIDENTIAL ANNEX
CC(66) 41st C o n c l u s i o n s , Minute 4
T u e s d a y , 2nd August, 1966, at 10. 00 a. ra.
JmE
pISTER'S
T TO
pHINGTCN
T H E P R I M E MINISTER i n f o r m e d the C a b i n e t t h a t during
h i s v i s i t to "7ashington at t h e end of the p r e v i o u s week he had h e l d
v e r y p r o f i t a b l e d i s c u s s i o n s with the P r e s i d e n t of the United S t a t e s ,
P r e s i d e n t Johnson.
T h e r e had been no d i s p o s i t i o n on the p a r t of
the United S t a t e s a u t h o r i t i e s to m a i n t a i n their e a r l i e r c r i t i c i s m of
o u r a t t i t u d e i n d i s s o c i a t i n g o u r s e l v e s f r o m t h e i r b o m b i n g of the
oil i n s t a l l a t i o n s at Hanoi and Haiphong and in p u r p o r t i n g to a t t a c h
c o n d i t i o n s to the supply of a r m s to the United S t a t e s .
They had
b e e n m o r e i n t e r e s t e d to d i s c u s s the d i s i n f l a t i o n a r y economic
m e a s u r e s which we had r e c e n t l y t a k e n , -measures which had
c l e a r l y c r e a t e d a f a v o u r a b l e i m p r e s s i o n in \7ashington
and should
e n s u r e t h a t h e n c e f o r w a r d the United States G o v e r n m e n t would
s u p p o r t u s in our efforts to r e c t i f y the b a l a n c e of the United
Kingdom e c o n o m y .
He had taken advantage of this opportunity
to r e m i n d P r e s i d e n t Johnson and his c o l l e a g u e s that, if t h e s e
m e a s u r e s failed, we m i g h t b e c o m p e l l e d to t a k e action which
would be u n w e l c o m e to the United S t a t e s G o v e r n m e n t - e. g. the
f o r c e d l i q u i d a t i o n of United K i n g d o m p r i v a t e l y - o w n e d s e c u r i t i e s
in the United S t a t e s .
But h e had m a d e it c l e a r that we should be
v e r y r e l u c t a n t to t a k e steps of this kind and should c e r t a i n l y p r e f e r
to c o n c e r t a c t i o n with the United S t a t e s G o v e r n m e n t tc face the
p r o b l e m s which lay a h e a d .
Not the l e a s t of t h e s e p r o b l e m s was
the q u e s t i o n of i n t e r n a t i o n a l liquidity, on which he had i m p r e s s e d
on P r e s i d e n t J o h n s o n and the United States S e c r e t a r y of the
T r e a s u r y the i m p o r t a n c e of c o l l a b o r a t i o n between the United
S t a t e s and the United K i n g d o m a g a i n s t the p o s s i b i l i t y that the
c u r r e n t m u l t i l a t e r a l i n t e r n a t i o n a l d i s c u s s i o n s on p o s s i b l e m e a n s
of i n c r e a s i n g liquidity m i g h t p r o v e to be insufficiently r a p i d or
effective.
It v/as c l e a r that the United States G o v e r n m e n t would
r e g a r d a d e v a l u a t i o n of s t e r l i n g a s i n i m i c a l to their i n t e r e s t s ;
and our own d e c i s i o n to avoid t h i s s t e p if p o s s i b l e m a d e i t the
m o r e likely t h a t we could s e c u r e t h e i r c c - o p e r a t i c n in
e s t a b l i s h i n g a link b e t w e e n s t e r l i n g and the d o l l a r which should
e n a b l e the United S t a t e s and the United Kingdom G o v e r n m e n t s to
p r e s e n t a united f r o n t on the q u e s t i o n of i n t e r n a t i o n a l liquidity.
T h e r e w e r e v a r i o u s ways in which t h i s c o n c e p t of a link b e t w e e n
t h e two r e s e r v e c u r r e n c i e s m i g h t be given f o r m a l e x p r e s s i o n ­
e. g. an a r r a n g e m e n t w h e r e b y United Kingdom-owned a s s e t s in
t h e United S t a t e s m i g h t be m a n a g e d by s o m e joint o r g a n i s a t i o n
r e p r e s e n t a t i v e of both G o v e r n m e n t s .
But it would have been
p r e m a t u r e to a t t e m p t , d u r i n g so b r i e f a v i s i t , to d i s c u s s the
d e t a i l s of any p r o j e c t s of this kind; and a m o r e fruitful method
of developing the c o n c e p t m i g h t be found in a s u g g e s t i o n , which
h e had m e n t i o n e d to P r e s i d e n t J o h n s o n , that we should e s t a b l i s h
in the United K i n g d o m an a d v i s o r y body on the analogy of the
-1­
(972941
Dillon C o m m i t t e e in t h e United States as a m e a n s of m a i n t a i n i n g
c o n t a c t and e x c h a n g i n g v i e w s with the United S t a t e s a u t h o r i t i e s on
the c o m p l e x of p r o b l e m s c o n n e c t e d with l i q u i d i t y .
A s r e g a r d s the m o r e specifically p o l i t i c a l i s s u e s which had
f i g u r e d in the d i s c u s s i o n s P r e s i d e n t Johnson had a p p e a r e d to be
r a t h e r l e s s d i r e c t l y i n t e r e s t e d than h i t h e r t o i n the p r o b l e m of
n u c l e a r s h a r i n g in r e l a t i o n to the F e d e r a l G e r m a n R e p u b l i c ; and
he h a d shown no p a r t i c u l a r c o n c e r n about the r e d u c t i o n s which we
p r o p o s e d to m a k e in o u r own m i l i t a r y e x p e n d i t u r e o v e r s e a s .
Gn
the o t h e r hand t h e r e w e r e now good r e a s o n s to s u p p o s e that the
United S t a t e s G o v e r n m e n t would m a k e a s u s t a i n e d a t t e m p t to
e n s u r e t h a t the heavy l i a b i l i t y which we should i n c u r in r e s p e c t
of o u r p u r c h a s e of the F i l l and o t h e r United S t a t e s a i r c r a f t would
be offset by United S t a t e s p u r c h a s e s of United K i n g d o m m i l i t a r y
equipment.
They w e r e a b o u t to p l a c e a s u b s t a n t i a l o r d e r for s h i p s
in t h e United Kingdom; t h e y had d e c i d e d to i n c o r p o r a t e the
R o l l s - R o y c e Spey engine i n c e r t a i n United S t a t e s a i r c r a f t , which
should y i e l d 100 m i l l i o n d o l l a r s over the p e r i o d of the o r d e r ; and
t h e i r d e c i s i o n that c e r t a i n United States t r o o p s in F r a n c e should
now be t r a n s f e r r e d to the United -Kingdom should p r o v i d e f u r t h e r
r e l i e f to our b a l a n c e cf p a y m e n t s .
T h e United S t a t e s G o v e r n m e n t w e r e e.lso k e e n l y i n t e r e s t e d
in t h e q u e s t i o n cf aid t o t h e developing c o u n t r i e s ; and t h i s had
shown i t s e l f both in t h e i r d e s i r e to d e v e l o p , in d i s c u s s i o n with
o u r s e l v e s , a m o r e c o h e r e n t and i n t e g r a t e d policy of aid to A f r i c a n
c o u n t r i e s and in the P r e s i d e n t s e x p r e s s e d d e t e r m i n a t i o n to
m a i n t a i n aid in the f o r m of food s u r p l u s e s u n d e r P u b l i c Law 480
by m a i n t a i n i n g a g r i c u l t u r a l p r o d u c t i o n in the United S t a t e s a t a
l e v e l which would e n s u r e the continued a v a i l a b i l i t y of such
surpluses.
T H E C H A N C E L L O R OF THE E X C H E Q U E R c o n f i r m e d that
the P r i m e iV.inister's d i s c u s s i o n s with P r e s i d e n t J o h n s o n h a d
a l r e a d y i n t r o d u c e d a new and w e l c o m e e l e m e n t of s t a b i l i t y i n a
s i t u a t i o n which s t i l l h e l d g r e a t d a n g e r s for s t e r l i n g .
The United
S t a t e s m o n e t a r y a u t h o r i t i e s w e r e now giving u s a l l p o s s i b l e
a s s i s t a n c e in s u p p o r t i n g t h e exchange r a t e ; a n d , p r o v i d e d that the
d i s i n f l a t i o n a r y m e a s u r e s which we had r e c e n t l y adopted w e r e put
into full effect and m a i n t a i n e d without r e l a x a t i o n , we could now
hope t h a t v/e should a c h i e v e a s u r p l u s on our b a l a n c e of p a y m e n t s
in 1967.
But it w a s e s s e n t i a l to r e i n f o r c e t h e s e m e a s u r e s by
r e s t o r i n g i n t e r n a t i o n a l confidence in the c r e d i b i l i t y of the
G o v e r n m e n t ' s p o l i c i e s ; and f r o m this point cf v i e w the G o v e r n m e n t
should do all they c o u l d to d i s c o u r a g e the continuing s p e c u l a t i o n
about a p o s s i b l e d e v a l u a t i o n of s t e r l i n g , which, if it w e r e
m a i n t a i n e d , would be l i a b l e to offset all the b e n e f i t s which we
m i g h t o t h e r w i s e e x p e c t to d e r i v e f r o m our d i s i n f l a t i o n a r y
measures.
On the s e p a r a t e , but r e l a t e d , topic of i n t e r n a t i o n a l
liquidity we m u s t p r e p a r e o u r s e l v e s for a s i t u a t i o n in which, if the
war i n V i e t n a m w e r e b r o u g h t to an end, the United States t h o r n ­
s e l v e s m i g h t m o v e into s u r p l u s on t h e i r b a l a n c e of p a y m e n t s
r e l a t i v e l y r a p i d l y ; and the p r o b l e m of t h e s h o r t a g e cf i n t e r n a t i o n a l
c a p i t a l would then b e c o m e a c u t e .
The United S t a t e s a u t h o r i t i e s
v/ere p r o b a b l y too o p t i m i s t i c in a s s u m i n g that the c u r r e n t i n t e r ­
n a t i o n a l d i s c u s s i o n s on liquidity would suffice to a v e r t t h i s d a n g e r
in good t i m e .
T h e r e was as yet no sufficient r e a s o n to s u p p o s e
t h a t the E u r o p e a n i n t e r e s t s c o n c e r n e d would c b ' - o p e r a t e effectively
to t h i s end; and F r a n c e , in p a r t i c u l a r , s e e m e d d e t e r m i n e d to
m a i n t a i n h e r s p e c u l a t i v e p r e s s u r e on s t e r l i n g .
It was a i l t h e
m o r e i m p o r t a n t , t h e r e f o r e , that we should c o n c e r t action with t h e
United S t a t e s to avoid t h e s e d a n g e r s .
Even so, wo could not
afford to r e l a x o u r own efforts to r e d u c e the s t r a i n on our b a l a n c e
of p a y m e n t s ; a n d it would be p a r t i c u l a r l y i m p o r t a n t to c u r t a i l
o u r m i l i t a r y e x p e n d i t u r e o v e r s e a s a s r a p i d l y and as effectively as
possible.
In f u r t h e r d i s c u s s i o n it was s u g g e s t e d t h a t after the new
m e a s u r e s of d i s i n f l a t i o n , p a r t i c u l a r l y t h e s t a n d s t i l l on wages and
p r i c e s , had b e e n in f o r c e for a p e r i o d of not l e s s than six m o n t h s ,
it m i g h t be p o s s i b l e to begin to c o n s i d e r adopting r e f l a t i o n a r y
measures.
But t h e s e would r e q u i r e v e r y ca.reful c o n s i d e r a t i o n
as r e g a r d s both t h e i r f o r m and the timing of t h e i r i n t r o d u c t i o n .
M e a n w h i l e , the r e s t o r a t i o n of confidence in s t e r l i n g would
i n e v i t a b l y take s o m e t i m e ; and we could not afford t o r e l a x any of
our efforts to t h i s end.
It was s a t i s f a c t o r y that the r e d u c t i o n s
in our defence e x p e n d i t u r e abroad which the Cabinet had a p p r o v e d
in p r i n c i p l e offered a p r o s p e c t that our net m i l i t a r y a c c o u n t o v e r ­
But the r e a l i s a t i o n
s e a s should be in b a l a n c e in two y e a r s t i m e .
of this p r o s p e c t d e p e n d e d on our a c h i e v i n g in full e a c h one of the
e c o n o m i e s in q u e s t i o n ; and from t h i s point of view i t would b e
p a r t i c u l a r l y i m p o r t a n t that we should d e m o n s t r a t e o u r d e t c r m i n a ­
tion to w i t h d r a w t r o o p s f r o m G e r m a n y if the F e d e r a l G e r m a n
G o v e r n m e n t w e r e u n a b l e or unwilling to m e e t our d e m a n d for
c o m p l e t e r e p a y m e n t of the foreign e x c h a n g e e x p e n d i t u r e involved.
The M i n i s t e r s c o n c e r n e d should give e a r l y c o n s i d e r a t i o n t o the
o v e r t m e a s u r e s which m i g h t now be taken for t h i s p u r p o s e ,
including the i n i t i a t i o n of die n e c e s s a r y c o n s u l t a t i o n s in the NorthA t l a n t i c T r e a t y O r g a n i s a t i o n and W e s t e r n E u r o p e a n Union.
1
Si
The C a b i n e t ­
(1)
Took n o t e , with a p p r o v a l , of the P r i m e M i n i s t e r 's r e p o r t on his r e c e n t v i s i t to Washington, (2)
Took n o t e that the P r i m e ivdnistcr would a r r a n g e for an e a r l y m e e t i n g of the Defence and O v e r s e a P o l i c y C o m m i t t e e to c o n s i d e r p r o p o s a l s for c l e m o n s t r a t i n g our d e t e r m i n a t i o n to w i t h d r a w t r o o p s f r o m G e r m a n y , if n e c e s s a r y . C a b i n e t Office, S . W . 1 .
2nd A u g u s t , 1966
The circulation of this paper has been strictly limited.
It is issued for the personal use
TOP
of... Qi&r&^tiu^
^
n
C-&-
SECRET
V
o
Copy No...-!:/:'..
CABINET
CONFIDENTIAL ANNEX
CC(66) 42nd C o n c l u s i o n s , Minute 3
T h u r s d a y , 4th A u g u s t , 1966, a t 10. 00 a . m .
T H E P R I M E MINISTER i n f o r m e d the C a b i n e t t h a t ,
t o g e t h e r with the F i r s t S e c r e t a r y of State and the C h a n c e l l o r of the
E x c h e q u e r , h e had m e t a r e p r e s e n t a t i v e g a t h e r i n g of b a n k e r s on the
p r e v i o u s evening in o r d e r to d i s c u s s the p r o b a b l e i m p a c t of the
d i s i n f l a t i o n a r y m e a s u r e s which the G o v e r n m e n t h a d r e c e n t l y
introduced.
T h e d i s c u s s i o n had b e e n p r o f i t a b l e and c o n s t r u c t i v e ;
and it w a s s a t i s f a c t o r y that t h o s e attending the m e e t i n g had
u n d e r t a k e n , r e g a r d l e s s of individual p o l i t i c a l c o n v i c t i o n s , to s u p p o r t
the G o v e r n m e n t s e n d e a v o u r s to r e c t i f y the b a l a n c e of the e c o n o m y
and to p r o t e c t s t e r l i n g .
T h e y h a d e x p r e s s e d t h e i r confidence t h a t ,
p r o v i d e d that the G o v e r n m e n t m a i n t a i n e d a united p o l i t i c a l front and
s u c c e e d e d in s u s t a i n i n g the c r e d i b i l i t y of t h e i r p r o g r a m m e s , the
r e c e n t m e a s u r e s should a c h i e v e t h e i r p u r p o s 6 f and it h a d been notable
t h a t , with one p o s s i b l e e x c e p t i o n , they h a d b e e n u n a n i m o u s in
r e j e c t i n g a d e v a l u a t i o n of s t e r l i n g .
T H E C H A N C E L L O R OF T H E E X C H E Q U E R said that it w a s
now e s s e n t i a l that the Cabinet should d i s m i s s d e v a l u a t i o n f r o m
c o n s i d e r a t i o n and should devote t h e m s e l v e s to a s i n g l e - m i n d e d and
d e t e r m i n e d a t t e m p t to e n s u r e the s u c c e s s of t h e r e c e n t d i s i n f l a t i o n a r y
m e a s u r e s , which had been b a s e d on the a s s u m p t i o n that the e x i s t i n g
It would be p a r t i c u l a r l y
p a r i t y of s t e r l i n g would be m a i n t a i n e d .
i m p o r t a n t to r e f r a i n f r o m a n y p u b l i c s t a t e m e n t s about d e v a l u a t i o n ,
s i n c e a n y r e f e r e n c e to the t o p i c , h o w e v e r c a r e f u l l y e x p r e s s e d , would
m e r e l y e x c i t e f r e s h s p e c u l a t i o n about the G o v e r n m e n t s i n t e n t i o n s .
1
In d i s c u s s i o n t h e r e v/as g e n e r a l s u p p o r t for this view.
At
the s a m e t i m e the G o v e r n m e n t should take s u c h s t e p s a s w e r e p o s s i b l e
to e n s u r e that they w e r e not confronted a g a i n , a t e q u a l l y s h o r t n o t i c e ,
b y an e m e r g e n c y r e q u i r i n g c r i t i c a l d e c i s i o n s t o be taken without
adequate preparation.
Contingency planning f o r e v e n t u a l i t i e s of t h i s
kind should t h e r e f o r e be put in h a n d ; and, although in c e r t a i n of i t s
m a n i f e s t a t i o n s it m i g h t need to be confined to a v e r y s m a l l n u m b e r
of M i n i s t e r s d i r e c t l y c o n c e r n e d , o t h e r a s p e c t s of o u r future e c o n o m i c
p o l i c y should r e c e i v e m o r e continuous and s y s t e m a t i c a t t e n t i o n f r o m
a M i n i s t e r i a l C o m m i t t e e v/hich should be s p e c i a l l y c o n s t i t u t e d for
t h i s p u r p o s e and should r e p o r t r e g u l a r l y to the Cabinet.
This
C o m m i t t e e should be c o n c e r n e d not with d e t a i l e d i s s u e s but with the
-1­
(97294'
b r o a d s t r a t e g y of e c o n o m i c p o l i c y .
M o r e o v e r , it should c o n s i d e r
not m e r e l y the d e f e n s i v e m e a s u r e s which v/e m i g h t have to take if
our e c o n o m i c situation d e t e r i o r a t e d once a g a i n but a l s o the p o s i t i v e
s t e p s w h i c h would be r e q u i r e d if the b a l a n c e of the e c o n o m y j * * * v o t M .
r e s t o r e d and it b e c a m e p o s s i b l e to r e l a x the d i s i n f l a t i o n a r y p r e s s u r e
and to i n t r o d u c e s e l e c t i v e m e a s u r e s of r e f l a t i o n .
All t h e s e i s s u e s
would need to be e x a m i n e d in r e l a t i o n to the b a s i c p r o b l e m of the
future p o s i t i o n of s t e r l i n g in the world and the g r o w i n g t h r e a t of a
s h o r t a g e of i n t e r n a t i o n a l c a p i t a l .
Any s y s t e m a t i c e x a m i n a t i o n of f u t u r e e c o n o m i c policy on
t h e s e l i n e s should a l s o i n c l u d e a r e a s s e s s m e n t , w h e t h e r by the new
M i n i s t e r i a l C o m m i t t e e o r o t h e r w i s e , of the p r i o r i t i e s at p r e s e n t
g o v e r n i n g G o v e r n m e n t e x p e n d i t u r e , which had b e e n l a r g e l y i n h e r i t e d
f r o m t h e C o n s e r v a t i v e A d m i n i s t r a t i o n but m i g h t now need to b e
radically revised.
T h i s p r o c e s s should be c a r r i e d out, if p o s s i b l e ,
before the Cabinet w e r e r e q u i r e d finally to d e c i d e the d e t a i l s of the
1967-68 E s t i m a t e s , which w e r e a t p r e s e n t u n d e r e x a m i n a t i o n by the
C o m m i t t e e on P u b l i c E x p e n d i t u r e .
The Cabinet Took note that t h e P r i m e M i n i s t e r would c o n s i d e r a r r a n g e m e n t s to e n s u r e that the s t r a t e g y of future e c o n o m i c p o l i c y would be kept u n d e r r e g u l a r r e v i e w . Cabinet Office, G.W.I.
4th A u g u s t , 1966
-2­
MR. REID
T h i s r e c o r d can be filed in the MCR s e r i e s with
a brief note t o the effect t h a t ­
"At t h e i r m e e t i n g on 13th O c t o b e r , 1966
(CC(66) 5 0th C o n c l u s i o n s ) the C a b i n e t
c o n s i d e r e d the p o s s i b i l i t y of using f o r c e to
b r i n g to a n end the r e b e l l i o n in R h o d e s i a .
No
r e f e r e n c e to t h i s d i s c u s s i o n is m a d e in the
C a b i n e t M i n u t e s of t h a t m e e t i n g ; but the following
i s a r e c o r d of what was a c t u a l l y said and d e c i d e d . "
r'
31st O c t o b e r ,
1966
T H E S E C R E T A R Y O F S T A T E F O R D E F E N C E said that
the R h o d e s i a n A r m y n u m b e r e d 10, 000 m e n , f o r m e d in t e n
b a t t a l i o n s , t o g e t h e r w i t h a S p e c i a l A i r S e r v i c e R e g i m e n t and an
A r t i l l e r y R e g i m e n t ; a l l w e r e well equipped with m o d e r n w e a p o n s ,
T h e r e w a s a n a r m e d p o l i c e f o r c e of 1 2 , 0 0 0 .
The R h o d e s i a n A i r
F o r c e c o m p r i s e d t h r e e s q u a d r o n s of m o d e r n ground a t t a c k a i r c r a f t
and one s q u a d r o n of C a n b e r r a light b o m b e r s .
The m o r a l e of t h e
f o r c e s w a s good.
S o m e v e r y s e n i o r o f f i c e r s w e r e opposed t o t h e
i l l e g a l r e g i m e but would not a t t e m p t t o use-, f o r c e a g a i n s t it.
The
r e s t s u p p o r t e d the R h o d e s i a F r o n t and t h e i r b a c k i n g for the r e g i m e
had b e c o m e f i r m e r d u r i n g r e c e n t m o n t h s .
The f o r m e r A r m y
C o m m a n d e r c o n s i d e r e d that they would fight h a r d to defend
Rhodesia.
F o r any B r i t i s h o p e r a t i o n t h e r e would be no m a i n b a s e
n e a r e r than A d e n ; and f o r w a r d m o u n t i n g b a s e s in N a i r o b i , L u s a k a ,
B l a n t y r e o r f r o m c a r r i e r s off B e i r a would b e at g r e a t d i s t a n c e s
from Rhodesia.
F o r s u p p l i e s by s e a the n e a r e s t p o r t at
D a r - e s - S a l a a m was 1, 000 m i l e s f r o m R h o d e s i a and the r o a d and
rail facilities between them w e r e inadequate.
We should r e q u i r e
full f a c i l i t i e s f r o m n e i g h b o u r i n g c o u n t r i e s , Z a m b i a , Kenya,
T a n z a n i a a n d M a l a w i , a s well a s overflying r i g h t s over M o z a m b i q u e .
A f u r t h e r c o n d i t i o n was t h a t South A f r i c a would not i n t e r v e n e .
The o p e r a t i o n would r e q u i r e five b r i g a d e s with a r t i l l e r y s u p p o r t .
T h e s e f o r c e s could be m a d e a v a i l a b l e only if heavy w i t h d r a w a l s
were made from Germany.
By m o b i l i s i n g a l l a v a i l a b l e a i r
t r a n s p o r t and r e q u i s i t i o n i n g s h i p p i n g t h r e e b r i g a d e s could be
p o s i t i o n e d i n t e n weeks a n d five b r i g a d e s i n t h r e e m o n t h s .
This
long p r e p a r a t o r y p e r i o d would give t i m e for p o l i t i c a l p r e s s u r e to
build up in the United Kingdom and m i g h t p r o v o k e South A f r i c a n
intervention.
It would b e i m p o s s i b l e t o a c h i e v e s u r p r i s e .
A l t h o u g h t h e r i s k of p r e - e m p t i v e a c t i o n by t h e R h o d e s i a n Air F o r c e
was not h i g h , it s e e m e d highly p r o b a b l e t h a t p o w e r s u p p l i e s f r o m
K a r i b a t o Z a m b i a would b e cut off.
F o r o u r own o p e r a t i o n a
p r e - e m p t i v e a i r s t r i k e would b e n e c e s s a r y on a l l R h o d e s i a n a i r f i e l d s
and at s o m e , s u c h a s S a l i s b u r y , t h e r e would c e r t a i n l y be c i v i l i a n
casualties.
T h e c a m p a i g n itself m i g h t w e l l be s h o r t ; but t h e r e a f t e r
we should b e c o m m i t t e d t o occupying the c o u n t r y , with a b i t t e r l y
h o s t i l e E u r o p e a n p o p u l a t i o n and with no A f r i c a n s c a p a b l e of r u n n i n g
the c o u n t r y .
We m i g h t w e l l find that we should s o o n be under t h e
s a m e p r e s s u r e a s w e r e n o w o p e r a t i n g a g a i n s t the i l l e g a l r e g i m e ,
i. e. to h a n d o v e r t o A f r i c a n r u l e b e f o r e the A f r i c a n s w e r e qualified
to e x e r c i s e it.
In d i s c u s s i o n t h e r e was g e n e r a l a g r e e m e n t that an o p e r a t i o n
on t h e l i n e s d e s c r i b e d by the S e c r e t a r y of S t a t e for Defence was
i m p r a c t i c a b l e and that it would be w r o n g to t h r e a t e n the u s e of
f o r c e a s a m e a n s of i m p r e s s i n g public opinion in R h o d e s i a .
It w a s
s u g g e s t e d t h a t we m i g h t c o n s i d e r m o r e l i m i t e d t y p e s of o p e r a t i o n in
s u p p o r t of t h e p o l i c y of m a n d a t o r y s a n c t i o n s ; t h e s e s a n c t i o n s m i g h t
well p r o v e ineffective and we s h o u l d b e u n d e r i n c r e a s i n g p r e s s u r e
to a g r e e t o s o m e f u r t h e r a c t i o n .
It w a s c o n f i r m e d that c e r t a i n
p o s s i b i l i t i e s in t h i s connection w e r e u n d e r c o n s i d e r a t i o n ; but e v e n
a b l o c k a d e of M o z a m b i q u e , let a l o n e of S o u t h e r n A f r i c a as a w h o l e ,
would r e q u i r e v e r y c o n s i d e r a b l e f o r c e s .
-1­
T H E P R I M E MINISTER, s u m m i n g up t h e d i s c u s s i o n ,
said t h a t in v i e w of the s t a t e m e n t by the S e c r e t a r y of State for
Defence t h e u s e of f o r c e to d e f e a t the i l l e g a l r e g i m e was
c l e a r l y i m p r a c t i c a b l e and we should t h e r e f o r e not u s e the t h r e a t
of f o r c e a g a i n s t R h o d e s i a .
But it m i g h t be i m p r e s s e d on the
r e g i m e in S a l i s b u r y t h a t , if our t e r m s for a s e t t l e m e n t w e r e
r e j e c t e d , we should have to w i t h d r a w the p r o t e c t i o n which we
h a d h i t h e r t o afforded R h o d e s i a in the United N a t i o n s ; and we
m i g h t a d d , without s p e l l i n g out t h e c o n s e q u e n c e s in d e t a i l ,
t h a t , if m a n d a t o r y s a n c t i o n s w e r e i m p o s e d and e n f o r c e m e n t
a c t i o n w a s t a k e n in s u p p o r t of t h e m , t h e r e could be no t e l l i n g
w h e r e t h i s r o a d would lead.
The C a b i n e t Took n o t e , with a p p r o v a l , of the P r i m e M i n i s t e r ' s
s u m m i n g up of t h e i r d i s c u s s i o n .
Cabinet Office, S. W. 1. ,
13th O c t o b e r , 1966.
-2­
1966
CC(66) 32nd C o n c l u s i o n s ,
Minute 2
Refdirm of the H o u s e of L o r d s
(CA)
CC(66) 37th C o n c l u s i o n s
The E c o n o m i c Situation
(CA)
CC(66) 4 1 s t C o n c l u s i o n s ,
Minute 4
T h e P r i m e M i n i s t e r ' s Visit
to Washington
(CA)
CC(66) 42nd C o n c l u s i o n s ,
Minute 3
E c o n o m i c Situation
(CA)
CC(66) 50th C o n c l u s i o n s
Rhodesia:
(MCR)
CC(67)
R o y a l M a r r i a g e s A c t , 1772:
T h e E a r l of H a r e w o o d
(NCR)
CC(67) 25th C o n c l u s i o n s
E f f e c t of E n t r y into the
E u r o p e a n Economic Community
o n the United K i n g d o m B a l a n c e
of P a y m e n t s
(NCR)
CC(67) 46th C o n c l u s i o n s ,
Minute 1 ( P a r t ) Hong Kong
(CA)
CC(67) 50th C o n c l u s i o n s
Devaluation
(NCR)
Note of M e e t i n g a t No. 10
Downing S t r e e t on F r i d a y ,
15th M a r c h 1968
International Monetary
Situation
(NCR)
CC(68) 2 1 s t C o n c l u s i o n s
International Monetary
Situation
(CA)
CC(68) 22nd C o n c l u s i o n s ,
Minute 1
International Monetary
Situation
(CA)
CC(68) 47th C o n c l u s i o n s ,
Minute 1
International Monetary
Situation
(CA)
CC(68) 48th C o n c l u s i o n s
International Monetary
Situation
(CA)
The Use of F o r c e
1967
2nd C o n c l u s i o n s
1963
Copy No.
CABINET
C O N F I D E N T I A L ANNEX
CC(67) 46th C o n c l u s i o n s , M i n u t e 1 ( P a r t ) T u e s d a y , ^ U t h J u l y , 1967 a t 10. 00 a. m . *
T H E COMMONWEALTH S E C R E T A R Y s a i d t h a t t h e r e had
b e e n a g r a v e i n c i d e n t on the b o r d e r of Hong Kong t h e p r e v i o u s
day.
In a v i l l a g e v/hich s p a n n e d the f r o n t i e r b e t w e e n Hong Kong
a n d C h i n a , s e v e r a l h u n d r e d d e m o n s t r a t o r s had a t t a c k e d the
Hong Kong p o l i c e s t a t i o n and t h e r e had b e e n f i r i n g a c r o s s the
border.
F i v e policemen had b e e n killed (four of t h e m b e f o r e they
t h e m s e l v e s h a d b e e n g i v e n a u t h o r i t y t o open f i r e ) a n d e l e v e n
p o l i c e m e n h a d b e e n wounded.
B r i t i s h troops had b e e n brought
u p b u t t h e d e m o n s t r a t o r s had d i s p e r s e d and it h a d n o t b e e n
n e c e s s a r y for the troops to open fire.
T h e r e was no evidence
t h a t the A r m y of t h e P e o p l e s R e p u b l i c of C h i n a had b e e n i n v o l v e d ,
n o r the C h i n e s e G o v e r n m e n t , b u t C h i n e s e n e w s p a p e r s a d m i t t e d
t h a t the C h i n e s e m i l i t i a h a d b e e n u s e d and f u r t h e r i n f l a m m a t o r y
p r o p a g a n d a w a s b e i n g i s s u e d i n P e k i n g in r e s p e c t of our p o s i t i o n
in Hong Kong.
T h e r e h a d s u b s e q u e n t l y b e e n f u r t h e r a t t a c k s on
t h e p o l i c e i n which two p o l i c e m e n had b e e n k i l l e d a n d , if
d i s o r d e r s c o n t i n u e d on t h i s s c a l e , it would not b e p o s s i b l e for t h e
police to maintain order indefinitely.
It would be p r o v o c a t i v e
if t r o o p s w e r e u s e d t o m a i n t a i n o r d e r , but t h i s m i g h t b e c o m e
inevitable.
It m u s t , h o w e v e r , b e r e c o g n i s e d t h a t t h i s m i g h t
l e a d to s t i l l f u r t h e r e x a c e r b a t i o n of t h e s i t u a t i o n and t h a t our
p o s i t i o n would quickly b e c o m e u n t e n a b l e if t h e C h i n e s e
G o v e r n m e n t w e r e d e t e r m i n e d t o e v i c t u s f r o m t h e Colony.
r
I n d i s c u s s i o n c o n c e r n w a s e x p r e s s e d by the C a b i n e t a t
the g r a v i t y of t h e s i t u a t i o n and a t the r i s k t o our p o s i t i o n i n
Hong Kong,
T h e r e was g e n e r a l a g r e e m e n t t h a t the r e p o r t
c u r r e n t l y b e i n g p r e p a r e d b y officials on the a c t i o n which we
should t a k e if it b e c a m e i m p o s s i b l e t o m a i n t a i n our p o s i t i o n i n
Hong Kong s h o u l d b e c o m p l e t e d a n d c i r c u l a t e d t o M i n i s t e r s a s
a m a t t e r of u r g e n c y .
It w a s a l s o s u g g e s t e d t h a t t h e r e would b e
a d v a n t a g e in s e t t i n g u p a C o m m i t t e e of the M i n i s t e r s p r i m a r i l y
c o n c e r n e d t o k e e p the s i t u a t i o n u n d e r c o n s t a n t r e v i e w and to
a g r e e on any a c t i o n which m i g h t b e n e c e s s a r y i n an e m e r g e n c y .
It w a s a l s o s u g g e s t e d t h a t the p r e s e n t d i v i s i o n of d e p a r t m e n t a l
r e s p o n s i b i l i t y b e t w e e n t h e F o r e i g n and C o m m o n w e a l t h
S e c r e t a r i e s i n r e s p e c t of our i n t e r e s t s in C h i n a , on t h e one h a n d ,
and Hong K o n g , on the o t h e r , m i g h t c o m p l i c a t e r e a c h i n g a g r e e m e n t
on p o l i c y a n d the t a k i n g of a c t i o n , p a r t i c u l a r l y w h e r e d e c i s i o n s
were urgently required.
THE PRIME M I N I S T E R , s u m m i n g u p t h i s p a r t of the
d i s c u s s i o n , s a i d t h a t the r e p o r t by officials should b e
c i r c u l a t e d t o M i n i s t e r s a s quickly a s possible,,
He would
c o n s i d e r what a r r a n g e m e n t s should be m a d e t o e n a b l e the
M i n i s t e r s p r i m a r i l y c o n c e r n e d to k e e p the s i t u a t i o n u n d e r
c o n s t a n t r e v i e w and to take i m m e d i a t e d e c i s i o n s a s e v e n t s m i g h t
require.
The C a b i n e t Took note t h a t the P r i m e M i n i s t e r would c o n s i d e r
what a c t i o n should be t a k e n to f a c i l i t a t e c o l l e c t i v e
M i n i s t e r i a l c o n s i d e r a t i o n of the s i t u a t i o n in Hong
Kong a n d in p a r t i c u l a r t o c o n s i d e r u r g e n t l y the
r e p o r t now b e i n g p r e p a r e d by officials on t h e
a c t i o n which should b e t a k e n if our p o s i t i o n in
Hong Kong b e c a m e u n t e n a b l e .
Cabinet Office, S. W. 1.
11th J u l y , 1967
CABINET
CONFIDENTIAL ANNEX.
CC(70) 7th Conclusions, Minute 4
Thursday, 12th F e b r u a r y , 1970, at 10.00 a . m .
In the c o u r s e of the discussion on incomes
policy THE PRIME MINISTER invited the Cabinet
to consider the wage c l a i m s before t h e m not only
on their individual m e r i t s but also in t e r m s of their
political implications during a period in which the
Government m u s t face an approaching GeneralElection.
If excessive wage s e t t l e m e n t s provoked
a new economic c r i s i s of a kind r e q u i r i n g fresh
m e a s u r e s of r e s t r i c t i o n or an autumn Budget, the
G o v e r n m e n t s freedom of e l e c t o r a l m a n o e u v r e could
be s e r i o u s l y affected;
and this danger would be
aggravated if international speculation about the
r e n e w a l of inflationary p r e s s u r e in the United
Kingdom reached a level at which the stability
of sterling c a m e under renewed t h r e a t .
La
considering the c u r r e n t wage c l a i m s , t h e r e f o r e ,
the Cabinet must weigh carefully the implied r i s k
that they might provoke a revival of demand inflation.
The r i s k of cost inflation could be held to be no l e s s
s e r i o u s ; and, although the wage c l a i m s under
consideration, being confined to the public s e c t o r ,
might be thought to have relatively little relevance
in this context, this a r g u m e n t would be nullified in
so far a s they set a precedent for c o m p a r a b l e c l a i m s
in the private s e c t o r .
The economy could not stand
a dock strike or a s e a m e n ' s s t r i k e .
But, if this w a s
so.-and if it followed that the Cabinet would have to
yield in the face of a t h r e a t of such a s t r i k e , they
should avoid, so far a s possible, any action in
r e l a t i o n to the public sector which might provoke
or aggravate demands for unacceptable wage c l a i m s
in the private s e c t o r .
These considerations had a direct bearing on
the phasing of the wage settlements now in question.
If it was indeed the case that further concessions of
the kind advocated by the responsible Ministers
might provoke an economic c r i s i s requiring further
m e a s u r e s of r e s t r i c t i o n , i t would probably be
d e s i r a b l e , on balance, to try to defer such
m e a s u r e s , if possible, until after the General
Election.
If the Labour P a r t y were then r e t u r n e d
to power, it would no doubt be distasteful to have to
introduce a policy of r e s t r i c t i o n immediately
thereafter;
faced.
but this situation would have to be
If, on the other hand, they lost the Election,
they might do so by only a n a r r o w margin; and in
that c a s e the Conservative P a r t y , who would then
constitute the Government, would have to shoulder
the responsibility for dealing with the potentially
inflationary problem which they would have
inherited, a problem which they would probably
find it impossible to r e s o l v e consistently with their
declared policies in other fields.
In either c a s e the
Labour P a r t y might be better placed than if they had
been compelled to introduce fresh disinflationary
m e a s u r e s before appealing to the country.
On this
basis the Cabinet should consider how the phasing of
forthcoming wage settlements - particularly a s
r e g a r d s the choice of effective dates for their
second stages - might contribute m o s t effectively
to a p r o c e s s designed to defer for as long as
possible the need to introduce renewed m e a s u r e s
of disinflation.
THE CHANCELLOR OF THE EXCHEQUER
said that there were c e r t a i n r i s k s in any c o u r s e of
action which would m e r e l y seek to postpone until
after a General Election the action n e c e s s a r y to deal
with the situation which might be created by
excessive wage s e t t l e m e n t s .
The Government
might be unable to adhere to the timetable involved;
and in that event they might be compelled to appeal
to the country at a time and in c i r c u m s t a n c e s which
in other r e s p e c t s would be unprbpitious.
Moreover,
the economy would be in an increasingly vulnerable
condition during the whole of the period in question;
and the Government would be putting at r i s k the
economic r e c o v e r y which they had now achieved
after s e v e r a l y e a r s of great difficulty and anxiety.
It could be argued to be better for the Labour P a r t y
that they should lose the next Election but should
leave behind them a r e c o r d of sound management
of the economy than that they should put that r e c o r d
at r i s k in order to achieve an e l e c t o r a l victory which
might be no m o r e than m a r g i n a l .
He could not
endorse this c o u r s e ; and for the r e a s o n s which
he had given e a r l i e r in the discussion he would
judge it wiser to continue to r e s i s t excessive wage
claims.
Until r e c e n t l y he had thought it possible
to accept a degree of relaxation of the p r i c e s and
incomes policy which might r e s u l t in a 10-12 per
cent r a t e of wage i n c r e a s e .
But this had proved
to be feasible for only a short period;
and now
that claims were running at a 20 per cent r a t e of
i n c r e a s e it must be made apparent that the
Government were not p r e p a r e d m e r e l y to
a c q u i e s c e in this tendency but were determined
to bring it to a halt before the situation d e t e r i o r a t e d
still further.
It was not sufficiently r e a l i s e d that all
the i n t e r e s t s now before the Cabinet had a l r e a d y
r e c e i v e d substantial wage i n c r e a s e s during the
l a s t four or five y e a r s ; and a m o r e determined
a t t e m p t should be made to convince public opinion
that the public sector had neither been unfairly
t r e a t e d in the m a t t e r of wage i n c r e a s e s nor been
allowed to fall so far behind the
The Cabinet should take particular c a r e to
p r e v e n t any d i s c l o s u r e of the fact that their
d i s c u s s i o n had involved, among other things, a
1
r e f e r e n c e to the possibility of a renewed t h r e a t
to the strength and stability of sterling.
Cabinet Office, S7W7I.
12th F e b r u a r y , 1970
S E P ( 6 7 ) 8th M e e t i n g , Item 1
M O N D A Y , 26th J U N E , 1967
E c o n o m i c Outlook to 1972
( S E P ( 6 7 ) 41)
NO CIRCULATION RECORD
T h i s note r e c o r d s part of the d i s c u s s i o n on the above i t e m which
i s not r e f e r r e d to in t h e m i n u t e s of the m e e t i n g .
THE LORD P R E S I D E N T said that, if the m a x i m u m growth r a t e
w h i c h w a s c o n s i s t e n t with stability i n the b a l a n c e of p a y m e n t s w a s the
a v e r a g e of 3 j per c e n t p e r annum postulated in the r e p o r t b y the
M e d i u m T e r m A s s e s s m e n t C o m m i t t e e a n n e x e d to SEP(67) 4 1 , the
G o v e r n m e n t could not e s c a p e the d i l e m m a of b e i n g c o m p e l l e d e i t h e r to
r e s t r i c t p e r s o n a l c o n s u m p t i o n to a d e g r e e which would be u n a c c e p t a b l e
or to r e d u c e e x p e n d i t u r e on s o c i a l s e r v i c e s in a way which would be
i n c o n s i s t e n t with the G o v e r n m e n t s philosophy and with t h e i r p o l i t i c a l
commitments.
The only way of e s c a p i n g f r o m this d i l e m m a w a s t o
s e c u r e a higher growth rate.
This m e a n t that we m u s t d e v i s e p o l i c i e s
to s e c u r e an i n c r e a s e in e x p o r t s and a r e d u c t i o n in i m p o r t s .
T h e r e was
no s i g n that e x i s t i n g p o l i c i e s w e r e l i k e l y to a c h i e v e t h i s ; and we should
t h e r e f o r e r e - e x a m i n e the d e s i r a b i l i t y of m o r e d r a s t i c c h a n g e s in p o l i c y .
H e w a s not a r g u i n g that a change in the parity of the pound was
n e c e s s a r i l y the right s o l u t i o n ; he w a s only s u g g e s t i n g that a thorough
e x a m i n a t i o n of this q u e s t i o n w a s d e s i r a b l e b e f o r e e c o n o m i c s t r a t e g y for
the m e d i u m - t e r m w a s s e t t l e d .
THE P R E S I D E N T OF THE BOARD OF TRADE said he did not
b e l i e v e that d e v a l u a t i o n would s o l v e the p r o b l e m .
N e v e r t h e l e s s , he
a g r e e d with the Lord P r e s i d e n t that e x i s t i n g p o l i c i e s s e e m e d u n l i k e l y
to e n s u r e s a t i s f a c t o r y e c o n o m i c p r o g r e s s : it s e e m e d m o r e probable
t h a t they would c o m p e l us to run the e c o n o m y at a l e v e l of d e m a n d which
would e n t a i l u n d e r - u s e of r e s o u r c e s , high u n e m p l o y m e n t and l o w i n v e s t m e n t .
S o m e n e w d e p a r t u r e i n policy m i g h t t h e r e f o r e be n e e d e d ; and quantitative
r e s t r i c t i o n of i m p o r t s w a s a p o s s i b i l i t y .
He did not advocate that this
s h o u l d n e c e s s a r i l y be c o n s i d e r e d now; but it should be r e - e x a m i n e d before
l o n g u n l e s s s o m e e v i d e n c e w a s f o r t h c o m i n g that e x i s t i n g p o l i c i e s would
l e a d t o a m o r e a c c e p t a b l e e c o n o m i c p r o s p e c t than at p r e s e n t s e e m e d l i k e l y .
In d i s c u s s i o n , it w a s pointed out that the Cabinet had d i s c u s s e d the
q u e s t i o n of parity a s r e c e n t l y a s the m e e t i n g at Chequers on 30th A p r i l .
N o u s e f u l p u r p o s e would b e s e r v e d by r e v e r t i n g to this i s s u e , p a r t i c u l a r l y
in v i e w of the r i s k s w h i c h could a r i s e if it w e r e r e o p e n e d and this b e c a m e
known.
T h e r e w e r e no c o n c l u s i v e grounds for thinking that d e v a l u a t i o n
would m a k e p o s s i b l e a h i g h e r growth r a t e and h e n c e a m o r e rapid i n c r e a s e
in p e r s o n a l c o n s u m p t i o n and public e x p e n d i t u r e .
M o r e o v e r , devaluation
c o u l d only a c h i e v e t h e d e s i r e d e f f e c t s on. the balance of p a y m e n t s if it w e r e
a c c o m p a n i e d by a c o n s i d e r a b l e m e a s u r e of deflation, including h i g h e r
taxation.
It would t h e r e f o r e e n t a i l a r e a l r e d u c t i o n in the standard of l i v i n g ,
w h i c h would be r e s e n t e d by public opinion.
The extent of the benefit to our
exports which might a c c r u e from devaluation was problematic, since many
e x p o r t e r s m i g h t s i m p l y a b s o r b the i n c r e a s e d profits i n s t e a d of reducing
p r i c e s and expanding s a l e s abroad.
A r e c e n t poll of informed opinion showed that, while a m a j o r i t y
of e c o n o m i s t s were in favour of a change in parity, the g r e a t e r number of
b a n k e r s and i n d u s t r i a l i s t s w e r e equally opposed to it.
So w e r e the general
public, on grounds that it was domestically painful to devalue the c u r r e n c y :
even if the i s s u e was imperfectly understood, the conclusions reached in
that r e s p e c t were sound enough. In any c a s e , a decision to change the
p a r i t y could only be taken in the light of international considerations, in
c i r c u m s t a n c e s in which the credibility of the G o v e r n m e n t s action would
be a c c e p t e d , and not simply on the grounds of t h V s t a t e of the d o m e s t i c
economy.
28th J u n e , 1967
NO CIRCULATION R E C O R D
CC(67) 2nd C o n c l u s i o n s (19th J a n u a r y , 1967 - 10. 00 a. m . ) On 19th J a n u a r y , 1967, the C a b i n e t c o n s i d e r e d the situation which had
a r i s e n a s a r e s u l t of t h e fact that L o r d H a r e w o o d h a d ' r e c e n t l y announced in
public h i s i n t e n t i o n to p a r t f r o m h i s wife and to m a r r y M i s s Tuckwell, by
whom he had had a son s o m e two y e a r s e a r l i e r .
Divorce proceedings
between L o r d H a r e w o o d and h i s wife h a d a l r e a d y b e e n s e t in t r a i n .
T H E H O M E SECRETARY i n f o r m e d the C a b i n e t that L o r d H a r e w o o d
would be p r e v e n t e d by the R o y a l M a r r i a g e s Act, 1772, f r o m c o n t r a c t i n g a
new m a r r i a g e without the c o n s e n t of t h e S o v e r e i g n signified under the G r e a t
Seal and d e c l a r e d in C o u n c i l .
A l t e r n a t i v e l y , if his m a r r i a g e w e r e
d i s a p p r o v e d by t h e S o v e r e i g n , he would be entitled to give notice of
his i n t e n t i o n to t h e P r i v y Council and to m a r r y after an i n t e r v a l of
12 m o n t h s u n l e s s both H o u s e s of P a r l i a m e n t had d e c l a r e d t h e i r d i s a p p r o b a ­
tion.
T h i s s i t u a t i o n , h o w e v e r , could only a r i s e if The Queen had i n i t i a l l y
refused p e r m i s s i o n ;
and, s i n c e it would be liable to s e e m a n o m a l o u s in
m o d e r n c i r c u m s t a n c e s that p e r m i s s i o n should in f a c t be withheld, it would
c l e a r l y be e m b a r r a s s i n g to Her M a j e s t y to have to adopt this c o u r s e .
Two a l t e r n a t i v e c o u r s e s of a c t i o n w e r e p o s s i b l e : ­
(a)
The A c t of 1772 could be a m e n d e d .
T h e r e w a s a s t r o n g c a s e on
m e r i t s for a l t e r i n g it s i n c e , although i t s b a s i c p u r p o s e w a s to s a f e g u a r d
the s u c c e s s i o n , i t w a s so d r a w n t h a t i t s p r o v i s i o n s a p p l i e d to many
i n d i v i d u a l s who, d e s p i t e t h e i r c o n n e c t i o n s with the R o y a l F a m i l y ,
were
n e v e r l i k e l y to s u c c e e d to the T h r o n e and w e r e t h e r e f o r e entitled to r e g a r d
their m a t r i m o n i a l affairs as their p r i v a t e concern.
On the o t h e r h a n d , the
c o n c u r r e n c e of o t h e r m e m b e r c o u n t r i e s of the C o m m o n w e a l t h w a s r e q u i r e d ,
u n d e r the Statute of W e s t m i n s t e r , in any a m e n d m e n t of the law touching the
succession;
and i t w a s u n d e s i r a b l e that t h e s e i s s u e s should be r a i s e d in
p u b l i c , for e x a m p l e in the C a n a d i a n P a r l i a m e n t , at a n i n o p p o r t u n e m o m e n t .
(b)
The Q u e e n could give h e r c o n s e n t to the r e m a r r i a g e .
But, s i n c e
she w a s Head of t h e C h u r c h a s w e l l a s Head of the S t a t e , she m i g h t be expose
to c r i t i c i s m in C h u r c h c i r c l e s if s h e c o n s e n t e d to L o r d H a r e w o o d ' s
r e m a r r i a g e , g i v e n the c i r c u m s t a n c e s of the d i v o r c e .
2P\
Of t h e s e two c o u r s e s the l a t t e r a p p e a r e d to be the l e a s t d i s a d v a n t a g e ­
ous, p r o v i d e d t h a t The Q u e e n ' s p o s i t i o n w a s p r o t e c t e d , i. e. p r o v i d e d that s h e
acted, and w a s known to a c t , on the a d v i c e of h e r United K i n g d o m M i n i s t e r s .
It would t h e r e f o r e s e e m r i g h t that the G o v e r n m e n t should t e n d e r a d v i c e to
Her M a j e s t y in t h i s s e n s e and that a t the a p p r o p r i a t e t i m e - i . e. when
Lord H a r e w o o d sought The Q u e e n ' s f o r m a l c o n s e n t to h i s r e m a r r i a g e after
the c o n c l u s i o n of the d i v o r c e p r o c e e d i n g s - they should s t a t e publicly that
they had done s o .
In d i s c u s s i o n t h e r e w a s g e n e r a l a g r e e m e n t with this p r o p o s a l .
The
Cabinet r e c o g n i s e d that, i n t e n d e r i n g f o r m a l a d v i c e to the C r o w n in a m a t t e r
of this kind, t h e y m i g h t be c r e a t i n g a p r e c e d e n t - a t l e a s t in t h e s e n s e that,
although it h a d b e e n a c c e p t e d in the p a s t t h a t The Q u e e n ' s c o n s e n t in m a t t e r s
of this kind w a s an a c t of S t a t e (and t h e r e f o r e to be given only on the a d v i c e
of M i n i s t e r s ) , t h e r e n e v e r t h e l e s s a p p e a r e d to be no p r e v i o u s o c c a s i o n on
which f o r m a l a d v i c e had i n fact b e e n t e n d e r e d in s u c h c i r c u m s t a n c e s and
t h e r e w a s c e r t a i n l y no o c c a s i o n on which a G o v e r n m e n t had p u b l i c l y s t a t e d
that they h a d so a d v i s e d t h e C r o w n .
On the o t h e r hand the c i r c u m s t a n c e s
of the p r e s e n t c a s e w e r e u n u s u a l and p e r h a p s u n l i k e l y to r e c u r ;
and t h e r e
a p p e a r e d to be no a l t e r n a t i v e to p r o c e e d i n g as w a s p r o p o s e d .
In f u r t h e r d i s c u s s i o n it w a s s u g g e s t e d that c o n s i d e r a t i o n should be
given to the p o s s i b i l i t y of a m e n d i n g the 1772 Act at s o m e o p p o r t u n e m o m e n t ,
p r o v i d e d t h a t it continued to apply to such i n d i v i d u a l s a s w e r e c l e a r l y in the
line of d i r e c t s u c c e s s i o n .
It w a s not c e r t a i n t h a t this would involve the r i s k
of e m b a r r a s s m e n t in r e l a t i o n to o t h e r m o n a r c h i c a l c o u n t r i e s of t h e
C o m m o n w e a l t h p a r t l y b e c a u s e , even if t h e i r c o n c u r r e n c e w a s r e q u i r e d ,
this n e e d not n e c e s s a r i l y i m p l y t h a t they m u s t t h e m s e l v e s e n a c t l e g i s l a t i o n
for this p u r p o s e (as d i s t i n c t f r o m signifying t h e i r a s s e n t by a n e x e c u t i v e
d e c i s i o n ) and p a r t l y b e c a u s e it could be a r g u e d that United K i n g d o m l e g i s l a t i o n
which m e r e l y l i m i t e d the A c t t o , s a y , t h e f i r s t six i n d i v i d u a l s in the line of
s u c c e s s i o n would not in i t s e l f affect the s u c c e s s i o n and that t h e c o n c u r r e n c e
of other C o m m o n w e a l t h c o u n t r i e s would not t h e r e f o r e be r e q u i r e d in any
event.
On t h e o t h e r hand Sir Anthony E d e n had s t a t e d , in r e p l y to a
P a r l i a m e n t a r y Q u e s t i o n in 1955, t h a t no a m e n d m e n t of the 1772 A c t could
be u n d e r t a k e n without the c o n c u r r e n c e of t h e o t h e r C o m m o n w e a l t h c o u n t r i e s ;
and in t h e l i g h t of t h i s s t a t e m e n t t h e r e m i g h t be a c a s e for e x a m i n i n g the
question f u r t h e r in due c o u r s e .
The Cabinet ­
(1)
Took note t h a t a t an a p p r o p r i a t e m o m e n t the P r i m e
M i n i s t e r would t e n d e r a d v i c e to The Queen t h a t
s h e should consent to L o r d H a r e w o o d ' s r e m a r r i a g e .
(2)
A g r e e d that it should be m a d e publicly known that, in
giving h e r consent, The Q u e e n had a c t e d on the a d v i c e
of h e r United K i n g d o m M i n i s t e r s .
(3)
Took note that the P r i m e M i n i s t e r would a r r a n g e for
f u r t h e r c o n s i d e r a t i o n to be given in due c o u r s e to
the d e s i r a b i l i t y of a m e n d i n g the R o y a l M a r r i a g e s
A c t , 1772.
Cabinet Office,
S;W.l.
19th J a n u a r y , 1967
"SO d e v a l u a t i o n we could r e a s o n a b l y a i m a t an i m p r o v e m e n t of at
l e a s t £300 m i l l i o n in our b a l a n c e of p a y m e n t s .
T h i s , with the
f u r t h e r i m p r o v e m e n t s w h i c h m i g h t be e x p e c t e d in l a t e r y e a r s ,
should offset any d a m a g e to our b a l a n c e of p a y m e n t s which might
r e s u l t f r o m o u r e n t r y into the C o m m u n i t y .
A t the s a m e t i m e ,
s i n c e the i n i t i a l d a m a g e to the b a l a n c e of p a y m e n t s that would
b e c a u s e d by d e v a l u a t i o n w a s a l s o put a t about £300 m i l l i o n ,
the t o t a l shift of r e s o u r c e s t h a t would be r e q u i r e d in the f i r s t
y e a r would be s o m e £600 m i l l i o n .
P a r t of t h i s d i v e r s i o n of
r e s o u r c e s would be a c h i e v e d by the d e f l a t i o n a r y effect of h i g h e r
i m p o r t p r i c e s , which would, of c o u r s e , entail a h i g h e r c o s t of
living.
But it would a l s o b e n e c e s s a r y to i m p o s e a d d i t i o n a l
t a x e s to t h e e x t e n t r e q u i r e d to e n s u r e that sufficient r e s o u r c e s
w e r e a v a i l a b l e to m e e t the i m p r o v e m e n t in our e x p o r t s which
the d e v a l u a t i o n would m a k e p o s s i b l e .
The a m o u n t of this
a d d i t i o n a l t a x a t i o n w a s put a t about £400 m i l l i o n .
These
c a l c u l a t i o n s a s s u m e d that w e should m a i n t a i n a r a t e of
u n e m p l o y m e n t of the o r d e r of 1. 8 p e r c e n t , i. e . s o m e w h a t l e s s
than we now h a d .
In s h o r t , we should need to d i v e r t a t l e a s t
£600 m i l l i o n of r e s o u r c e s f r o m d o m e s t i c u s e to e x p o r t s ; and
a d d i t i o n a l t a x a t i o n of p e r h a p s £400 m i l l i o n would h a v e to be
r a i s e d in t h e f i r s t y e a r .
The r e s u l t i n g a u s t e r i t i e s would
t h e r e f o r e b e a d d i t i o n a l to t h o s e which we w e r e suffering a t p r e s e n t .
It w a s a l s o n e c e s s a r y to take into a c c o u n t the e x t e r n a l
effects of d e v a l u a t i o n .
F i r s t , t h e r e would be the effects of
i m i t a t i o n of, and r e t a l i a t i o n a g a i n s t , our d e v a l u a t i o n of which
he had already spoken.
T h e r e would a l s o be a l o s s of confidence
b y the h o l d e r s of s t e r l i n g , who would i n e v i t a b l y d r a w down t h e i r
b a l a n c e s if we d e v a l u e d .
T h e r e would be a f u r t h e r r e a c t i o n
upon confidence in the d o l l a r , opening up the p o s s i b i l i t y of a
flight into gold and a c o n s e q u e n t i a l r e d u c t i o n in w o r l d l i q u i d i t y ,
w h i c h in t u r n would r e a c t upon our e x p o r t m a r k e t s .
The device
of a floating r a t e which had b e e n put f o r w a r d a s a way out of
t h e s e difficulties w a s not a s o l u t i o n .
It would not be a t t r a c t i v e
to h o l d e r s of s t e r l i n g , who would b e bound to take the view that
we h a d a l l o w e d the r a t e to float in o r d e r that it should float
d o w n w a r d s r a t h e r than u p w a r d s ; and this a s s u m p t i o n would
c r e a t e the c o n d i t i o n s in w h i c h the r a t e would b e bound to fall
progressively.
In s u m the e x t e r n a l c o n s e q u e n c e s m i g h t well
l e a d to a r e t u r n of those d i s o r d e r s in w o r l d t r a d e and p a y m e n t s
which the I n t e r n a t i o n a l M o n e t a r y F u n d had b e e n e s t a b l i s h e d to
c o u n t e r ; a n d they would i n e v i t a b l y r e s u l t in a p e r i o d of
c o n s i d e r a b l e confusion b e f o r e i n t e r n a t i o n a l s t a b i l i t y w a s
eventually r e s t o r e d .
The a l t e r n a t i v e w a s t o follow a policy d e s i g n e d to
o v e r c o m e t h e i n t e r n a l d i s a b i l i t i e s f r o m which our e c o n o m y had
been suffering.
We w e r e now s e t on this c o u r s e , which would
n o t b e e a s y to follow but would n e v e r t h e l e s s be within o u r
capacity, a s r e c e n t discussions had confirmed.
It followed
t h a t , w h i l s t a t h e o r e t i c a l c a s e could be c o n s t r u c t e d in favour
of d e v a l u a t i o n a t the point w h e n we e n t e r e d the E E C , i t would
u n l e a s h s u c h p o w e r f u l a d v e r s e f o r c e s beyond o u r c o n t r o l and
would involve a b r e a c h of s o m a n y p l e d g e s w h i c h he h a d given
to h o l d e r s of s t e r l i n g that h e could not r e m a i n C h a n c e l l o r of the
E x c h e q u e r if t h i s c o u r s e w e r e a d o p t e d .
In d i s c u s s i o n it w a s a s k e d why, if the c o n s e q u e n c e s of
d e v a l u a t i o n would be so u n f a v o u r a b l e f o r u s , the F r e n c h a p p e a r e d
to h a v e benefited f r o m i t .
In r e p l y it was pointed out that the
F r e n c h (who h a d had to d e v a l u e twice) had had no p r o b l e m of franc
b a l a n c e s on the s c a l e of the s t e r l i n g b a l a n c e s .
Moreover, their
d e v a l u a t i o n s h a d b e e n a c c o m p a n i e d by p r i c e i n c r e a s e s and
c o m p u l s o r y wage s t a b i l i s a t i o n ( e s t i m a t e d to have p r o d u c e d an
8 p e r cent r e d u c t i o n in r e a l w a g e s ) , which had b e e n m a d e p o s s i b l e
only by the p e r s o n a l a u t h o r i t y of G e n e r a l de Gaulle and the
w e a k n e s s of the F r e n c h P a r l i a m e n t .
It did not s e e m p o l i t i c a l l y
f e a s i b l e that, e . g . P a r t IV of the P r i c e s and I n c o m e s A c t , should
b e r e i n t r o d u c e d and r e i n f o r c e d not only in o r d e r t o hold down
i n c o m e s but a l s o to effect a s u b s t a n t i a l reduction i n t h e m .
It w a s a l s o a s k e d w h e t h e r the i m p r o v e m e n t in the b a l a n c e
of p a y m e n t s w h i c h d e v a l u a t i o n m i g h t be expected to s e c u r e in, say,
the t h i r d y e a r would not offset the d i s a d v a n t a g e s w h i c h it w a s
e s t i m a t e d would be c a u s e d in the f i r s t y e a r .
In r e p l y it w a s
s t a t e d that it w a s not p o s s i b l e to m a k e an effective quantification
of t h e s e a d v a n t a g e s b e c a u s e of the u n c e r t a i n t i e s of a s s u m p t i o n s
a b o u t s u c h f a c t o r s a s the e l a s t i c i t y of demand for e x p o r t s and
imports.
In the t h i r d y e a r the b a l a n c e of p a y m e n t s should
c e r t a i n l y show a n i m p r o v e m e n t ; b u t to r e a c h that point the
G o v e r n m e n t would f i r s t h a v e to s u r v i v e the initial i m p a c t .
In f u r t h e r d i s c u s s i o n , it w a s suggested that d e v a l u a t i o n
w a s i r r e l e v a n t to c o n s i d e r a t i o n of our e n t r y into the E E C , since
i t s effects would be c o n c e n t r a t e d in the s h o r t t e r m , w h e r e a s the
a d v e r s e c o n s e q u e n c e s of e n t r y , p a r t i c u l a r l y a s r e g a r d s a c c e p t a n c e
of the c o m m o n a g r i c u l t u r a l policy would involve a l o n g - t e r m
w o r s e n i n g of the t e r m s of t r a d e and a r e d u c t i o n in t h e s t a n d a r d
of l i v i n g .
T h e s e l o n g - t e r m effects could not be a l t e r e d by
devaluation.
On the o t h e r hand it w a s u r g e d that the a d v e r s e
c o n s e q u e n c e s of e n t r y m i g h t well c r e a t e conditions w h e r e
d e v a l u a t i o n w a s f o r c e d upon u s ; a n d it was t h e r e f o r e r i g h t to
c o n s i d e r w h e t h e r we should f o r e s t a l l this situation b y d e v a l u a t i o n
before entry.
If we e n t e r e d the C o m m u n i t y without devaluing
a n d s u b s e q u e n t l y found that we had m i s c a l c u l a t e d , w e m i g h t not
b e a l l o w e d , a s m e m b e r s of the C o m m u n i t y , to devalue our
currency.
But in that event the only a l t e r n a t i v e would b e s e v e r e
d e f l a t i o n , which in t u r n would offset the a d v a n t a g e s of e c o n o m i c
e l a n which it w a s c l a i m e d we might s e c u r e a s a c o n s e q u e n c e of
e n t r y , b u t only if we w e r e to e n t e r v e r y quickly. A s a g a i n s t
t h i s , h o w e v e r , it w a s wrong to i n t e r p r e t the a n a l y s i s which had
b e e n put b e f o r e the C a b i n e t a s r e p r e s e n t i n g devaluation and
deflation a s a l t e r n a t i v e s .
Devaluation itself would r e q u i r e to
b e r e i n f o r c e d by s h a r p deflation.
In the context of the t i m e ­
s c a l e of e n t r y to the E E C the a d d i t i o n a l shift of r e s o u r c e s
r e q u i r e d to offset the e x t r a s t r a i n w h i c h e n t r y m i g h t p l a c e on
the b a l a n c e of p a y m e n t s amounted t o no m o r e than -j of 1 p e r cent
of the e s t i m a t e d a n n u a l g r o w t h r a t e , s t a r t i n g in a b o u t 1970, and
t h e r e a f t e r making itself felt only g r a d u a l l y over a t r a n s i t i o n a l
p e r i o d of five y e a r s o r m o r e , so t h a t the full s t r a i n would not
b e f e l t until 1975 or l a t e r .
M e a n t i m e , we should h a v e had the
o p p o r t u n i t y , a s full m e m b e r s of the C o m m u n i t y , to influence the
c r i t i c a l d e c i s i o n s of the E E C on s u c h r e l e v a n t m a t t e r s a s the
c o m m o n a g r i c u l t u r a l p o l i c y and the h a r m o n i s a t i o n of e c o n o m i c
policies.
M o r e o v e r , the s a v i n g s on defence and f o r e i g n p o l i c y
w h i c h w e r e l i k e l y to e m e r g e f r o m the f o r t h c o m i n g d e c i s i o n s on
the D e f e n c e Review should p r o d u c e s u b s t a n t i a l savings in
f o r e i g n e x c h a n g e by 1975.
We should a l s o h a v e d i s c h a r g e d o u r
r e m a i n i n g d e b t s to the IMF by 1970. F u r t h e r , only f r e e a c c e s s
to the l a r g e r m a r k e t of the E E C would g i v e B r i t i s h i n d u s t r y the
n e c e s s a r y s t i m u l u s f o r i n v e s t m e n t and g r o w t h , the effects of
w h i c h would be an i n c r e a s i n g f o r c e in o u r f a v o u r in the y e a r s
1970-75.
T H E P R I M E M I N I S T E R s u m m i n g up this p a r t of the
d i s c u s s i o n , said it h a d b e e n r i g h t to c o n s i d e r the i s s u e of
d e v a l u a t i o n in the c o n t e x t of the a p p r o a c h to E u r o p e .
Devaluation
m u s t a l w a y s be one of the options open to the G o v e r n m e n t , w h e t h e r
they e n t e r e d the E E C or n o t ; and it was a l w a y s p e r m i s s i b l e f o r
the C h a n c e l l o r of the E x c h e q u e r to r a i s e this i s s u e in the
a p p r o p r i a t e way at the r i g h t t i m e .
There were, however,
e x t r e m e l y powerful o b j e c t i o n s , a s outlined by the C h a n c e l l o r
of the E x c h e q u e r and in d i s c u s s i o n , to d e v a l u a t i o n a s a w a y out
of o u r p r e s e n t and p r o s p e c t i v e d i f f i c u l t i e s .
It w a s of the
h i g h e s t i m p o r t a n c e , t h e r e f o r e , that no h i n t should be g i v e n
outside the Cabinet t h a t the q u e s t i o n of d e v a l u a t i o n had b e e n
u n d e r d i s c u s s i o n ; if any d i s c l o s u r e w e r e m a d e , the c o n s e q u e n c e s
could be e x t r e m e l y g r a v e .
The Cabinet should now r e s u m e the
m a i n t h e m e of t h e i r d i s c u s s i o n of C(67) 61.
C a b i n e t Office, S. W . l .
30th M a y , 1967
- Iv t (L
TOP SECRET
CC(67) 5Sarf C o n c l u s i o n s
T h u r s d a y , 20th July
T h i s note r e c o r d s a d i s c u s s i o n which took p l a c e a f t e r the
c o n c l u s i o n of the C a b i n e t ' s m a i n b u s i n e s s and is not r e c o r d e d in the
circulated Conclusions.
T H E C H A N C E L L O R OF THE E X C H E Q U E R said that s o m e 70 of
the G o v e r n m e n t s s u p p o r t e r s in the H o u s e of C o m m o n s h a d signed a
m a n i f e s t o , which h a d b e e n p u b l i s h e d that d a y , p r o p o s i n g in effect a
d e v a l u a t i o n of s t e r l i n g .
T h i s could h a v e s e r i o u s r e p e r c u s s i o n s on
i n t e r n a t i o n a l confidence in the p a r i t y ; and it w a s t h e r e f o r e e s s e n t i a l
that the G o v e r n m e n t t h e m s e l v e s should not be thought to be a s s o c i a t e d
in a n y w a y with the s i g n a t o r i e s of the m a n i f e s t o .
Otherwise, devaluation
m i g h t b e c o m e i n e v i t a b l e ; and a d e c i s i o n which, if it w e r e e v e r t a k e n ,
should b e an a c t of c o n s i d e r e d and d e l i b e r a t e policy would be f o r c e d on
the G o v e r n m e n t a t a t i m e and in c i r c u m s t a n c e s which m i g h t b e wholly
inappropriate.
He h i m s e l f did not a c c e p t that d e v a l u a t i o n r e p r e s e n t e d
any s o l u t i o n to our p r e s e n t e c o n o m i c d i f f i c u l t i e s ; and h e was not p r e p a r e d
to be a p a r t y to it.
M o r e o v e r , whatever views his colleagues might
p r i v a t e l y hold on the p o s s i b l e m e r i t s of d e v a l u a t i o n , it w a s e s s e n t i a l ,
if the G o v e r n m e n t w e r e to r e t a i n t h e i r f r e e d o m of d e c i s i o n , that they
should c o n s i s t e n t l y m a i n t a i n in public that the G o v e r n m e n t w e r e r e s o l v e d
to m a i n t a i n the p r e s e n t p a r i t y .
In d i s c u s s i o n t h e r e w a s g e n e r a l a g r e e m e n t that M i n i s t e r s should
follow the c o u r s e i n d i c a t e d by the C h a n c e l l o r of the E x c h e q u e r and should
e n s u r e t h a t t h e i r j u n i o r M i n i s t e r s and P a r l i a m e n t a r y P r i v a t e S e c r e t a r i e s
did l i k e w i s e .
At the s a m e t i m e , M i n i s t e r s should avoid inflating the
i m p o r t a n c e of the m a n i f e s t o which h a d b e e n published that d a y .
It m u s t
be d e e m e d to h a v e b e e n p r o m p t e d l a r g e l y b y a p p r e h e n s i o n s on the p a r t
of the G o v e r n m e n t s s u p p o r t e r s that the c u r r e n t r e v i e w of public
e x p e n d i t u r e would r e s u l t in d r a s t i c r e d u c t i o n s in e x p e n d i t u r e on the s o c i a l
s e r v i c e s ; and it would t h e r e f o r e h e l p to r e d u c e the c h a n c e s of f u r t h e r
d a m a g i n g s t a t e m e n t s on d e v a l u a t i o n if a n e a r l y o p p o r t u n i t y could be found
to a l l a y t h e s e a p p r e h e n s i o n s .
It would a l s o be p a r t i c u l a r l y i m p o r t a n t to
s e e k to s t e a d y opinion on the q u e s t i o n of d e v a l u a t i o n d u r i n g the f o r t h c o m i n g
d e b a t e on the e c o n o m i c s i t u a t i o n ; and^since this d e b a t e would be founded
on a n Opposition Motion of "no c o n f i d e n c e " a r r a n g e m e n t s should be m a d e
to r e m i n d the G o v e r n m e n t s s u p p o r t e r s of t h e i r o v e r r i d i n g duty in such
circumstances.
/
T H E P R I M E M I N I S T E R , s u m m i n g u p the d i s c u s s i o n , s a i d the
C h a n c e l l o r of the E x c h e q u e r w a s c l e a r l y r i g h t to take a r o b u s t line in
a f f i r m i n g that the G o v e r n m e n t w e r e r e s o l v e d to m a i n t a i n the e x i s t i n g
p a r i t y of s t e r l i n g .
It w a s e s s e n t i a l that all M i n i s t e r s should follow
this l e a d and should e n s u r e that their j u n i o r M i n i s t e r s did l i k e w i s e .
The Cabinet T o o k n o t e , with a p p r o v a l , of the P r i m e M i n i s t e r s s u m m i n g u p of t h e i r discussion. Cabinet Office, S . W . 1 .
20th J u l y , 1967
NO CIRCULATION RECORD CC(67) 25th C o n c l u s i o n s
(Sunday, 30th A p r i l , 1967 - 10.30 a . m . )
frr OF
I INTO T H E
PEAN
l
M I C
[ilNITY O N
PITED
JOM
NCE OF
Ints
T h i s note r e c o r d s a p a r t of the d i s c u s s i o n b y the Cabinet,
which i s not included i n the c i r c u l a t e d r e c o r d , of the note by the
S e c r e t a r y of the C a b i n e t (C(67) 61) on the effects of e n t r y into
the E u r o p e a n E c o n o m i c C o m m u n i t y (EEC) on the United Kingdom
b a l a n c e of p a y m e n t s .
It w a s a r g u e d that it w a s a m a j o r p r e m i s e of the
m e m o r a n d u m b e f o r e the Cabinet that we should not e n t e r the
E E C u n l e s s our e c o n o m y w a s fully c o m p e t i t i v e , with a
r e l a t i v e l y good l e v e l of efficiency - w a g e s and a s u r p l u s on the
b a l a n c e of p a y m e n t s sufficient to e n a b l e us to take the s t r a i n s
of e n t r y .
But we w e r e s t i l l s o m e way f r o m such a condition; and
if w e w e r e to e n t e r in any w e a k e r s t a t e , the c o n s e q u e n c e s would
be g r a v e .
In f u r t h e r a n c e of our e x i s t i n g b a l a n c e of p a y m e n t s
o b j e c t i v e s , it had a l r e a d y b e e n n e c e s s a r y f i r s t to a r r e s t , and now
to continue to r e s t r a i n , the r a t e of g r o w t h of the e c o n o m y ; to
m a i n t a i n an u n d e s i r a b l y high l e v e l of u n e m p l o y m e n t ; and to c u r t a i l
d e s i r a b l e social expenditure.
If we w e r e to e n t e r the E E C , the
s u b s t a n t i a l l y a d v e r s e effects on our b a l a n c e of p a y m e n t s would
add to t h e s e p r e s e n t d i f f i c u l t i e s .
It would not be a c c e p t a b l e ,
h o w e v e r , to m e e t this a d d i t i o n a l b u r d e n s i m p l y by intensifying
p r e s e n t d e f l a t i o n a r y p o l i c i e s with t h e i r u n p a l a t a b l e e c o n o m i c
and s o c i a l c o n s e q u e n c e s ; and it would t h e r e f o r e be n e c e s s a r y to
consider major policy changes.
T h e r e w e r e two m a i n
p o s s i b i l i t i e s - f i r s t , a m a j o r change in f o r e i g n p o l i c y which
would p e r m i t c u t s in d e f e n c e e x p e n d i t u r e o v e r s e a s g r e a t e r than
t h o s e now in c o n t e m p l a t i o n (a c o u r s e which would b e e n t i r e l y
c o n s i s t e n t with e n t r y into the E E C ) ; s e c o n d , a change in the
p a r i t y of s t e r l i n g .
In p a r t i c u l a r , without s o m e d e g r e e of
d e v a l u a t i o n we w e r e u n l i k e l y to s e c u r e the f u r t h e r shift of
r e s o u r c e s into e x p o r t s and i m p o r t s u b s t i t u t i o n , over and above
that n e c e s s a r y to r e s o l v e our p r e s e n t d i f f i c u l t i e s , which would
be r e q u i r e d to m i t i g a t e the a d v e r s e effects of e n t r y on the b a l a n c e
of p a y m e n t s .
But a d e c i s i o n to d e v a l u e s t e r l i n g could be
d i s c u s s e d only by a v e r y s m a l l n u m b e r of M i n i s t e r s ; and both
the d i s c u s s i o n and the d e c i s i o n would have not only to r e m a i n
s e c r e t b u t , if n e c e s s a r y , to be denied until the d e c i s i o n had been
announced.
It w a s t h e r e f o r e r i g h t that t h e r e should be s o m e
d i s c u s s i o n of d e v a l u a t i o n b e f o r e a n y d e c i s i o n w a s taken which
m i g h t , a s a c o n s e q u e n c e , l e a d to c i r c u m s t a n c e s in which
d e v a l u a t i o n could not b e r u l e d out.
THE P R I M E MINISTER said that the points w h i c h had
b e e n r a i s e d w e r e r e l e v a n t in the p r e s e n t c o n t e x t .
Nevertheless,
the C a b i n e t would a p p r e c i a t e that t h e r e w e r e g r e a t d a n g e r s in
any d i s c u s s i o n of a change in the p a r i t y , a s w a s shown b y the
e x p e r i e n c e s of l a s t J u l y when a g r a v e r u n on s t e r l i n g had
r e s u l t e d f r o m a p o p u l a r belief that the G o v e r n m e n t had a n
a d j u s t m e n t of the p a r i t y u n d e r c o n s i d e r a t i o n .
It m u s t a l w a y s
be open t o any C h a n c e l l o r of the E x c h e q u e r to c o n s i d e r
d e v a l u a t i o n a t the p r o p e r t i m e and in full s e c r e c y .
In the
context of e n t r y to the C o m m u n i t y , h o w e v e r , t h e r e would p r o b a b l y
be s t r o n g r e s i s t a n c e in F r a n c e to a B r i t i s h d e v a l u a t i o n .
During
the v i s i t which he and the F o r e i g n S e c r e t a r y h a d r e c e n t l y paid to
P a r i s M . P o m p i d o u h a d d i s c l a i m e d the s e n t i m e n t s a t t r i b u t e d to
h i m l a s t J u l y and h a d s p e c i f i c a l l y s t a t e d that we had b e e n r i g h t
not to d e v a l u e at that t i m e .
Whilst d e v a l u a t i o n r e m a i n e d an
option w h i c h w a s open to u s , it w a s not a p n e - w a y option; it
could h a v e e c o n o m i c c o n s e q u e n c e s no l e s s u n p l e a s a n t than t h o s e
of d e f l a t i o n .
The Cabinet m i g h t wish to d i s c u s s the subject
f u r t h e r f r o m this p o i n t of v i e w .
But it would be i m p e r a t i v e that
any s u c h d i s c u s s i o n should r e m a i n s t r i c t l y s e c r e t and should not
be i m p a r t e d to any o t h e r i n d i v i d u a l , w h e t h e r M i n i s t e r i a l , official
or a d v i s o r y .
T H E CHANCELLOR OF THE E X C H E Q U E R said h e a g r e e d
that it w a s r i g h t that h e should give the C a b i n e t h i s v i e w s on this
q u e s t i o n in the s t r i c t e s t s e c r e c y .
He w a s bound to say a t the
o u t s e t t h a t d e v a l u a t i o n w a s not a n option which w a s open to h i m
p e r s o n a l l y - he had given too m a n y p l e d g e s to h o l d e r s of s t e r l i n g
for t h a t .
N e v e r t h e l e s s , i t m u s t be r e c o g n i s e d that d e v a l u a t i o n
r e m a i n e d both an option open to us and a c o u r s e which m i g h t be
f o r c e d upon u s .
It w o u l d , h o w e v e r , p r e s e n t u s with f u n d a m e n t a l
d i f f i c u l t i e s , of which the m o s t i m p o r t a n t w a s the p r o b l e m of
c h o o s i n g the r i g h t r a t e to w h i c h to d e v a l u e .
Too s m a l l a
d e v a l u a t i o n would l e a d to the e x p e c t a t i o n of f u r t h e r s i m i l a r
m e a s u r e s a n d so to r e n e w e d s p e c u l a t i o n .
It would a l s o confer
no sufficient a d v a n t a g e , e . g . in t e r m s of i m p o r t d e t e r r e n t s a n d
export incentives.
On the o t h e r hand, too g r e a t a d e v a l u a t i o n
would i n v i t e o t h e r c o u n t r i e s to follow o u r l e a d not only in o r d e r
to s t a y on c o m p a r a t i v e l y f a v o u r a b l e c o m p e t i t i v e t e r m s with u s
but p e r h a p s a l s o in c e r t a i n c a s e s for r e t a l i a t o r y r e a s o n s s t e m m i n g
f r o m u l t e r i o r m o t i v e s in the i n t e r n a t i o n a l m o n e t a r y field - the
F r e n c h h o s t i l i t y to the d o l l a r a s the m a i n r e s e r v e c u r r e n c y w a s
a c a s e in point.
The c h o i c e of r a t e would t h e r e f o r e be a v e r y
delicate one.
If we c h o s e the r i g h t r a t e , our i m p o r t p r i c e s
would n o t r i s e to the full e x t e n t of the d e v a l u a t i o n , b e c a u s e s o m e
of o u r s t e r l i n g a r e a s u p p l i e r s , for e x a m p l e , would d e v a l u e
p a r i p a s s u with u s .
N o r would our e x p o r t p r i c e s fall in r e a l
t e r m s b y the full e x t e n t of the change in p a r i t y , b e c a u s e s o m e
of o u r e x p o r t e r s would take the opportunity to i n c r e a s e t h e i r
p r o f i t m a r g i n s w h i l s t m a i n t a i n i n g o r i n c r e a s i n g t h e i r volume
of s a l e s .
In g e n e r a l , h o w e v e r , it could be a s s u m e d that, while
d e v a l u a t i o n would c a u s e s u b s t a n t i a l s h o r t - t e r m d a m a g e to the
b a l a n c e of p a y m e n t s , its l o n g - t e r m i m p a c t should be m u c h m o r e
than offset b y the e x p a n s i o n of e x p o r t s a n d the c o n t r a c t i o n of
i m p o r t s w h i c h it should s t i m u l a t e .
A final a s s e s s m e n t of the
total effect, h o w e v e r , w a s v e r y difficult to f r a m e b e c a u s e of the
p r o b l e m s of q u a n t i f i c a t i o n which had b e e n u n d e r l i n e d in a n o t h e r
c o n t e x t d u r i n g the p r e s e n t d i s c u s s i o n s .
Nevertheless, a
t e n t a t i v e a n a l y s i s of the o v e r a l l effects h a d b e e n m a d e in the
light of the e x p e r i e n c e of the F r e n c h d e v a l u a t i o n s of 1957 and
1959, on the b a s i s of the m o s t f a v o u r a b l e a s s u m p t i o n s which
could be m a d e a s to the c h o i c e of r a t e and other f a c t o r s .
On
that b a s i s the b e s t e s t i m a t e w a s that in the f i r s t y e a r a f t e r a
$
The circulation o f this paper has been strictly limited.
It is issued for the personal use
TOP
ou^fi^.Aai*fifr*r^ti^
SECRET
Copy No...
CABINET
CONFIDENTIAL. ANNEX
CC(69) 15th C o n c l u s i o n s , Minute 1
Thursday, 3rd April^ 1969 at 10. 00 a. m .
THE PRIME MINISTER said that, during his absence on
his v i s i t t o N i g e r i a , a political situation had developed, initially
within the Parliamentary Labour Party ( P L P ) and subsequently
on a nation-wide s c a l e , which c l e a r l y required the f i r m e s t handling
by the Government.
He h i m s e l f intended t o give a clear lead for
this purpose; but he would n e e d the full support of the Cabinet,
acting in complete unity.
There had for some t i m e b e e n a growing tendency for s o m e
M i n i s t e r s to a c t in ways which c a l l e d in question the collective
r e s p o n s i b i l i t y of the Cabinet, in s o far as they had apparently felt
f r e e , in their p e r s o n a l dealings both with m e m b e r s of the P L P and
with the P r e s s , t o d i s s o c i a t e t h e m s e l v e s from c e r t a i n of the
G o v e r n m e n t s p o l i c i e s and to allow this to be known to outside
b o d i e s , particularly the Trade U n i o n s , with whom their c o l l e a g u e s
w e r e often conducting difficult and delicate negotiations in the name
Before a d e c i s i o n was reached on any
of the Government as a whole.
i t e m of Government policy a M i n i s t e r was entitled t o defend his own
point of view within the Cabinet as strongly and p e r s u a s i v e l y as he
wished.
But once a d e c i s i o n had b e e n taken the principle of
c o l l e c t i v e r e s p o n s i b i l i t y required e v e r y m e m b e r of an Administration
t o e n d o r s e it and t o defend it t o any outside body on any o c c a s i o n ,
This r e m a i n e d true even if the
whether private or public.
M i n i s t e r was h i m s e l f a m e m b e r of the outside body concerned.
There was no objection in principle t o M i n i s t e r s retaining
affiliations of this kind provided tha.t no conflict of i n t e r e s t or
allegiance resulted.
But this p r o v i s o was e s p e c i a l l y important
in the c a s e of M i n i s t e r s who w e r e m e m b e r s of the National Executive
C o m m i t t e e of the Labour Party (NEC), where any c l a s h of l o y a l t i e s
It had to b e
was liable to b e particularly e m b a r r a s s i n g .
r e c o g n i s e d that the NEC's concept of its r e l a t i o n s h i p to the
P a r l i a m e n t a r y Party had changed s i n c e the Labour Party became the
Government Party,
During the Labour Government of 1945-51 the
E x e c u t i v e would n e v e r have sought t o enforce a d e c i s i o n of the annual
And e v e n in I 9 6 0 ,
c o n f e r e n c e of the Party on the Government.
when the Labour Party were i n Opposition, the Executive had
r e f u s e d t o try t o i m p o s e the d e c i s i o n s of the conference on the P L P ,
N o w , however,, it w a s seeking to a s s e r t a right to withhold support
f r o m the Government on i s s u e s on which the annual conference had
not y e t e x p r e s s e d a v i e w .
'
It would be unfortunate if c i r c u m s t a n c e s d e v e l o p e d ,
perhaps later in the y e a r , in which it proved i m p o s s i b l e to d e a l
with this situation e x c e p t by means of a ruling that no m e m b e r of
the Cabinet might offer himself for o l e c t i o n to the NEC.
He
h i m s e l f would greatly r e g r e t it if he were f o r c e d to give such a
r u l i n g , since the r e s u l t would be not only t o weaken the links
b e t w e e n the Government and the NEC but a l s o to reduce the
latter t o a body which was competent m e r e l y to d i s c u s s and to
p r o t e s t but not to e x e r c i s e influence or to accept r e s p o n s i b i l i t y .
N e v e r t h e l e s s , this situation could be avoided only if M i n i s t e r s
t h e m s e l v e s r e c o g n i s e d and accepted that, where any conflict of
l o y a l t i e s a r o s e , the principle of the c o l l e c t i v e r e s p o n s i b i l i t y of
the Government w a s absolute and o v e r - r i d i n g in all c i r c u m s t a n c e s
and that, if any M i n i s t e r felt unable to subscribe to this principle
without r e s e r v a t i o n , it was his duty to r e s i g n his office forthwith.
He r e g r e t t e d that he had had t o reaffirm this doctrine and
t o e m p h a s i s e its c o r r e c t interpretation in relation t o m e m b e r s h i p
of the NEC,
But r e c e n t events had left him no alternative; and,
s i n c e NEC m e m b e r s h i p was not confined to m e m b e r s of the
Cabinet, he would arrange t o draw the attention of a l l m e m b e r s of
the Administration to the principle involved.
F o r t h i s purpose he
m u s t formally invite the Cabinet to endorse his statement as the
definition of a code of conduct to be o b s e r v e d by all M i n i s t e r s in
r e l a t i o n to the c o l l e c t i v e responsibility of the Government.
T h e r e a f t e r it would be n e c e s s a r y to give further consideration to
the b e s t means of improving communication between the
Government and the P L P and r e s t o r i n g the morale of the Party as
a whole.
In d i s c u s s i o n r e f e r e n c e was made to the meeting of the
NEC on Wednesday, 26th M a r c h , at which the Home S e c r e t a r y
had voted for a r e s o l u t i o n which was at variance with the
G o v e r n m e n t s policy on industrial r e l a t i o n s , as recently published
in the White Paper "In P l a c e of Strife" (Cmnd. 3888).
THE HOME
SECRETARY said that in his view there had b e e n only a marginal
difference between the attitude which he had adopted at the NEC
m e e t i n g and the attitude adopted by the F i r s t S e c r e t a r y of State
when she had spoken in defence of the White Paper.
He would ask
c o l l e a g u e s to r e m i n d t h e m s e l v e s of the s p e e c h e s of the F i r s t
S e c r e t a r y and her P a r l i a m e n t a r y S e c r e t a r y during the debate on
the White Paper in the House of C o m m o n s .
She had c l e a r l y said
on that o c c a s i o n that its proposals w e r e a matter for d i e c u s s i o n
with the i n t e r e s t s a f f e c t e d and might therefore need t o be amended
b e f o r e l e g i s l a t i o n was introduced.
U n l e s s this offer was m e a n i n g ­
l e s s and it was now intended that the Government would not in any
c i r c u m s t a n c e s be prepared to modify the proposals in the White
This was a l l
P a p e r , there was c l e a r l y 6 c o p e for c o m p r o m i s e .
that he had sought t o a c h i e v e , bearing in mind the difficult
r e l a t i o n s h i p s with the Party and the unions in the s u m m e r ahead.
E v e n in i t s original f o r m the r e s o l u t i o n before the NEC had b e e n
r e l a t i v e l y mildly worded.
M o r e o v e r , the amendment which had
b e e n proposed v/ould have made it m i l d e r s t i l l in s o far a s it
would have had the effect that the E x e c u t i v e would not have b e e n
c o m m i t t e d to oppose "any" of the p r o p o s a l s but would have
indicated that they could not endorse "all" of them and would have
urged the F i r s t S e c i e t a r y of State t o give the matter further
consideration.
In its final f o r m , it c a m e s o near to the purpose
of the statement which the Government t h e m s e l v e s had made when
the White Paper was originally published that he could not agree
that t h e r e had b e e n any b r e a c h of c o l l e c t i v e r e s p o n s i b i l i t y on his
part.
But, if a contrary v i e w was taken, he was v e r y ready t o
d i s c u s s the matter further with the P r i m e Minister,
On the other hand it was r e c a l l e d that the Cabinet had
c o n s i d e r e d at an e a r l i e r stage a s u g g e s t i o n that the G o v e r n m e n t s
p r o p o a a l s should be published a s a Green Paper or in some other
f o r m which would indicate that the c o n t r o v e r s i a l p r o p o s a l s in
p a r t i c u l a r w e r e put forward as a b a s i s for public d i s c u s s i o n w i t h ­
out c o m m i t m e n t on the G o v e r n m e n t s part.
But they had specifically
r e j e c t e d this s u g g e s t i o n and had decided that the p r o p o s a l s should be
published as a White P a p e r , L e. a s a definite statement of
Government policy which was not negotiable.
Equally, the Cabinet
had decided that there could be no c o n c e s s i o n on the t h r e e cardinal
points in these p r o p o s a l s - n a m e l y , that an official strike should be
p r e c e d e d by a s e c r e t b a l l o t ; that an unofficial strike should be
p r e c e d e d by a pause for conciliation; and that this pause should, if
n e c e s s a r y , be enforced by the sanction of attachment of e a r n i n g s .
And they had ruled that only if alternative suggestions which would
be no l e s s effective w e r e produced could there be any q u e s t i o n of
modifying these p r o p o s a l s .
Certain hypothetical modifications of
this kind w e r e in fact under c o n s i d e r a t i o n ; but this did not affect
the fact that those who took part in the m e e t i n g of the NEC on
26th M a r c h w e r e w e l l a w a r e that the i s s u e with which they were
dealing was an i s s u e of major policy- on which the G o v e r n m e n t s
p o s i t i o n had b e e n made c l e a r in the White Paper.
The Home
S e c r e t a r y ' s intervention at the NEC could therefore be argued t o
have b e e n , in e f f e c t , a vote against the G o v e r n m e n t s policy and an
attempt t o modify that poiicy f r o m a position outside the Cabinet.
As a r e s u l t the r e s o l u t i o n which had finally e m e r g e d had inevitably
prejudged to s o m e extent the outcome of the d i s c u s s i o n s with the
i n t e r e s t s concerned which the Government had undertaken to initiate;
and the extent of the G o v e r n m e n t s e m b a r r a s s m e n t w a s illustrated
by the f a c t that Trade Union branches in v a r i o u s parts of the country
w e r e now writing to c e r t a i n M i n i s t e r s deploring the fact that they
w e r e among those who had voted in favour of the White Paper.
M o r e o v e r , the NFC had s e e n fit, during the public c o n t r o v e r s y
which had followed t h e i r m e e t i n g , to r e f u s e to c i r c u l a t e to the
P r e s s c e r t a i n p a s s a g e s in a statement by a m e m b e r of the Cabinet
in which he had c r i t i c i s e d the p r o c e e d i n g s .
The whole episode
d e m o n s t r a t e d the need for the P r i m e Minister to r e a s s e r t his
authority in the Cabinet and t o require Ministers to accept the
d i s c i p l i n e n e c e s s a r i l y inherent in the concept of c o l l e c t i v e
r e s pons ib ility,
THE PRIME MINISTER, summing up the d i s c u s s i o n , said
that, given the Cabinet's e a r l i e r d e c i s i o n s about the b a s i s on which
the White Paper should be published, it was c l e a r that any Minister
who had voted in favour of the resolution before the NEC at their
m e e t i n g on 26th March had c o m m i t t e d a b r e a c h of the principle of
collective Ministerial responsibility.
N e v e r t h e l e s s , he was m o r e
concerned with the future than with the past; and, provided that the
b a s i c principle was thenceforward observed s t r i c t l y , he did not
propose to take any further a c t i o n in relation to the NEC m e e t i n g .
It was open to any Minister t o r a i s e any matter within the Cabinet,
which would have another opportunity to d i s c u s s the i s s u e s involved
when the relevant l e g i s l a t i o n on industrial relations came forward
for consideration.
Meanwhile M i n i s t e r s were c o m m i t t e d ,
individually and c o l l e c t i v e l y , to support the Cabinet's e a r l i e r
d e c i s i o n as e x p r e s s e d in the White Paper "In P l a c e of S t r i f e "
u n l e s s and until a l t e r n a t i v e , and no l e s s a c c e p t a b l e , proposals
w e r e put forward.
As r e g a r d s the m o r e general i s s u e the practice of
canvassing outside support for p e r s o n a l v i e w s m u s t thenceforward
cease.
It was possible that he had b e e n too tolerant in this r e s p e c t
in the p a 6 t j but he must now require the whole Cabinet to r e a f f i r m
the principle of c o l l e c t i v e M i n i s t e r i a l r e s p o n s i b i l i t y in the f o r m in
which he had stated it and in r e l a t i o n not only to White P a p e r s but
a l s o to G r e e n Papers while they were the subject of public
d i s c u s s i o n and t o any other s t a t e m e n t s of Government policy.
He
would take s t e p s to e n s u r e that a l l m e m b e r s of the Government who
were not m e m b e r s of the Cabinet were informed that t h e y , t o o ,
would be expected to comply s t r i c t l y with this principle t h e n c e ­
f o r w a r d ; and he would give further c o n s i d e r a t i o n t o the implications
of the action of Transport House in refusing t o c i r c u l a t e , and thereby
purporting t o c e n s o r , a public statement by a Cabinet Minister.
He would u s e his own d i s c r e t i o n in deciding the m e a n s by
which the outcome of the Cabinet's d i s c u s s i o n should be g i v e n
appropriate publicity, as was c l e a r l y n e c e s s a r y in order to r e s t o r e
the m o r a l e of the Labour Party.
The Cabinet ­
(1)
Took note, with a p p r o v a l , of the P r i m e Minister 's statement about the principle of c o l l e c t i v e M i n i s t e r i a l r e s p o n s i b i l i t y and of his intention t o bring h i s statement t o the notice of a l l m e m b e r s of the A d m i n i s t r a t i o n a s a code of conduct t o be
strictly o b s e r v e d ,
(2)
A s s u r e d the P r i m e Minister of their full support
in any action which he might find it n e c e s s a r y t o
take in order to d e a l with any b r e a c h of t h i s
principle.
(3)
A g r o e d that in the exceptional c i r c u m s t a n c e s of
the c a s e it would be d e s i r a b l e that appropriate
publicity should be given t o the outcome of their
d i s c u s s i o n and took note that the P r i m e M i n i s t e r
himself, in h i s s o l e d i s c r e t i o n , would make the
n e c e s s a r y a r r a n g e m e n t s for this purpose.
(4)
A g r e e d that it would be n e c e s s a r y after the
E a s t e r R e c e s s t o consider how b e s t to improve
communication b e t w e e n the Government on the
one hand and the P a r l i a m e n t a r y Labour Party,
the National E x e c u t i v e Committee and the
Labour Party in the country on the other hand.
(5)
Reaffirmed their e n d o r s e m e n t of the proposals in
the White Paper "In P l a c e of S t r i f e " (Cmnd. 3888),
subject to further c o n s i d e r a t i o n in the light of any­
alternative p r o p o s a l s which might be put forward
before the Cabinet had to approve the relevant
legislation.
Cabinet O f f i c e , S. W. 1.
"
2 1 s t A p r i l , 1969
-5­
9mm The circulation o f this paper has been strictly limited.
It is issued for the personal use o f 1 ^ ^ . . . ^ ^ ^ . . . . ^ . ^ ^
s
T O P S E C R E T
Copy No... X.
CABINET
CONFIDENTIAL ANNEX
CC(69) 22nd C o n c l u s i o n s , Minute 1
Thursday, 8th May, 1969 at 11.00 a , m .
THE PRIME MINISTER said that on the previous day the
3RNMENT
Chairman of the P a r l i a m e n t a r y Labour Party ( P L P ) ,
THE
Mr. Houghton, had made a prepared statement warning the
LIAMENTARYGovernment that they should not p r e s s their proposed Industrial
OUR PARTY Relations Bill in the f a c e of the opposition of their own back­
b e n c h e r s to the point of risking the disintegration of the Labour
Party.
This statement r a i s e d an important i s s u e which had
constitutional implications comparable with those which had been
involved when Mr. Harold L a s k i , then Chairman of the Labour
I:
P a r t y , had p r e s e n t e d a s i m i l a r challenge to the P r i m e M i n i s t e r
of the 1945-51 Labour Government, Mr. A t t l e e .
It implied e i t h e r
t
that the Government m u s t accept that they could not c a r r y on the
I
government of the country and must face a D i s s o l u t i o n of
li
P a r l i a m e n t or that, if they continued to govern, they must d o s o
p
on sufferance and in the knowledge that there w e r e certain p o l i c i e s
which they m u s t not p u r s u e , however n e c e s s a r y in the c o u n t r y s
i n t e r e s t s they might c o n s i d e r them to be.
If the Government
accepted such a situation a t the dictation of the P L P , they would
be acquiescing In a dangerous precedent, which might be invoked
against them on subsequent and equally c r i t i c a l o c c a s i o n s ; and
they would be demonstrating the truth of their opponents'' c l a i m
that Labour government did not work and could not v/ork in any
f o r e s e e a b l e future c i r c u m s t a n c e s .
The Cabinet t h e m s e l v e s must
be c l e a r w h e r e they stood on this i s s u e .
f
THE HOME SECRETARY said that the i s s u e s of principle
r a i s e d by the proposed Industrial Relations Bill had strained the
loyalty of the P L P and of s o m e Ministers to breaking point.
The
Cabinet w e r e not in fact in unanimous a g r e e m e n t on the B i l l ; and
it could not be expected to a c h i e v e m o r e than a bare majority in
the House of C o m m o n s , e v e n if all m e m b e r s of the Government
voted in its favour; and that w a s an i s s u e which they would need
to c o n s i d e r when the Bill w a s available for d i s c u s s i o n ,
He
h i m s e l f did not b e l i e v e that the benefits which it was claimed would
r e s u l t f r o m the Bill w e r e worth the d e s t r u c t i o n of the Labour
P a r t y ; and he would do a l l in his power to prevent a D i s s o l u t i o n
on an i s s u e which w a s of such little r e a l s i g n i f i c a n c e .
He
therefore strongly urged the Cabinet to c o n s i d e r how they could
withdraw f r o m the brink of d i s a s t e r ; in p a r t i c u l a r , they should
r e a l i s e that they could not enact the Bill in i t s p r e s e n t f o r m and
they should therefore r e f r a i n f r o m publishing it before the
Conference of the T r a d e s Union C o n g r e s s (TUG) on 5th June,
O t h e r w i s e , they would inevitably d e s t r o y any p o s s i b i l i t y that the
TUC m i g h t bring f o r w a r d alternative p r o p o s a l s which would
afford a w a y out of the i m p a s s e .
In d i s c u s s i o n it w a s argued that, although Mr. Houghton
had b e e n at fault in i s s u i n g his warning a s Chairman of the P L P ,
p a r t i c u l a r l y on the eve of the local g o v e r n m e n t e l e c t i o n s in
England and W a l e s , he had not in f a c t r a i s e d a s t r i c t l y
constitutional i s s u e , unlike Mr, La ski who had a d d r e s s e d the
Government of the day f r o m a position outside P a r l i a m e n t .
No
Government could g o v e r n without the support of their own
P a r l i a m e n t a r y P a r t y ; and it w a s the right of any m e m b e r of that
P a r t y , not l e a s t i t s c h a i r m a n , to warn them that they ran the r i s k
The
cf forfeiting that support and d e s t r o y i n g the Party itself,
Cabinet had throughout underestimated the opposition to the Bill;
and it w a s a m i s t a k e to suppose that support for their policy w a s
now growing or that it could be s e c u r e d by the threat of a
Dissolution.
On the c o n t r a r y , many m e m b e r s of the P L P now
f o r e s a w only defeat f o r t h e m s e l v e s and for the Party at the next
G e n e r a l E l e c t i o n i n any event; and the Government should
t h e r e f o r e l o s e no time in r e a s s e s s i n g their attitude to the Bill for
the sake of the Party*s m o r a l e .
On the other hand there was r e a s o n to b e l i e v e that many
m e m b e r s of the P L P w e r e content that the Government w e r e a c t i v e l y
seeking a g r e e m e n t with the TUC; and it w a s in the G o v e r n m e n t ^
i n t e r e s t s to e n c o u r a g e the Party to turn f r o m arguments about
p r i n c i p l e s to the d i s c u s s i o n of the d e t a i l s of industrial p o l i c y ,
f r o m which a g r e e m e n t might e m e r g e .
The w i s e s t c o u r s e ,
t h e r e f o r e , would be to avoid any appearance of rebuking
Mr, Houghton w h o had c l a i m e d to have alternative p r o p o s a l s of
h i s own, and to allow time for a c a l m e r approach to the Industrial
R e l a t i o n s Bill to d e v e l o p . A t the s a m e time the Government m u s t
avoid encouraging the irrational belief in the P L P that a new, but
unidentified, L e a d e r could r e s c u e them f r o m a d e s p e r a t e situation.
It m u s t be made c l e a r to them that in this r e s p e c t they w e r e
pursuing a f a n t a s y : t h e r e was no question of the C a b i n e t s
accepting that the P L P could overthrow the p r e s e n t P r i m e Minister
and e x p e c t a s u c c e s s o r to e m e r g e in h i s p l a c e .
The P a r t y m u s t
shed the i l l u s i o n that they could at the s a m e time g o v e r n and not
govern.
If they r e j e c t e d one Government they m u s t be able and
willing to support another; but this they could not produce f r o m
within t h e m s e l v e s .
-2­
t
THE PRIME MINISTER, summing up the d i s c u s s i o n , said
that it must be c l e a r l y understood that any Minister who did not
vote in favour of fche B i l l in whatever f o r m it w a s eventually
introduced could not, of c o u r s e , r e m a i n a m e m b e r of tho
Government.
But it w a s c l e a r l y important that the Government,
with the help which Mr. Houghton had p r o m i s e d e a r l i e r in the
w e e k , should endeavour in their forthcoming d i s c u s s i o n s with the
TUC about the Industrial Relations Bill to find m e a n s of reducing
the c o n t r o v e r s y within the Party and making the proposed
legislation generally acceptable.
It must not be thought that the
statement by the Chairman of the P L P had placed the Government
in a d i l e m m a ; but, e q u a l l y , the Party should be in n o doubt that,
if they sought to overthrow the P r i m e Minister and it became
i m p o s s i b l e to maintain effective g o v e r n m e n t , a Dissolution of
P a r l i a m e n t would be inevitable. He would arrange to give
further consideration, in consultation with senior c o l l e a g u e s ,
to the b e s t way of handling the political situation henceforward.
The Cabinet Took note, with approval, of the P r i m e
M i n i s t e r s summing up of their
discussion.
T
Cabinet Office, S. W. 1.
23rd May,. 1969
-3­
UMENT IS THE PROPERTY Or HEK BRITAIN £NIC M A J t s i r a
uuviiKiMvicnx
^ ^ T h e c i r c u l a t i o n o f this paper has been strictly limited.
It is issued for the personal use of
, 7
\ 1*
SJ^iMUiV^^ ^* ' 7
TOP
(v
SECRET
Copy No.
CABINET
CONFIDENTIAL ANNEX
CC(69) 41st Conclusions
T u e s d a y , 19th August, 1969 at 2 . 0 0 p. m .
The Cabinet c o n s i d e r e d a m e m o r a n d u m by the Home
S e c r e t a r y ( c o p i e s of which are available M the Cabinet Office)
reviewing the situation in Northern Ireland and making p r o p o s a l s
f o r the handling of the d i s c u s s i o n s between the P r i m e Minister and
the P r i m e M i n i s t e r of Northern Ireland later than afternoon.
THE HOME SECRETARY said that the situation in Northern
Ireland had b e c o m e m o r e g r a v e since the Cabinet l a s t reviewed it
on 30th July.
There had been rioting in Belfast on the nights of the
2nd and 3rd A u g u s t , b a r r i c a d e s being built and p e t r o l bombs
thrown.
The following week had been f a i r l y quiet but he had
s u g g e s t e d to the P r i m e M i n i s t e r of Northern Ireland that to reduce
the r i s k of further v i o l e n c e , he might c o n s i d e r banning the
d e m o n s t r a t i o n planned by the Civil Rights A s s o c i a t i o n on the
11th A u g u s t , the P a r a d e of the (Protestant) Apprentice Boys on the
12th and the m e e t i n g of the (Catholic) Order of Hibernians on the
15th A u g u s t .
Major C h i e h e s t e r - C l a r k h o w e v e r , had considered
that It would be i m p o s s i b l e to ban one of these o c c a s i o n s without
banning them all; he had not expected that the March of the
Apprentice Boys would itself l e a d to violence in v i e w of the
a c c o m m o d a t i o n which had b e e n reached l o c a l l y between Catholics
and P r o t e s t a n t s and no trouble had been thought l i k e l y to result
f r o m the m e e t i n g of the Order of Hibernians.
The Civil Rights
R a l l y on the Monday (11th August) had been d i s o r d e r l y ; on the
T u e s d a y , there had b e e n fighting in Londonderry, v/ith the
r e s i d e n t s of B o g s i d e d e t e r m i n e d to keep the Royal U l s t e r
Constabulary (RUC) out of the a r e a ; and after a lull on Wednesday,
toere had been w o r s e rioting on the Thursday, with tension
mounting in B e l f a s t .
Qa the Thursday he had met the P r i m e
M i n i s t e r at the RAF Station, St. Mawgan, to d i s c u s s the situation,
and l a t e r that d a y , with fche P r i m e Minister'c authority he had a g r e e d
to the request of She Northern Ireland Government £ or troops to be brought
in to r e s t o r e o r d e r in Londonderry.
S i m i l a r a c t i o n had l a t e r b e e n
taken in r e g a r d to Belfast,,
Thanks to the efficient pre-planning of
the Ministry of D e f e n c e , the troops had moved in v e r y fast and o r d e r
s
5
-1­
had b e e n rapidly r e s t o r e d imthe limited a r e a s w h e r e they could be
deployed in f o r c e , although there had b e e n some minor incidents
e l s e w h e r e . T h e i r a r r i v a l had been g e n e r a l l y w e l c o m e d , in
p a r t i c u l a r by the C a t h o l i c s .
The q u e s t i o n before the Government was what to do next.
Opinions differed a s to who was responsible for the t r o u b l e s .
T h e r e w a s a good deal of corroboration for the v i e w that the
C a t h o l i c s had a c t e d l a r g e l y in s e l f - d e f e n c e , and there was little
e v i d e n c e to support the view of the Northern Ireland Government
that the Irish R e p u b l i c a n A r m y (IRA) w e r e mainly r e s p o n s i b l e ; but
there w a s no doubt that the dominant feeling in Northern Ireland
was fear.
The initial impact made by the a r r i v a l of British troops
could not be e x p e c t e d to l a s t , and it w a s e s s e n t i a l to act urgently to
l o w e r the t e m p e r a t u r e . He had h i m s e l f posted a senior official
and an Inspector of Constabulary with the General Officer
Commanding (GOC) to a d v i s e h i m on the G o v e r n m e n t s political
o b j e c t i v e s and on E n g l i s h p o l i c e p r a c t i c e ! and he had sent the
Deputy C o m m i s s i o n e r of P o l i c e of the Metropolis and the Chief
Constable of H a m p s h i r e to be l i a i s o n offfeers and consultants with
the RUC and to a s s e s s the structural changes that might be needed
in that f o r c e .
T h e s e w e r e the a i m s which h e suggested the P r i m e Minister
should pursue in h i s d i s c u s s i o n s with Major C h i c h e s t e r - C l a r k .
He
thought that the l a t t e r w a s now a chastened man and that he would be
w i l l i n g to collaborate s o far a s he f e l t a b l e .
So long a s he w a s
w i l l i n g to do s o , it would be better t o avoid d i r e c t intervention and
T O P RPCRET
t o u s e the Northern Ireland Government a s a g e n t s ; h e would propose
to place s e n i o r c i v i l servants in the P r i m e M i n i s t e r s Office and the
M i n i s t r y of Home Affairs a s a m e a n s of bringing influence to b e a r .
It w a s important t o r e m e m b e r that the m a j o r i t y of the population of
N o r t h e r n Ireland w e r e P r o t e s t a n t ; in seeking to a l l a y the
a p p r e h e n s i o n s of the C a t h o l i c s , they m u s t not drive that m a j o r i t y
beyond e n d u r a n c e . He thought that in the c i r c u m s t a n c e s
Major C h i c h e s t e r - C l a r k would f e e l able to a c c e p t die withdrawal
of the S p e c i a l s and a r r a n g e m e n t s for their a r m s * to be kept in
armouries.
R e a c t i o n s - t o the p r o p o s a l s for an enquiry and for a
change in the I n s p e c t o r - G e n e r a l w e r e difficult to f o r e c a s t ; there
m i g h t be r e s i g n a t i o n s a t the top, but he thought that s o m e m i d d l e ­
rank officers would w e l c o m e a change in the ethos of the f o r c e .
THE SECRETARY OF STATE FOR D E F E N C E said that
the deployment of troops had gone smoothly, ?.nd they had been
w e l c o m e d by both s i d e s ; but there w e r e a l r e a d y s i g n s that the
h o n e y m o o n p e r i o d w a s ending.
T h e r e would shortly be two
b r i g a d e s in Northern Ireland. F u r t h e r units could be made
a v a i l a b l e if n e e d e d , without affecting our North Atlantic Treaty
Organisation (NATO) c o m m i t m e n t , and this f o r c e should be adequate
f o r i t s p r e s e n t r o l e ; but it would be quite inadequate to cope with
a major e m e r g e n c y , such a s would a r i s e if the P r o t e s t a n t m a j o r i t y
w e r e stung into a r m e d opposition. In that event, it would be
n e c e s s a r y t o draw on f o r c e s a s s i g n e d to NATO. He w a s in
a g r e e m e n t with the Home S e c r e t a r y on the need to a c t urgently to
m a k e the situation l e s s e x p l o s i v e ; but at the s a m e t i m e , he w i s h e d
to s t r e s s the importance of not pushing too nard and s o alienating
P r o t e s t a n t opinion. It w a s important to r e m o v e the ^B Specials
f r o m Catholic and mixed a r e a s - if p o s s i b l e this should be announced
tonight - and t o withdraw their weapons into a r m o u r i e s where they
could be kept under control, and would not constitute a temptation
The GOC would then be able t o
t o the IRA and other s u b v e r s i v e s .
c o n s i d e r what further troops he needed to maintain l a w and o r d e r ;
h e w a s aiming at a light c o v e r a g e of the whole country by mobile
The a r r a n g e m e n t w h e r e b y the troops had b e e n introduced
troops.
a t the r e q u e s t of the Northern Ireland Government and the
continuing c l o s e contacts b e t w e e n the GCC, the Northern Ireland
Government and the Home Secretary*s r e p r e s e n t a t i v e s ensured
c i v i l control over the d i s p o s i t i o n of the troops.
1
He a g r e e d that they should a i m to retain the Northern Ireland
Government a s an effective f o r c e , f o r in that way they stood m o r e
chance of being able to withdraw the t r o o p s .
, Final 1 y h e , w i s h e d to"s"upp6lcrtEW"pfOposal made by the Northern
bloc!
. / I r e l a n d , G o v e r r a e n t , - w i m me a^ps:o7al pf the GOC, f o r the blocking
a afjsome m i n o r :troads c r o s s i n g "the h b r d e r b' m e a n s ; this would make it more? difficult f ( iarms,in and g e n e r a l l y e x p l o i t the situation. :
!
hFruBOC
K
RECORDS ACT
I
THE SECRETARY OF STATE FOR FOREIGN AND
COMMONWEALTH AFFAIRS said that the Government of the Irish
Republic had been o v e r - a n x i o u s to outflank the IRA and the e x t r e m i s t s
generally.
T h e i r Minister of F o r e i g n A f f a i r s , D r . H i l l e r y , had
paid an uninvited v i s i t to London, but had been told £hat we regarded
N o r t h e r n Ireland a s a m a t t e r of internal jurisdiction.
D r . Hillery
had now'requested a m e e t i n g of the Security Council of the United
Nations, and if n o r m a l p r a c t i c e w e r e followed this request would be
a c c e d e d to. He had a l s o asked to a d d r e s s the Council,.
The
F o r e i g n and C o m m o n v e a l t h S e c r e t a r y did not propose to object to
h i s doing s o , but he thought there w a s a good chance that the Irish
would f a i l to m u s t e r the v o t e s n e c e s s a r y f cr the i t e m to be included
on the agendas that would be a s a t i s f a c t o r y outcome. He was
instructing our A m b a s s a d o r in Dublin to remind the Government
of the Irish Republic of their r e s p o n s i b i l i t y for curbing die activities
of rhe IRA in Northern Ireland.
The P r i m e Minister of Northern
Ireland should a l s o be reminded that foreign relations w e r e the
r e s p o n s i b i l i t y of the United Kingdom Government; a break with
the Irish Republic would be m o s t damaging, in the fiLort run more
damaging to u s than t c the Republic.
Bu; in h i s view the i s s u e s
w e r e mainly d o m e s t i c , and their International s i g n i f i c a n c e , though
important, should not be e x a g g e r a t e d .
He a g r e e d with the
i m m e d i a t e s t e p s proposed by the Home S e c r e t a r y and on the need
f o r i m m e d i a t e r e s u l t s (particularly in regard to the B Specials)
t o be s e e n to flow f r o m that evening*s m e e t i n g .
F o r the future he
would prefer t o work through the Northern Ireland Government
and thought that the proposal to influence them through senior civil
s e r v a n t s stationed in Belfast w a s w o r k a b l e .
But if they would not
c o - o p e r a t e the Government would have no alternative but to a s s u m e
direct control.
t
t
In d i s c u s s i o n there w a s g e n e r a l a g r e e m e n t that the
i m m e d i a t e need w a s to contain the situation and that for this purpose
the s t e p s proposed by the H o m e S e c r e t a r y w e r e the right ones;
there would be no advantage in recalling P a r l i a m e n t .
The f i r s t
p r i o r i t y w a s to persuade the P r i m e Minister of Northern Ireland to
a c c e p t the withdrawal of the S p e c i a l s f r o m the s t r e e t s and their
effective d i s a r m i n g .
Subject to t h i s , it would be d e s i r a b l e to leave
the M i n i s t e r s conducting the d i s c u s s i o n s with the Northern Ireland
Government the w i d e s t p o s s i b l e d i s c r e t i o n to play the hand as they
thought b e s t .
The r e p l a c e m e n t of the I n s p e c t o r - G e n e r a l of the
RUC w a s a l s o highly d e s i r a b l e , b e c a u s e withdrawal of the troops
depended on the re constitution of that f o r c e , but m o s t m e m b e r s of
the Cabinet thought that the talks should not be allowed to break down
on this point.
There w a s a l s o a g r e e m e n t on the urgent need for
r e s u l t s to be s e e n to flow f r o m that evening's t a l k s .
They should
a i m at the publication of a communique laying down b a s i c principles
and setting out the i m m e d i a t e d e c i s i o n s .
This should make c l e a r
that the border w a s not in i s s u e and that the p r o b l e m lay wholly
-4­
:;
$smfiMtifc me'^'mt'fldfcttbn'of"-th6
United K i n g d o m G o v e r n m e n t , should
^ l e x p l a i n i t h e b a s i s o n w h i c h t r o o p s h a d b e e n c o m m i t t e d , a n d should
. s?eler;&tOH&e p r o g r a m m e of r e f o r m s a l r e a d y p r o m i s e d . T h e
c o m m u n i q u e - s h o u l d be a c c o m p a n i e d b y a d e c l a r a t i o n of t h e r i g h t t o
s q u a l i t y j o f - t r e a t m e n t of a l l c i t i z e n s i r r e s p e c t i v e of p o l i t i c a l v i e w s
- ' .
and religion. .
5
Ife^:
T h e t i m e h a d n o t y e t c o m e to take d e c i s i o n s about the l o n g B ^fflPutur^trelatlonship b e t w e e n t h e two G o v e r n m e n t s j but t h e
v
SgtGoWrninent!of
N o r t h e r n I r e l a n d would h a v e to r e o i g n i s e that the
facfc;tb^t m e y t w e r e u n a b l e t o m a i n t a i n l a w a n d o r d e r without the u s e
^ P ^ ^ ^ S f c ^ a e e d ' a - n e w political situation
T h e P r i m e - M i n i s t e r of
l p $ I 6 r t h e r a - I r e l a n d h a d s p o k e n of f o r m i n g a m o r e b r o a d l y - b a s e d
a d m i n i s t r a t i o n , a n d h e should b e a s k e d w h a t h e m e a n t b y t h i s .
Th&M-xm^&te v i r t u e - i n - a p p o i n t i n g a M i n i s t e r of C o m m u n i t y
R e l a t i o n s , a d v i s e d b y a C o m m i s s i o n r e p r e s e n t i n g both c o m m u n i t i e s ,
5 ? e o j e i i m l a a t e s d I s c r i n u ^ t I o n . , P a r t of the f r u s t r a t i o n f e l t by t h e C a t h o l i c c o m m u n i t y a r o s e f r o m t h e fact t h a t t h e y h a d a t p r e s e n t n o :hcpeibf staking p a r t i n t h e G o v e r n m e n t ; and the C o m m i s s i o n on t h e
C o n s t i t u t i o n m i g h t b e a s k e d to c o n s i d e r m e a n s of r e m e d y i n g t h i s
B i t u a t i b n i c j s T h e s e a n d o t h e r i d e a s should b e studied with a v i e w t o
l e g i s l a t i o n b e i n g i n t r o d u c e d to a m e n d the G o v e r n m e n t of I r e l a n d A c t .
.'v-A l l p r e s e n t w e r e a g r e e d that it would be p r e f e r a b l e t o w o r k
6hroug5h.'the:Government of N o r t h e r n I r e l a n d r a t h e r than-take d i r e c t
^ C O n t t p l t ; s o l o n g a s t h a t G o v e r n m e n t w a s p r e p a r e d t o c o - o p e r a t e and
effective m e a n s of b r i n g i n g influence t o b e a r upon i t could b e f o u n d .
^ D i r e c t - r u l e Would p o s e a s e v e r e a d m i n i s t r a t i v e p r o b l e m and w o u l d
i n c r e a s e t h e r i s k of a r m e d conflict with the P r o t e s t a n t c o m m u n i t y .
* T h e , G o v e r n m e n t should p u r s u e a m i d d l e of t h e r o a d p o l i c y a n d a i m
to p r e v e n t t h e f u t u r e of N o r t h e r n I r e l a n d b e c o m i n g a m a t t e r of a c u t e
rJpoHtical controversy.
If on the o t h e r h a n d the t a l k s that evening p r o d u c e d n o
a c c e p t a b l e a g r e e m e n t m o r e d r a s t i c m e a s u r e s would b e i n e v i t a b l e .
- I n t h a t c a s e , - . t h e C a b i n e t should r e s u m e t h e i r d i s c u s s i o n a s s o o n a s
Impossible, In f u r t h e r d i s c u s s i o n d o u b t s w e r e e x p r e s s e d about the w i s d o m
of blocking m i n o r r o a d s c r o s s i n g t h e f r o n t i e r .
It w a s s u g g e s t e d
that s u c h a c t i o n would b e o v e r - d r a m a t i c a n d u n l i k e l y to b e e f f e c t i v e ,
t h e - m o r e s o s i n c e t h e IRA w e r e not the m a i n c a u s e of t h e t r o u b l e .
^ O n t h e w b t h e ^ h a n d i t w a s p o i n t e d out that s i m i l a r a c t i o n h a d b e e n
I n 1956 a n d t h a t i t would a d d t o t h e difficulties of t h e IRA in
exploiting^ t h e situation? the r e q u e s t of the N o r t h e r n I r e l a n d
^ G o v e r n m e n t ' w a s s u p p o r t e d b y t h e G O C . A g r e e m e n t on t h i s p o i n t
m i g h t b e a u s e f u l c o n c e s s i o n In t h e t a l k s ; n o public a n n o u n c e m e n t
^wouldbe heeded.
;
Ipfaken
-5­
^^^^^^^
T O P SECRET
^ ^ p ^ i p t e ^ l t ] ^ ' - - M l i ^ T X R , summing up the discuss£on said
^^c*as had thoughfc it right that the Cabinet should have the
0pppbT^333S^y::i& consider the situation despite-the authority which had
IbeeaXdelegai&d to h
ithfev They were agreed that the first need was
ctb contain the position and that for this purpose the steps proposed
b y the Home Secretary were appropriate. They were also agreed
-that the withdrawal and effective disarming of the Specials were
^&'9^^^a^)'he^ wotild make it his prime purpose in his talk with
' the Prime Minister of Northern Ireland to s e c u r e his agreement to
fchiSo For £He rest the Cabinet were content that he should reach
lthesBWi£;sefcdement that he could on the lines which they had
-discussed^, agreement to the blocking of roads might be an element
slich a settlement,, bat he would not take the initiative in proposing
ife^He$proposed to start the talks that evening with a general
discussion^ and then work towards an agreed communique which ^wouldfdecla^e that the border was not an issue and that the disturbances.were entirely an internal affair within the ^jurisdiction of the United Kingdom Government^ explain the basis jOnwhicb;troops had been brought Inj and refer to the programme :?o£*^&vxh0'-to which the Northern Ireland Government were committed? this should be accompanied by a declaration setting out
;fifee^lSdiple'ar;whidh would guide the policies and the mutual
pOKfcIbnlshIp:;6i the two Governments. The Prime Minister of
SNdrtheM;lreland would be supported by a number of Ministers at
the talks and he therefore proposed that the Foreign and
-Commonwealth and Defence Secretaries should be present in
S-addltiOn^tb t h e Home Secretary. Assuming that the talks were
fsueeessfuli it would probably be appropriate to have a second round
lfq£rta^^^5ab'd(i*'a fortnights time at.which longer term arrange^
"meats could be discussed. If however the talks came to no
^satisfactory conclusion^ it would be necessary for the Cabinet to
'fies t!J^gtheiridiscussion as soon as possible and he asked those
present to hold themselves available. He would consider further In
' consultation with the Ministers most concerned how security
- Intelligence, might be improved. Finally he wished to emphasise
£he importance of ensuring that noTiiht of their discussions reached
Sthe^Prees which could be exploited by the Opposition or others to
^suggest that there was any disagreement in the Cabinetj the lives
^of our troops were at stake, 1
s
:
8
;
The Cabinet ­
:
^ ^ ^ l ; S T o & note - with" approval, of the Prime
- Minister s summing up of their ^discussion. s
,
Cabinet Office,. S. W 1.
c
^Om Ai^gust, 1969
The circulation o f this paper has b e e n s ^ t h y l m i t e o ^ It is issued f o r the personal use o f 3^...^53*feft*.....!.^ TOP SECRET
Copy No
j)L
CABINET
CONFIDENTIAL ANNEX
CC(69) 42nd Conclusions, Minute 2
Thursday, 4th S e p t e m b e r , 1969 at 3 . 0 0 p . m.
THE PRIME MINISTER said that the m e e t i n g which had
taken p l a c e on 19th August with the Northern Ireland P r i m e
M i n i s t e r , Major C h i c h e s t e r - C l a r k , had gone w e l l .
The
d i s c u s s i o n s had been p r o t r a c t e d l a r g e l y by the need to d i s c u s s
among o u r s e l v e s the p r o p o s a l made at the meeting by the Northern
Ireland P r i m e Minister with - a s was subsequently confirmed - the
a g r e e m e n t of the General Officer Commanding, Northern Ireland,
that the latter should a s s u m e o v e r a l l r e s p o n s i b i l i t y for s e c u r i t y
operations.
There had a l s o been a good d e a l of d i s c u s s i o n with
the Northern Ireland r e p r e s e n t a t i v e s over the t e r m s of the
Declaration of P r i n c i p l e s and Communique,
However, the
final r e s u l t had b e e n s a t i s f a c t o r y .
There had been no n e e d ,
a s at one t i m e had appeared p o s s i b l e , to r e c a l l the Cabinet;
and the o b j e c t i v e s agreed by the latter at their meeting e a r l i e r
in the day had in substance b e e n achieved.
Subsequently, the
Home S e c r e t a r y had v i s i t e d Northern Ireland f r o m 27th to 29th
August; he invited the Home S e c r e t a r y to r e p o r t on the outcome
of this v i s i t ,
THE HOME SECRETARY said that he had been accompanied
on h i s v i s i t b y the Minister of State at the Home Office,
Lord Stonham, and a l s o by his P a r l i a m e n t a r y P r i v a t e S e c r e t a r y ,
Mr. Roland M o y l e , MP, both of whom had r e n d e r e d invaluable
s e r v i c e s behind the s c e n e s .
He had found the Northern Ireland
Government b e w i l d e r e d and i n e r t .
It had b e e n difficult to a r o u s e
them to a r e a l i s a t i o n of the full gravitv.of the situation, p o s s i b l y
b e c a u s e for obvious r e a s o n s they hadjjbeen able to s e e for t h e m ­
s e l v e s the situation in the a r e a s where tension was at i t s h i g h e s t .
But though t h e r e v/as i n e r t i a , t h e r e was no i l l - w i l l and they had
appeared r e a d y enough to c o - o p e r a t e once they had been given a
lead. He had a d d r e s s e d the backbenchers of the U l s t e r Unionist
Party and had s e n s e d a s u r p r i s i n g amount of a g r e e m e n t with what
he had said t o t h e m .
They v/ere however c l e a r l y apprehensive
about the extent to which they could c a r r y their supporters with
them,
He had a l s o had c o n t a c t s with r e l i g i o u s l e a d e r s .
Both
P r o t e s t a n t s and Catholics had e m p h a s i s e d that the p r o b l e m s of
Northern Ireland w e r e p o l i t i c a l and economic rather than religious^
TOP
SECRET
"HIS IS A COPY. THE ORIGINAL
yM 3 (4)
b u t both h a d a l s o e x p r e s s e d m i s g i v i r i g s a b o u t . t h e e x t e n t to w h i c h
the o t h e r P r o t e s t a n t c h u r c h e s were" losing" s u p p o r t e r s
f^&.sWM
Paisley.
The N o r t h e r n I r i s h w e r e a tough-people" me.,:rnam,tenance of Taw a n d "' "
o r d e r in U l s t e r w a s a difficult t a s k a t the b e s t of t i m e s ; and
Mr.
T h e r e w a s i n d e e d s o m e d a n g e r of a P r o t e s t a n t r i g h t wing b a c k l a s h
in w h i c h the U l s t e r Unionist P a r t y would l o s e s u p p o r t not to t h e
left b u t to t h e r i g h t .
So f a r a s s e c u r i t y w a s c o n c e r n e d , h e h a d
s p o k e n to t h e C o m m a n d a n t s of the ' B ' S p e c i a l s , a l l of w h o m w e r e
r e t i r e d Service officers.
He h a d a p p e a l e d - he thought n o t w i t h o u t
s u c c e s s - to t h e i r loyalty to the C r o w n and t h e c o n s t i t u t i o n a l
Government.
A l t h o u g h t h i s would b e s u b j e c t e d to a s e v e r e
s t r a i n if t h e r e w e r e a r a d i c a l c h a n g e in the r o l e o.f the ' 3 ' S p e c i a l s ,
the p o s i t i o n would b e e a s e d if the c h a n g e c a m e a s a r e s u l t of t h e
i n d e p e n d e n t i n v e s t i g a t i o n a t p r e s e n t b e i n g c o n d u c t e d by Lord Hunt.
The C o m m a n d a n t s would o b e y o r d e r s , b u t t h e r e r e m a i n e d s o m e
d o u b t s a b o u t the e x t e n t to w h i c h t h e i r m e n would follow t h e m .
T h e handing in of t h e B * S p e c i a l s ' a r m s w a s a n e x t r e m e l y
d e l i c a t e o p e r a t i o n , but it h a d b e e n p r o c e e d i n g r e a s o n a b l y
well.
T h e r e w e r e h o w e v e r r e p o r t s t h a t s o m e of t h e s e a r m s
h a d b e e n finding t h e i r way to the P r o t e s t a n t v o l u n t e e r s c o n t r o l l e d
by M r . P a i s l e y and o t h e r s j and the s i t u a t i o n would have to be
carefully watched.
M e a n w h i l e , the ' B ' S p e c i a l s h a d b e e n w i t h d r a w n
f r o m c r o w d c o n t r o l d u t i e s a n d r e s t r i c t e d to t h e g u a r d i n g of
v u l n e r a b l e p o i n t s and p o l i c e s t a t i o n s .
The R o y a l U l s t e r
C o n s t a b u l a r y (RUC) r e m a i n e d u n a c c e p t a b l e to l a r g e s e c t i o n s
of public opinion, both for r e a s o n s of h i s t o r y and b e c a u s e feeling
a g a i n s t t h e m w a s b e i n g e x p l o i t e d for u l t e r i o r p o l i t i c a l m o t i v e s ;
a n d s o m e a r e a s in the l a r g e c i t i e s w e r e s t i l l e i t h e r s e l f - p o l i c e d
or without any effective e n f o r c e m e n t of law and o r d e r .
It would
b e difficult to r e s t o r e public c o n f i d e n c e in the RUG and the F o r c e s
c o n f i d e n c e i n i t s e l f : and m a j o r c h a n g e s of p o l i c y , o r g a n i s a t i o n and
p e r s o n n e l w e r e l i k e l y to b e c a l l e d for in the l i g h t of L o r d H u n t 3
report.
The public l a c k of c o n f i d e n c e in the p o l i c e f o r c e s t h r e w
a h e a v y b u r d e n on t h e A r m y , w h o s e c o m m i t m e n t to the m a i n t e n a n c e
of l a w and o r d e r w a s l i k e l y to h a v e to c o n t i n u e for s e m e c o n s i d e r a b l e
time.
A l t h o u g h the t r o o p s had done v e r y w e l l , they w e r e not
t r a i n e d in p o l i c e d u t i e s : t h e y c o u l d n o t be e x p e c t e d to c a r r y t h e m
out i n d e f i n i t e l y : b u t for t h e p r e s e n t t h e r e w a s no a l t e r n a t i v e .
­
!
1
1
After outlining the m e a s u r e s t a k e n following the N o r t h e r n
I r e l a n d P r i m e IvIiniSterfs v i s i t to London and h i s own v i s i t to U l s t e r
the H o m e S e c r e t a r y p o i n t e d out t h a t while c i v i l r i g h t s and n o n ­
d i s c r i m i n a t i o n w e r e of c a r d i n a l i m p o r t a n c e , the p r o b l e m of
N o r t h e r n I r e l a n d w a s a l s o to a v e r y l a r g e e x t e n t a n e c o n o m i c
one.
F r o m t h i s p o i n t of v i e w , the b i g g e s t p r o b l e m of all w a s
L o n d o n d e r r y - a c i t y d i v i d e d a g a i n s t i t s e l f a n d without h o p e .
T h e p a t t e r n w a s t h a t u n e m p l o y m e n t l e d to p o l i t i c a l e x t r e m i s m ,
a n d e x t r e m i s m to d i s o r d e r s , which w e r e then r e f l e c t e d in B e l f a s t ,
43
F
If even 1, 500 jobs could be c r e a t e d in Londonderry, this would go
a long w a y towards transforming the situation: and he appealed to
h i s c o l l e a g u e s for their c o - o p e r a t i o n .
The I r i s h p r o b l e m , after
nearly 50 y e a r s of r e l a t i v e stagnation, v/as on the move again and
unrest w a s l i k e l y to continue as long as the l o n g - t e r m p r o b l e m
p e r s i s t e d , whatever we did i n the short t e r m to e a s e i m m e d i a t e
pressures.
The situation w a s a grave and urgent one.
Time
was not on our s i d e .
M o r e barricades had b e e n s e t up by both
s i d e s in B e l f a s t the previous night.
While this w a s m o r e of a
gesture than anything e l s e , i t was indicative of the atmosphere
that s t i l l p r e v a i l e d .
But disturbing though the outlook w a s , it
was m o r e p r o m i s i n g than it had been a generation ago.
In contrast
to the p o s i t i o n in 1914, the B r i t i s h A r m y was not now emotionally
involved^
The Opposition at W e s t m i n s t e r , w h o m he had been a t
great p a i n s to keep informed - w e r e no longer totally c o m m i t t e d
to the P r o t e s t a n t North; and despite s o m e unhelpful public
u t t e r a n c e s by the P r i m e Minister of the I r i s h Republic,
Mr. Lynch, and o t h e r s , ha judged that the temper in the
I r i s h Republic was v e r y different.
As to this l a s t point,
he b e l i e v e d that our l o n g - t e r m objective should be to m o v e
forward towards a better relationship between Northern Ireland
and the Republic,
This would need very c a r e f u l consideration and
i t might b e that no major p r o g r e s s would be a c h i e v e d within the
l i f e t i m e of the p r e s e n t P a r l i a m e n t .
However, a s a f i r s t step
i t might be useful for the P r i m e Minister to s e e Mr. Lynch.
The timing of this would need further thought: but talks might
take p l a c e after he h i m s e l f had paid a second v i s i t to Northern
Ireland, which it was his p r e s e n t intention to do about 8th-9th
October; after the r e p o r t s of the various c o n a m i s s i o n s and other
investigating bodies which had been set up had b e e n r e c e i v e d ; and
after further d i s c u s s i o n s in London with the Northern Ireland
P r i m e Minister,
In d i s c u s s i o n general appreciation v/as e x p r e s s e d of the
w a y in which both the political and m i l i t a r y a s p e c t s of the
situation had b e e n handled.
The conduct of the troops had
b e e n e x e m p l a r y : but they w e r e not equipped or trained to do
a l o n g - t e r m policing job. Although their p r e s e n c e and their
obvious impartiality had been a valuable p s y c h o l o g i c a l d e t e r r e n t ,
this was t o s o m e extent a wasting a s s e t ; and t h e r e was s o m e doubt
whether if there v/ere further major outbreaks of v i o l e n c e , the
troops would have the n e c e s s a r y e x p e r i e n c e or techniques to
contain t h e m .
This m a d e it a l l the m o r e urgent to p r e s s on
with the r e o r g a n i s a t i o n of the regular p o l i c e f o r c e s and the
r e s t o r a t i o n of public confidence in them.
The point was made
that one i l l e g a l broadcasting station was attempting to c r e a t e
friction i n B e l f a s t and Londonderry between the troops and the
l o c a l population: and it might be n e c e s s a r y to take action against
the a n a r c h i s t groups who w e r e behind it. The I r i s h Republican
A r m y was a l s o trying to maintain tension and f o m e n t v i o l e n c e :
but i t had n o t b e e n v e r y e f f e c t i v e ; i t s i m p o r t a n c e had b e e n g r e a t l y
o v e r - e s t i m a t e d by-the N o r t h e r n I r e l a n d a u t h o r i t y ; and t h e r e had
b e e n l i t t l e r e a l c o - o p e r a t i o n b e t w e e n i t and t h e e x t r e m e left, even
in the a r e a s , s u c h a s the B o g s i d e in L o n d o n d e r r y , w h e r e the w r i t
of the N o r t h e r n I r e l a n d G o v e r n m e n t s t i l l did n o t r u n .
There was
g e n e r a l a g r e e m e n t on the u r g e n t n e c e s s i t y ox c r e a t i n g m o r e
o p p o r t u n i t i e s for e m p l o y m e n t , e s p e c i a l l y in L o n d o n d e r r y and,
in g e n e r a l , in the a r e a s w e s t of the R i v e r 3 a n n , w h e r e both
u n e m p l o y m e n t and the p r o p o r t i o n of R o m a n C a t h o l i c s w e r e
highest.
T h e f i n a n c i a l i m p l i c a t i o n s would h a v e to be c o n s i d e r e d
f u r t h e r w h e n s p e c i f i c p r o p o s a l s had b e e n w o r k e d out.
T h e point
w a s m a d e t h a t i n t e l l i g e n c e a b o u t the i n t e r n a l s e c u r i t y s i t u a t i o n
h a d b e e n d e f i c i e n t in the e a r l y s t a g e s .
At t h a t point, we had had
to r e l y on t h e R U C v/hose i n f o r m a t i o n v/as both o n e - s i d e d and
i n a d e q u a t e and it had n o t b e e n c o n s i d e r e d a d v i s a b l e to e s t a b l i s h
an i n d e p e n d e n t i n t e l l i g e n c e o r g a n i s a t i o n .
S t e t s had hov/ever
now b e e n t a k e n to i m p r o v e both the R U C s and our own s o u r c e s
of i n f o r m a t i o n .
In g e n e r a l , P r e s s and public r e a c t i o n s to the
m e a s u r e s which had b e e n t a k e n had been f a v o u r a b l e ; and the
O p p o s i t i o n had n o t s o u g h t to e x p l o i t the G o v e r n m e n t s d i f f i c u l t i e s .
R e a c t i o n s a b r o a d had a l s o b e e n f a v o u r a b l e , a n d the v i s i t c:Z
M i s s B e r n a d e t t e D e v l i n , M P , to the United S t a t e s h a d on the
whole b e e n a f a i l u r e .
T H E P R I M E MINISTER, s u m m i n g up the d i s c u s s i o n ;
s a i d t h a t t h e m e e t i n g of 19th A u g u s t with the N o r t h e r n I r e l a n d
P r i m e M i n i s t e r and the H o m e S e c r e t a r y ' s s u b s e q u e n t v i s i t to
N o r t h e r n I r e l a n d had a c h i e v e d the s u b s t a n c e of the o b j e c t i v e s
l a i d down b y the C a b i n e t .
M e a s u r e s had been s e t in t r a i n to
deal with the m o s t urgent p r o b l e m s .
The a c t i o n taken h a d been
w e l l r e c e i v e d by public opinion, and would r e f l e c t c r e d i t on t h e
Government,
"7e had b o u g h t t i m e in which to work out a l o n g ­
t e r m solution.
T h i s m i g h t b e a long t i m e in c o m i n g , and it v/as
u n l i k e l y to bo a c h i e v e d w i t h i n the l i f e t i m e of the p r e s e n t
Parliament.
Meanwhile we should avoid being r u s h e d ;
and i n p a r t i c u l a r m e r e s h o u l d b e no p r e m a t u r e w i t h d r a w a l
of the t r o o p s .
The C a b i n e t Took n o t e of the P r i m e M i n i s t e r ' s s u m m i n g up and
of the p o i n t s m a d e i n d i s c u s s i o n .
C a b i n e t Office, S. 1 7 . 1 .
5th S e p t e m b e r , 1969
-4­
T h e circulation of this paper has been strictly limited.
It is issued for the personal use of S f c t o f r l k T + W
TOP
SECRET
^ M Q^Q
(jWGr)
1
0
Copy N o
CABINET
CONFIDENTIAL ANNEX
CC(69) 43rd Conclusions, Minute 3
Thursday, 11th S e p t e m b e r , 1969 at 10.00 a . m .
THE HOME SECRETARY said that although he w a s l e s s
p e s s i m i s t i c about the outlook than he had been 2 4 hours e a r l i e r ,
the situation in Northern Ireland was s t i l l e x t r e m e l y t e n s e .
The
t e n s i o n w a s unlikely to be diminished by the publication of the
C a m e r o n Report on the origins of the d i s t u r b a n c e s of l a s t January,
w h i c h would take place on the following day. A r r a n g e m e n t s had been
m a d e f o r Che Roman Catholic Archbishop of A r m a g h ,
Cardinal Conway, to r e c e i v e a copy of the r e p o r t in advance of
publication, and to have the m a i n feature s of it explained to h i m .
T h i s would go s o m e w a y towards dissipating the i m p r e s s i o n the
Cardinal had formed that we w e r e not taking h i m fully into our
confidence.
Most of the p r o b l e m s r a i s e d In the report w e r e being
c o v e r e d by the various working parties and c o m m i s s i o n s which had
b e e n s e t up following the London meeting with the Northern Ireland
P r i m e M i n i s t e r , Major C h i c h e s t e r - C l a r k , and h i s own v i s i t to
N o r t h e r n Ireland, In p r e s e n t i n g the report to public opinion,
e m p h a s i s would be laid on the fact that the d i s o r d e r s had taken place
nine months a g o , and that s i n c e then, action had been initiated on a
n u m b e r of the g r i e v a n c e s which had caused t h e m ; but the task of
p r e s e n t a t i o n remained a difficult one.
Much of the r e c e n t i n c r e a s e
i n t e n s i o n w a s due to the a c t i v i t i e s of the i l l e g a l broadcasting
s t a t i o n s which had been set up by both s i d e s : for instance the crowd
of 3 , 0 0 0 which had been responsible for the d i s o r d e r s in Belfast on
7th September had b e e n called together by i n c i t e m e n t s f r o m
"Radio Orange", It had not b e e n thought advisable to attempt to
c l o s e the i l l e g a l stations down: but it had now been decided that
d e s p i t e the various l e g a l and ethical objections t o such a c o u r s e ,
they m u s t be j a m m e d , and this was now being done, though the
j a m m i n g w a s not yet f u l l y effective.
One difficulty was that the
f r e q u e n c i e s employed b y the illegal stations w e r e v e r y c l o s e to that
u s e d b y a station In the Irish Republic, and there w a s a r i s k of
p r o t e s t s f r o m the Government of the Republic if there w e r e interference
-1­
m
with, i t . \There w a s a l s o s o m e ground t o suppose mat s o m e of the
i l l e g a l P r o t e s t a n t s t a t i o n s had the support of influential U l s t e r
UnioniotsiV The situation would be c a r e f u l l y watched, and the
broadcasts monitored.
T h e r e w a s i n c r e a s i n g c o n c e r n i n Northern
Ireland a t a situation i n which political t e n s i o n w a s leading to a
p r o g r e s s i v e breakdown in the e n f o r c e m e n t of l a w and o r d e r : and
it w a s l i k e l y that the Northern Ireland P r i m e M i n i s t e r s statement
of 9th S e p t e m b e r on the r e m o v a l of the b a r r i c a d e s - of w h i c h the
H o m e S e c r e t a r y had had only a n h o u r s warning - had b e e n prompted
by p r e s s u r e f r o m the b u s i n e s s community rather than f r o m the
U l s t e r Unionist *hard-liners*. When he had s e e n the Northern
Ireland M i n i s t e r for C o m m e r c e , Mr. Bradford, the H o m e S e c r e t a r y
had e m p h a s i s e d the need f o r c l o s e r consultation on pronouncements
l i k e this w h i c h c a u s e d s e r i o u s implications for the troops in
N o r t h e r n Ireland: but the Northern Ireland Government had b e e n
under c o n s i d e r a b l e p o l i t i c a l p r e s s u r e to show that they w e r e s t i l l
i n c o n t r o l of affairs and he did not want to add to their d i f f i c u l t i e s .
Over the past few d a y s he had had a n u m b e r of contacts with the
t
THIS IS A COPY. THE ORIGINAL IS
RETAINED UNDER SECTION 3 (4)
OF THE PUBLIC RECORDS ACT
The H o m e S e c r e t a r y would
that afternoon be r e c e i v i n g a deputation c o n s i s t i n g of M r . F i t t and
other influential R o m a n C a t h o l i c s , including F a t h e r P a d r a i c Murphy,
a p a r i s h p r i e s t f r o m the F a l l s Road a r e a of B e l f a s t .
H e hoped that
the deputation would c o m e out publicly with a statement urging the
r e m o v a l of the b a r r i c a d e s , if n e c e s s a r y o v e r a period, and if
n e c e s s a r y under the p r o t e c t i o n of the A r m y .
T h i s would d o a g r e a t
d e a l t o i m p r o v e the a t m o s p h e r e .
So f a r a s the Northern Ireland
Government w a s c o n c e r n e d , the Northern Ireland P r i m e M i n i s t e r s
s t a t e m e n t of 9ih S e p t e m b e r had been a g a m b l e ; but it w a s s a t i s f a c t o r y
that h e (and now the M i n i s t e r of C o m m e r c e ) had staked h i s political
future f i r m l y on the continuance of r e f o r m . Major C h i c h e s t e r - C l a r k
w a s s t i l l hesitating about the appointment, f o r e s h a d o w e d in the
communique i s s u e d on 29th August, of a M i n i s t e r f o r C o m m u n i t y
R e l a t i o n s , but we w e r e keeping up the p r e s s u r e on t h i s .
It w a s
difficult t o give a f i r m f o r e c a s t of p r o g r e s s .
But m o s t of the working
p a r t i e s would have c o m p l e t e d their r e p o r t s by the end of S e p t e m b e r .
L o r d Hurifs enquiry into the police f o r c e s would probably be
c o m p l e t e d about 6th October, though he p r o p o s e d that i t s r e s u l t s
should not be published until he h i m s e l f v i s i t e d N o r t h e r n Ireland a
f e w d a y s l a t e r , w h e n h e would be in a p o s i t i o n t o s a y something
about the v i e w s and intentions of the B r i t i s h Government,
The
n e c e s s a r y l e g i s l a t i o n by the Northern Ireland P a r l i a m e n t might be
p a s s e d by the end of the y e a r .
T h e r e would c l e a r l y h a v e to be a d e b a t e on N o r t h e r n I r e l a n d
a t W e s t m i n s t e r when P a r l i a m e n t r e a s s e m b l e d .
The m o s t suitable
t i m e for this m i g h t be a f t e r the p u b l i c a t i o n of. the v a r i o u s r e p o r t s and
a f t e r h i s own v i s i t to U l s t e r .
He h a d been c o n s i d e r i n g w h e t h e r , a s
a l o n g - t e r m m e a s u r e , it would be p o s s i b l e to r e l i e v e the A r m y of the
b u r d e n of p o l i c e d u t i e s , for which they w e r e not equipped or t r a i n e d ,
by b r i n g i n g in s u b s t a n t i a l p o l i c e contingents f r o m G r e a t B r i t a i n .
T h i s would r e q u i r e l e g i s l a t i o n i n the United Kingdom P a r l i a m e n t ,
and one p o s s i b i l i t y m i g h t be for the N o r t h e r n I r e l a n d d e b a t e to be
h e l d on t h i s . Although it w a s i m p o s s i b l e to f o r e c a s t the future
c o u r s e of e v e n t s with any a c c u r a c y , it v/as c l e a r tiiat the whole I r i s h
p r o b l e m v/as once m o r e on the m o v e and that t h e r e would be p r e s s u r e
f o r f u n d a m e n t a l c h a n g e s going f a r beyond what w a s at p r e s e n t
contemplated.
In these c i r c u m s t a n c e s , it w a s i m p o r t a n t to get a
d i a l o g u e going with the G o v e r n m e n t of the I r i s h R e p u b l i c a f t e r the
r e p o r t s h a d b e e n p u b l i s h e d , he h i m s e l f had paid a second v i s i t to
N o r t h e r n I r e l a n d and a d e b a t e h a d b e e n held a t W e s t m i n s t e r .
The
a t t i t u d e of the P r i m e M i n i s t e r of the Irr'.sh R e p u b l i c , M r , Lynch,
h a d not b e e n helpful or e a s y to a s s e s s .
Though h e h a d s p e c i f i c a l l y
r e n o u n c e d the u s e of f o r c e , he h a d s e n t t r o o p s to the b o r d e r ; and he
h a d e m b a r k e d on a v/orld-wide p r o p a g a n d a c a m p a i g n a g a i n s t the
U n i t e d K i n g d o m and N o r t h e r n I r e l a n d G o v e r n m e n t s ,
If he r e a l l y
w a n t e d a united I r e l a n d , he m u s t c o n c i l i a t e P r o t e s t a n t opinions but
s o f a r h i s t a c t i c s had done nothing but a l a r m it.
N e v e r t h e l e s s , if
t h e r e w e r ^ t o be any p r o s p e c t of a final s o l u t i o n , r e l a t i o n s between
the N o r t h and South of I r e l a n d , a n d b e t w e e n the South and the
U n i t e d K i n g d o m m u s t be lifted to a different p l a n e . A s things
s t o o d a t p r e s e n t this v/as l i k e l y t o take a long t i m e .
In c o n c l u s i o n , the Homo S e c r e t a r y paid t r i b u t e to the m a n n e r
i n w h i c h the A r m y had d i s c h a r g e d an a r d u o u s and u n g r a t e f u l t a s k .
H e e x p r e s s e d h i s g r a t i t u d e for the s u p p o r t he had r e c e i v e d f r o m h i s
c o l l e a g u e s , and in p a r t i c u l a r for tire h e l p they had g i v e n hirn in the
p r o v i s i o n of staff for the v a r i o u s w o r k i n g p a r t i e s a n a c o m m i s s i o n s .
H e would have t o a s k for the p r e s e n t p r o v i s i o n a l a r r a n g e m e n t s to be
c o n t i n u e d for s o m e t i m e to c o m e , and he hoped that h i s c o l l e a g u e s
w o u l d b e a r with h i m in t h i s : but it would p r o b a b l y be p o s s i b l e to
r e g u l a r i s e the p o s i t i o n a f t e r the end of O c t o b e r .
THE D E F E N C E S E C R E T A R Y said that v/ith e i g h t b a t t a l i o n s
i n N o r t h e r n I r e l a n d and two in r e s e r v e , we had r e a c h e d the l i m i t of
a v a i l a b i l i t y of t r o o p s u n c o m m i t t e d to the North A t l a n t i c T r e a t y
Organisation.
F u r t h e r r e i n f o r c e m e n t s could of c o u r s e be made
a v a i l a b l e if need be u n d e r the p r o c e d u r e s a g r e e d with the S u p r e m e
A l l i e d C o m m a n d e r , E u r o p e ; and he fully a p p r e c i a t e d the n e c e s s i t y
e s p e c i a l l y f r o m the point of view of m a i n t a i n i n g the confidence of the
R o m a n C a t h o l i c s , of providing w h a t e v e r f o r c e s v / e r e r e q u i r e d .
He
m u s t hov/ever g i v e w a r n i n g that the f o r c e s at our d i s p o s a l v/ere not
-3­
T
T
inexhaustible.
The c a l l i n g - i n of the a r m s of the B S p e c i a l s had
gone r e a s o n a b l y w e l l in B e l f a s t and Londonderry, but l e s s w e l l in
the country.
The p r e s e n t a r r a n g e m e n t s might have t o be changed;
and t h i s m i g h t l e a d to an i n c r e a s e in tension.
" I n d i s c u s s i o n g e n e r a l a g r e e m e n t was e x p r e s s e d with the
H o m e S e c r e t a r y ^ a n a l y s i s of the situation.
The Cabinet a g r e e d
that i t m i g h t lead to, a considerable slackening in tension if the
R o m a n Catholic deputation to be r e c e i v e d by the Home S e c r e t a r y that
day could b e induced to make a statement on the l i n e s he had
proposed;' While the Army*s i m a g e a s an impartial authority had b e e n
a m a j o r a s s e t in the e a r l y s t a g e s , Protestant confidence in the A r m y ' a
objectivity had b e e n shaken by r e c e n t events and by m i s r e p r e s e n t a ­
tions i n i l l e g a l b r o a d c a s t s , and there w a s now a danger of s e m e
d e g r e e of p o l a r i s a t i o n , with the P r o t e s t a n t s placing their r e l i a n c e
on the R o y a l U l s t e r Constabulary (RUC) and the R o m a n Catholics
putting their trust i n the A r m y .
This might l e a d to d i s t r u s t and
t e n s i o n b e t w e e n the police and the A r m y : and the tone of the r e c e n t
RUC s t a t e m e n t on the u s e by the A r m y of CS g a 3 in B e l f a s t on
7th S e p t e m b e r s u g g e s t e d that this might a l r e a d y be happening.
It
would b e u s e f u l if the General Officer Commanding, Northern
Ireland,^ could c o m e to London and give h i s a p p r e c i a t i o n of the
mUItary-situatioh to the M i n i s t e r s m o s t c l o s e l y c o n c e r n e d .
There
w a s general approval of the H o m e S e c r e t a r y s s u g g e s t i o n that
f
Though the t e n s i o n in Northern Ireland
w a s not n e c e s s a r i l y e n t i r e l y r e l i g i o u s in o r i g i n , the Churches w e r e
c l e a r l y a k e y f a c t o r : and the Cabinet w e l c o m e d the efforts which
had b e e n made to take them into our confidence.
Reporting by the
PreBS and other information m e d i a had not a l w a y s b e e n s t r i c t l y
o b j e c t i v e , and a watch should be kept on this: in p a r t i c u l a r , a n e y e
should be kept on c o m m e r c i a l t e l e v i s i o n in U l s t e r , which w a s under
U l s t e r Unionist control. Although the Northern Ireland P r i m e
M i n i s t e r a n d s e v e r a l of h i s c o l l e a g u e s had committed t h e m s e l v e s
f i r m l y t o the cause of r e f o r m , the Government w a s i n danger f r o m
both l e f t and right, and the p o s s i b i l i t y could not be excluded of i t s
l o s i n g c o n t r o l of the situation.
In that event the United Kingdom
G o v e r n m e n t might have to a s s u m e d i r e c t r e s p o n s i b i l i t y .
If this
contingency a r o s e , it would be better both p r e s e n t a t i o n a l l y and
p o l i t i c a l l y if the United Kingdom Government w e r e to take o v e r at
the r e q u e s t of the Northern Ireland Government rather than on its
own i n i t i a t i v e . A c r i s i s m i g h t a r i s e at v e r y short n o t i c e , and the
a r r a n g e m e n t s f o r the introduction of d i r e c t rule should be r e v i e w e d
and if n e c e s s a r y brought up to d a t e ,
THE PRIME MINISTER, summing up the d i s c u s s i o n , said thafc-the-Home-Secretary "had made it abundantly c l e a r that the s i t u a t i o n i n N o r t h e r n Ireland w a s still e x t r e m e l y g r a v e .
He invited the H o m e S e c r e t a r y to give a further full report to h i s RETAINED UNDER SECTION 3 (4* E PUBLIC RECORD c o l l e a g u e s a t t h e i r n e x t m e e t i n g ; and he w a r n e d the C a b i n e t that
they m i g h t h a v e to be r e c a l l e d e a r l i e r t h a n w a s at p r e s e n t
c o n t e m p l a t e d if t h e r e w e r e any m a r k e d d e t e r i o r a t i o n in the
situation.
The a r r a n g e m e n t s f o r t r a n s i t i o n t o d i r e c t r u l e should
be r e - e x a m i n e d by officials with a v i e w to a d i s c u s s i o n in the
M i n i s t e r i a l G r o u p on N o r t h e r n I r e l a n d ,
Officials should give
f u r t h e r c o n s i d e r a t i o n to the l o n g - t e r m p o s s i b i l i t i e s to which the
H o m e S e c r e t a r y had r e f e r r e d and in p a r t i c u l a r to that of placing
r e l a t i o n s w i t h the I r i s h R e p u b l i c on a b e t t e r and m o r e c o n s t r u c t i v e
footing.
T h e y should a l s o e x a m i n e our d i p l o m a t i c p o s t u r e and the
i n t e r n a t i o n a l i m p l i c a t i o n s of the N o r t h e r n I r e l a n d situation in t e r m s
not only of the I r i s h p r o p o s a l , to which the F o r e i g n and
C o m m o n w e a l t h S e c r e t a r y had r e f e r r e d e a r l i e r , for the i n s c r i p t i o n
of the N o r t h e r n I r e l a n d s i t u a t i o n on the a g e n d a of the f o r t h c o m i n g
m e e t i n g of the G e n e r a l A s s e m b l y of the United N a t i o n s , but in t e r m s
of o u r b i l a t e r a l r e l a t i o n s with C o m m o n w e a l t h and f o r e i g n c o u n t r i e s .
In view of the g r a v i t y of the N o r t h e r n I r e l a n d s i t u a t i o n and
the p o t e n t i a l l y s e r i o u s c o n s e q u e n c e s , both i n t e r n a l and
i n t e r n a t i o n a l , of a n y i n d i s c r e t i o n s , m e m b e r s of the G o v e r n m e n t
would h a v e to e x e r c i s e p a r t i c u l a r c a r e to avoid making any public
p r o n o u n c e m e n t which m i g h t be exploited to the G o v e r n m e n t s
d e t r i m e n t or to i n c r e a s e t e n s i o n . He would c i r c u l a t e a w a r n i n g to
M i n i s t e r s not in the C a b i n e t and to j u n i o r M i n i s t e r s on this p o i n t .
The Cabinet ­
(1)
Took note of the s t a t e m e n t s by the H o m e S e c r e t a r y and Defence S e c r e t a r y , and of the p o i n t s m a d e in discussion,, (2)
Took note with a p p r o v a l of the P r i m e M i n i s t e r s s u m m i n g u p of t h e i r discussion. C a b i n e t Office,
S.W.I.
12th S e p t e m b e r , . 1969
T h e circulation of this paper has been strictly l i m i t e d . . r
It is issued for the personal use o f J
b ^ J \u g l i l '
T O P SECRET
.
\
1
lA^
l^K
9
Copy N o
CABINET
CONFIDENTIAL ANNEX
CC(69) 44th C o n c l u s i o n s , Minute 1
Tuesday, 16th September, 1969, at 1L, 00 a. m.
IN
THE PRIME MINISTER eaid that on tlie p r e v i o u s evening
h e , the Home S e c r e t a r y and the Defence S e c r e t a r y had m e t with
the General Officer Commanding (GOC), Northern Ireland,
G e n e r a l Sir Ian F r e e l a n d , and Mr, Oliver Wright, the United
Kingdom G o v e r n m e n t s s p e c i a l r e p r e s e n t a t i v e in Northern Ireland,
G e n e r a l Freeland and Mr, Wright had given the m e e t i n g their
appreciation of the situation, which showed that the p o s i t i o n was
still a very serious one.
This had been followed by a d i s c u s s i o n
of the situation a r i s i n g f r o m the i s s u e by the e x t r e m i s t c o m m i t t e e
w h i c h was in de facto control of the Catholic e n c l a v e s in B e l f a s t
and Londonderry of a statement in connection with the r e m o v a l of
the b a r r i c a d e s which linked this to f a r - r e a c h i n g political demands
and affirmed that the e x t r e m i s t s w e r e prepared to negotiate only
with the A r m y and n o t with the Government of Northern Ireland,
During the meeting the Government of Northern Ireland had informed
u s of their intention to i s s u e i m m e d i a t e l y a statement which would
s e t a t i m e l i m i t for the r e m o v a l of the b a r r i c a d e s by a g r e e m e n t ,
failing which they v/ould be r e m o v e d by f o r c e .
The Northern
Ireland P r i m e M i n i s t e r , Major Chichester -Clark, w a s c l e a r l y
under p r e s s u r e f r o m his right wing.
If he failed to make a f i r m
s t a t e m e n t on the r e m o v a l of the b a r r i c a d e s , or was inhibited f r o m
doing s o by u s , t h e r e w a s a danger that a l a r g e s e c t i o n of Ms
s u p p o r t e r s would be alienated and join the "Protestant backlash"
which had r e c e n t l y b e c o m e evident, and that there might be
r e s i g n a t i o n s from h i s Government which would threaten i t s
survival.
At one point i t had s e e m e d p o s s i b l e that the P r i m e
Minister h i m s e l f or the Government c o l l e c t i v e l y might r e s i g n .
In that e v e n t , it w a s unlikely that any alternative Government
could be f o r m e d with wMch w e could c o - o p e r a t e .
It m i g h t not
be p o s s i b l e to f o r m a government at a l l , in wMch c a s e we should
have no c h o i c e but to a s s u m e d i r e c t r e s p o n s i b i l i t y for the government
of Northern Ireland.
It might be n e c e s s a r y in the l a s t r e s o r t to u s e
force.
On the other hand, a threat, e x p l i c i t or i m p l i c i t , to u s e it
c o m m i t t e d the United Kingdom Government, wMch would have to
provide the f o r c e .
The u s e of f o r c e would have the g r a v e s t
i m p l i c a t i o n s , and the GOC, Northern Ireland, had e x p r e s s e d
s t r o n g m i s g i v i n g s about the c o n s e q u e n c e s of our b e c o m i n g
involved, a s v/e v/ell m i g h t b e , in an u r b a n g u e r i l l a w a r .
It s e e m e d a d v i s a b l e to b r i n g p r e s s u r e to b e a r on the N o r t h e r n
I r e l a n d G o v e r n m e n t to o m i t f r o m their s t a t e m e n t any r e f e r e n c e
to a t i m e l i m i t or t o the u s e of f o r c e , and to hold the s i t u a t i o n s o
f a r a s they w e r e c o n c e r n e d b y s a y i n g - and allowing t h e m , if they
w i s h e d , to s a y - t h a t G e n e r a l F r e e l a n d had b e e n a u t h o r i s e d to d i s c u s s
with t h e G o v e r n m e n t of N o r t h e r n I r e l a n d the n a t u r e of the a c t i o n
i n v o l v e d i n d i s m a n t l i n g the b a r r i c a d e s a n d t h e m a n n e r in which
t h i s would b e d o n e .
In s u c h d i s c u s s i o n s the GOC was not to c o m m i t
h i m s e l f to any p r e c i s e t i m e t a b l e .
If t h e r e w e r e any q u e s t i o n of the
u s e of f o r c e he w a s to r e f e r b a c k for i n s t r u c t i o n s , w h i c h would have
to be c o n s i d e r e d c o l l e c t i v e l y by M i n i s t e r s .
In the e v e n t the
N o r t h e r n I r e l a n d G o v e r n m e n t had a g r e e d to i s s u e a s t a t e m e n t
on l i n e s a c c e p t a b l e to u s .
This had b e e n followed by a t e l e v i s i o n
i n t e r v i e w g i v e n by the H o m e S e c r e t a r y in which M r . Callaghan had
e m p h a s i s e d t h a t t h e r e could be n o q u e s t i o n of e n t e r i n g into a
p o l i t i c a l n e g o t i a t i o n hi the c o n t e x t of the r e m o v a l of the b a r r i c a d e s .
This w a s a s e c u r i t y p r o b l e m which the GOC w a s e m p o w e r e d to
d i s c u s s : b u t he w a s n o t e m p o w e r e d to d i s c u s s with s e l f - a p p o i n t e d
b o d i e s p o l i t i c a l i s s u e s which w e r e p r o p e r l y the c o n c e r n of the
G o v e r n m e n t of N o r t h e r n I r e l a n d , which had a l r e a d y put f o r w a r d
t h r o u g h the a p p r o p r i a t s c o n s t i t u t i o n a l c h a n n e l s i t s p r o p o s a l s for
d e a l i n g with the m a j o r i t y of the p r o b l e m s i n v o l v e d .
Meanwhile,
n e g o t i a t i o n s on the s p o t for the r e m o v a l of the b a r r i c a d e s c o n t i n u e d .
THE D E F E N C E S E C R E T A R Y said t h a t L o n d o n d e r r y w a s
r e l a t i v e l y c a l m , but t h a t t h e s i t u a t i o n in B e J i a s t r e m a i n e d v e r y
tense.
The t r o o p s w e r e s u b j e c t e d to c o n s t a n t v i l i f i c a t i o n by
e x t r e m i s t P r o t e s t a n t e l e m e n t s : b u t by the s t a n d a r d s which
a p p l i e d to a c t i v e s e r v i c e the s t r a i n on t h e m w a s n o t e x c e s s i v e ,
and the GOC w a s n o t w o r r i e d a b o u t m o r a l e .
With the a r r i v a l
that day of a f u r t h e r b a t t a l i o n in E e l f a s t (making she b a t t a l i o n s
in a l l i n t h a t a r e a ) t h e GOC felt t h a t he would be able to c o n t a i n
the s i t u a t i o n , p r o v i d e d m a t t h e r e was no m a j o r d e t e r i o r a t i o n .
He i n t e n d e d to p a y a s h o r t v i s i t t c N o r t h e r n I r e l a n d h i m s e l f o n
18th S e p t e m b e r .
THE MINISTER O F S T A T E FOR F O R E I G N AND
C O M M O N W E A L T H A F F A I R S said that the I r i s h p r o p o s a l
for the i n s c r i p t i o n on the a g e n d a of the G e n e r a l A s s e m b l y
of the United N a t i o n s would be c o n s i d e r e d by the G e n e r a l
C o m m i t t e e of the United N a t i o n s o n 17th S e p t e m b e r ,
We
had b e e n l o b b y i n g w i t h s o m e s u c c e s s , and the p r o s p e c t s
for an a d v e r s e v o t e w e r e q u i t e f a v o u r a b l e , b u t p r o m i s e s
of s u p p o r t o b t a i n e d i n c a p i t a l s did not a l w a y s r e s u l t i n v o t e s
i n the d e s i r e d s e n s e by d e l e g a t e s .
E v e n if t h e I r i s h p r o p o s a l
w e r e r e j e c t e d by the G e n e r a l C o m m i t t e e the m a t t e r could be
If this h a p p e n e d
r a i s e d a f r e s h in the G e n e r a l A s s e m b l y itself,
ft and if the p r o p o s a l for i n s c r i p t i o n s u c c e e d e d , the United Kingdom
P e r m a n e n t R e p r e s e n t a t i v e to the United N a t i o n s , Lord Caradon,
had b e e n instructed to p r e s s for the matter to b e r e f e r r e d to the
Human R i g h t s Cornmission w h e r e i t could be argued that i t would
be out of order to d i s c u s s the p o l i t i c a l a s p e c t s of the question.
In d i s c u s s i o n there was general approval of the action taken
b y M i n i s t e r s a r i s i n g out of the meeting on 15th S e p t e m b e r .
The
point w a s made that w e should not r e c o i l f r o m p o l i t i c a l demands
a s such.
What w a s at i s s u e w a s the manner in which t h e s e w e r e
made.
They could not be channelled through the GOC who was
c o n c e r n e d s o l e l y with s e c u r i t y , but should be dealt with through
the N o r t h e r n Ireland G o v e r n m e n t which in many i n s t a n c e s had
a l r e a d y initiated a c t i o n on the a l l e g e d points of g r i e v a n c e .
It
would be n e c e s s a r y to k e e p up the p r e s s u r e in Stormont.
Full
u s e should be made of the good offices of m o d e r a t e s on both s i d e s
and i n particular of r e s p o n s i b l e churchmen.
In this connection it
w a s noted that the Catholic h i e r a r c h y w e r e a l r e a d y in touch with
t h e l e a d e r of the c o m m i t t e e running the Catholic barricaded a r e a s
i n B e l f a s t and Londonderry, a Mr. Sullivan,
with a v i e w
t o inducing h i m to adopt a m o r e r e a s o n a b l e attitude.
Consideration
w a s given to the p o s i t i o n which m i g h t a r i s e if the p r e s e n t Northern
Ireland P r i m e Minister w e r e f o r c e d into r e s i g n a t i o n .
If the
p r e s e n t Minister of D e v e l o p m e n t , Mr. Faulkner, w e r e able to
f o r m a g o v e r n m e n t , he would probably continue i n the m a i n with
p r e s e n t p o l i c i e s and w e should b e able to c o - o p e r a t e with h i m .
A government headed by the f o r m e r Minister of Home A f f a i r s ,
M r . C r a i g , would however p r e s e n t an e n t i r e l y different situation,
and w e could not a l l o w o u r s e l v e s to be f o r c e d into the p o s i t i o n of
supporting an a d m i n i s t r a t i o n of e x t r e m e and u n c o m p r o m i s i n g
right-wingers.
It had to be borne in mind that it might p r o v e
i m p o s s i b l e to f o r m a v i a b l e N o r t h e r n Ireland government at a l l .
E m e r g e n c y l e g i s l a t i o n to d e a l with this contingency had been
p r e p a r e d , and had r e c e n t l y b e e n r e v i e w e d , a s had the g e n e r a l
constitutional p o s i t i o n .
It was true that there had been s o m e
weakening i n confidence in the A r m y a s an i m p a r t i a l f o r c e a s
b e t w e e n P r o t e s t a n t s and C a t h o l i c s , i n particular among the
former.
The u s e by the A r m y on a v e r y s m a l l s c a l e of CS
g a s a g a i n s t a P r o t e s t a n t c r o w d had produced a m u c h m o r e
v i o l e n t r e a c t i o n than the expenditure of CS gas on a much
l a r g e r s c a l e by the R o y a l U l s t e r Constabulary a g a i n s t CathoHcs
at an e a r l i e r s t a g e .
But a c c u s a t i o n s , hov/ever unsubstantiated,
tliat the A r m y had a prooCatholic bias v/ere probably i a a v i t a b l e
in a situation w h e r e the Catholics w e r e on the whole on the
d e f e n s i v e , w h e r e A r m y intervention had in the m a i n been
with a v i e w to their p r o t e c t i o n ; and w h e r e r e f o r m s , m o s t l y
p r o - C a t h o l i c in effect, which had b e e n delayed for 50 y e a r s
had^toJbe^xushed^thr-ough^in-a-few m o n t h s .
j
: as 15k G0i- V. :-EQRitS El!S
ETAINED UNDER SECTION 3 ( 4 )
)F THE PUBLIC R E C O R S S ^
:
I The C a b i n e t Took n o t e of the s t a t e m e n t s by the P r i m e M i n i s t e r ,
the D e f e n c e S e c r e t a r y a n d the M i n i s t e r of State for
F o r e i g n and C o m m o n w e a l t h A f f a i r s and of the
p o i n t s m a d e in d i s c u s s i o n .
C a b i n e t Office, S . 1 7 . 1 .
16th S e p t e m b e r , 1969
tOS DOOTMENT IS THE PROPERTY OF HER BRITANNIC MAJESTVS GOVERNMENT--­
gL
,
-
—
—
.
—-
T h e circulation o f this paper has been strictly lim^ted.^
.
(
It is issued f o r the personal use o f
.
\
(ftUttf)
T O P SECRET
kAr* Q
\
9
Copy N o
CABINET
C O N F I D E N T I A L ANNEX
' C C / 6 9 ) 46th C o n c l u s i o n s , Minute 4
^ T u e s d a y , 7th O c t o b e r , 1969 a t 3 . 0 0 p , n u
The Cabinet considered s t a t e m e n t s by the H o m e S e c r e t a r y
and the-Defence S e c r e t a r y about the report to the N o r t h e r n Ireland
G o v e r n m e n t of L o r d Hunt*s A d v i s o r y Board on the future of the
R o y a L U l s t e r Constabulary (RUC) and the U l s t e r S p e c i a l
Constabulary (USC); and a m e m o r a n d u m by the H o m e S e c r e t a r y
(G(69)"331) dealing with the p r o p o s a l s of the three working p a r t i e s
and the^economic m i s s i o n which h e had initiated on h i s v i s i t to
N o r t h e r n Ireland i n A u g u s t .
- THE HOME SECRETARY said that the Government could
applaud the principal r e c o m m e n d a t i o n s of Lord H u n f s r e p o r t .
T h e s e w e r e that the RUC should b e stripped of its p a r a - m i l i t a r y '
functions and concentrate on n o r m a l p o l i c i n g ; a p o l i c e authority,
o n the "Great B r i t a i n pattern, should b e interposed b e t w e e n the f o r c e
and the: Northern Ireland Government; HM Inspectors of Constabulary
should i n s p e c t the f o r c e at r e g u l a r i n t e r v a l s ; a r m s should not
n o r m a l l y b e c a r r i e d ; the uniform should be rede s i g n e d and be blue
i n s t e a d of black; the e s t a b l i s h m e n t should be much e n l a r g e d ; m e a n s
should he found of recruiting m o r e Roman C a t h o l i c s ; t h e r e should
b e interchange with p o l i c e f o r c e s in Great Britain; and l i n k s should
be f o r m e d with p o l i c e institutions in Great Britain.
T h e H o m e S e c r e t a r y said thatjhe had a Chief Constable cf a
f o r c e , in G r e a t B r i t a i n ready to take c h a r g e ; and the a i m should be
t o have t h i s officer In p o s t s i m u l t a n e o u s l y with the publication of the
r e p o r t and the announcement of the d e c i s i o n s on It, H e w a s s e e k i n g
a^SUitablegRonmnOathoU
to the p o s t of Deputy
^l iiY ?f?^
fc
a
oving
d i f f i c u l t
t
o
i
i
n
d
a
volunteerf
i.
L e g i s l a t i o n would be n e c e s s a r y e i t h e r in the o v e r s p i l l p e r i o d o r e a r l y
next S e s s i o n t o i m p l e m e n t the a r r a n g e m e n t s f o r the t r a n s f e r and
s e c o n d m e n t of G r e a t B r i t a i n p o l i c e . He hoped that he could
p e r s u a d e the N o r t h e r n I r e l a n d G o v e r n m e n t to a c q u i e s c e in a l l t h e s e
p r o p o s a l s f o r the R U C .
,
5
T h e p r o p o s a l s r e l a t i n g to the USC (the B S p e c i a l s ) , w e r e
m o r e difficult; and h e and the Defence S e c r e t a r y s h a r e d r e s e r v a t i o n s
about t h e m .
The Hunt R e p o r t p r o p o s e d t h a t the USC should be
d i s b a n d e d and that t h e i r f o r m e r functions should be u n d e r t a k e n by
two n e w b o d i e s : a s p e c i a l c o n s t a b u l a r y , on the G r e a t B r i t a i n
p a t t e r n , of unpaid, u n a r m e d v o l u n t e e r s u n d e r p o l i c e c o n t r o l , which
would r e l i e v e the RUC of r o u t i n e d u t i e s such a s traffic c o n t r o l ;
a n d a p a r t - t i m e , l o c a l l y r e c r u i t e d , p a i d and a r m e d defence f o r c e ,
r a t h e r like the w a r t i m e L o c a l Defence V o l u n t e e r s , to g u a r d the
b o r d e r and k e y i n s t a l l a t i o n s , who would l e c e i v e m i l i t a r y t r a i n i n g
f r o m the B r i t i s h A r m y and would be u n d e r the c o n t r o l of the
G e n e r a l Officer C o m m a n d i n g (GOC), a c t i n g in c o n s u l t a t i o n with the
N o r t h e r n Ireland Government.
Lord H u n f s Advisory Board
t h o u g h t that the p o l i t i c a l r e p e r c u s s i o n s of d i s b a n d i n g the USC would
be l e s s s e v e r e if it w a s r e p l a c e d by s u c h a f o r c e ; s o m e of the
m o r e s u i t a b l e of its e x - m e m b e r s m i g h t be a b s o r b e d into the new
f o r c e a n d the c r e a t i o n o£ the f o r c e would r e d u c e the r i s k of the
USG going u n d e r g r o u n d .
E v e n s o , t h e r e w a s s o m e r i s k of a n
a d v e r s e P r o t e s t a n t r e a c t i o n , although it w a s p e r h a p s n o t a s g r a v e
a s M r . Q u f c d n H o g g h a d s u g g e s t e d to h i m it m i g h t b e .
T h e m o s t difficult p r o b l e m in t h i s p a r t of the p r o p o s a l s w a s
how a n d to what e x t e n t the N o r t h e r n I r e l a n d G o v e r n m e n t should
s h a r e i n the c o n t r o l of the new defence f o r c e .
T h e y h a d m a d e it
c l e a r t h a t t h e y wanted t o p l a y a l a r g e r p a r t t h a n L o r d Hunt h a d
e n v i s a g e d w h e r e b y the GOC would e x e r c i s e h i s c o m m a n d in c l o s e
c o n s u l t a t i o n with t h e m t h r o u g h the m e d i u m of a S e c u r i t y C o m m i t t e e
u n d e r t h e c h a i r m a n s h i p of the M i n i s t e r of H o m e A f f a i r s .
He
r e c o g n i s e d the s p e c i a l difficulty f o r the N o r t h e r n I r e l a n d
G o v e r n m e n t in a c c e p t i n g t h i s e l e m e n t i n the p r o p o s a l s ; and it would
c l e a r l y be m u c h e a s i e r to p e r s u a d e P r o t e s t a n t opinion to a c c e p t the
d i s b a n d m e n t of the USC if the p a c k a g e i n c l u d e d a good m e a s u r e of
c o n t r o l of the new f o r c e by S t o r m o n t ; but it would not be p o s s i b l e
t o go beyond a n a r r a n g e m e n t f o r the GOC t o c o n s u l t with the
N o r t h e r n I r e l a n d G o v e r n m e n t on a n y m a t t e r s of the f o r c e s s i z e and
d e p l o y m e n t , w h e r e t h e i r l o c a l knowledge would obviously be helpful.
T h e m a t t e r w a s so d e l i c a t e that L o r d Hunt and h i s c o l l e a g u e s had
n o t b e e n a b l e to r e a c h a fully w o i k e d out s o l u t i o n and It would
t h e r e f o r e f a l l t o h i m , k e e p i n g in touch with the Defence S e c r e t a r y ^
to do t h i s d u r i n g h i s f o r t h c o m i n g t a l k s with me S t o r m o n t
Government.
The d i s b a n d m e n t of the USC and the e s t a b l i s h m e n t of
the new l o c a l defence f o r c e u n d e r the c o n t r o l of the GCC azud m e
s
v
-2­
M i n i s t r y of Defence w e r e integral parts of the package of r e f o r m s ,
which w e r e the m i n i m u m that we should r e q u i r e . He b e l i e v e d that
he would be able to persuade the Northern Ireland Government of
this but h e would need the.Cabinet s authority for a m e a s u r e of
d i s c r e t i o n in his t a l k s ,
T
THE DEFENCE SECRETARY said that he found the Hunt
R e p o r t s recommendations f o r the RUC itself a d m i r a b l e .
He
a g r e e d that the USC should be abolished In Its present f o r m and
he accepted that there was a c a s e f o r a military f o r c e t o undertake
the t a s k s which they had performed in the border a r e a s .
It would
not be p o s s i b l e for the regular f o r c e s to shoulder this burden
t h e m s e l v e s , and, e v e n if they had the manpower, there w e r e other
objections to their becoming involved in it. He a c c e p t e d , therefore,
that there would have to be a separate new military f o r c e .
To be
adequate, the new f o r c e would need a strength n e a r e r 5 , 000 than
the 4 , 000 proposed by the Hunt Report; and It would need about
2 5 0 B r i t i s h officers and NCOs in i t s command s t r u c t u r e .
Their
t a s k would be s i m i l a r to that which the A r m y and the USC had had
to p e r f o r m in blocking the f r o n t i e r during the Iriah Republican A r m y
(IRA) i n s u r g e n c i e s of the 1950s. The nature of this task would
r e q u i r e the f o r c e to be r a i s e d in m a i n l y rural a r e a s and to be
provided with a r m s which they would keep at h o m e . He saw no
s e r i o u s objection to t h i s . The f o r c e should not be part of the
e x i s t i n g R e s e r v e A r m y but rather should be analagous t o the
H o m e Guard, with a flavour m o r e of the original Local Defence
Volunteers,
The Home Guard l e g i s l a t i o n , which w a s s t i l l on the
Statute Book, would provide a convenient model for a separate
c o m p r e h e n s i v e Bill - to be p a s s e d by the United Kingdom
P a r l i a m e n t - to c o v e r the new f o r c e , which would be preferable to
attempting to make p r o v i s i o n for It by amendments t o R e s e r v e A r m y
legislation^ He would w i s h to be s u r e that adequate a r r a n g e m e n t s
would be made to offset the extra £1 m i l l i o n cost of the f o r c e to the
D e f e n c e budget. L i k e the Home S e c r e t a r y , he r e c o g n i s e d that
t h e s e p r o p o s a l s r a i s e d a political d i l e m m a .
To make the new
f o r c e acceptable to R o m a n Catholic opinion, it would have to be
c l e a r l y under the control of the W e s t m i n s t e r Government and
f i r m l y linked to the A r m y .
On the other hand, to avoid a s e r i o u s
P r o t e s t a n t reaction, the Stormont Government would somehow have
to b e involved in its m a n a g e m e n t .
He was content t o leave it to
the H o m e S e c r e t a r y t o obtain the b e s t t e r m s of a g r e e m e n t he could
with the Northern Ireland Government, s o long a s u l t i m a t e control
of the f o r c e l a y with the GOG responsible to the Ministry of D e f e n c e ,
In d i s c u s s i o n it w a s argued that no h a s t y d e c i s i o n should be
m a d e on the proposed new defence f o r c e .
S e v e r a l m a j o r questions
needed to be a n s w e r e d . How could it be ensured that the f o r c e
would contain a reasonable balance of Protestants and Roman
C a t h o l i c s ? E the f o r c e w e r e dominated by Protestants - a s s e e m e d
"3"
l i k e l y , a n d , i n d e e d , p e r h a p s n e c e s s a r y if it w e r e to defend the
b o r d e r with r e s o l u t i o n - how would the I r i s h R e p u b l i c r e a c t t o i t ,
and how could R o m a n C a t h o l i c opinion in the North be p e r s u a d e d of
i t s a d v a n t a g e s o v e r the U S C ? It w a s not sufficient to c o m p a r e i t
f a v o u r a b l y with the U S C , b e c a u s e the USC w a s a r e l i c of the p a s t
which w a s v/idely r e c o g n i s e d a s offensive a n d w h i c h the G o v e r n m e n t
now h a d to r e m o v e .
We should be m o s t c i r c u m s p e c t about
c r e a t i n g , a t t h i s s t a g e of N o r t h e r n I r e l a n d s h i s t o r y , a new s p e c i a l
m i l i t a r y f o r c e , e v e n though i t a d m i t t e d l y would be b e t t e r t h a n what
it r e p l a c e d .
f
On the o t h e r h a n d , it w a s pointed out that the G o v e r n m e n t
h a d only a c h o i c e of e v i l s b e f o r e t h e m .
T h e r e w e r e undoubtedly
s e r i o u s o b j e c t i o n s t o the p r o p o s e d new defence f o r c e ; but it would
be a s u b s t a n t i a l i m p r o v e m e n t cn the USC.
It would be only half
a s l a r g e ; it would b e l o c a t e d a w a y f r o m the u r b a n a r e a s of t e n s i o n ;
and it would be d i r e c t l y u n d e r A r m y c o m m a n d a n d not i n d i r e c t l y
and ineffectively c o n t r o l l e d t h r o u g h the R U C .
The i s s u e of the
m i n i m u m n e c e s s a r y a r m s to t h e m h a d to be v i e w e d a g a i n s t the
b a c k g r o u n d of the h u n d r e d s of t h o u s a n d s of s m a l l a r m s p r i v a t e l y
h e l d i n U l s t e r , m a n y of t h e m by the USC t h e m s e l v e s .
But She
decisive consideration was that there was no satisfactory alternative
T h e A r m y would n e e d five f u r t h e r b a t t a l i o n s to u n d e r t a k e the d u t i e s
en.visa.ged for the d e f e n c e f o r c e .
T h e s e would be a d d i t i o n a l t o the
e x t r a g a r r i s o n t h a t would be r e q u i r e d in the long t e r m f o r the A r m y
to fulfil i t s r o l e of a s s i s t i n g the civil p o w e r and backing the d e f e n c e
of the f r o n t i e r .
The A r m y ' s o t h e r c o m m i t m e n t s would not a l l o w it
to p r o v i d e a f o r c e totalling t h e 11 b a t t a l i o n s w h i c h would be n e e d e d .
In the long r u n it w a s to be h o p e d that the d e f e n c e f o r c e would
w i t h e r a w a y w h e n it h a d s e r v e d i t s p u r p o s e .
In f u r t h e r d i s c u s s i o n t h e r e w a s g e n e r a l a g r e e m e n t t h a t the
N o r t h e r n I r e l a n d G o v e r n m e n t should not h a v e a s l a r g e a s a y in the
c o n t r o l of the f o r c e a s L o r d Hunt p r o p o s e d , l e s t it should in effect
b e c o m e s i m p l y a r e i n c a r n a t i o n of the USC.
THE P R I M E MINISTER, s u m m i n g u p this p a r t of the
d i s c u s s i o n , said t h a t the C a b i n e t w e l c o m e d the p r o p o s a l s of
L o r d Hunt*s A d v i s o r y B o a r d f o r bringing the U l s t e r police s y s t e m
a s c l o s e l y a s p o s s i b l e into l i n e with that in G r e a t B r i t a i n ; and they
a g r e e d w i t h the H o m e S e c r e t a r y s p r o p o s a l s f o r the p u b l i c a t i o n of
the r e p o r t , the a n n o u n c e m e n t of d e c i s i o n s on it and the a p p o i n t m e n t
of the n e w I n s p e c t o r - G e n e r a l .
T h e y a g r e e d a l s o t h a t h e should
b r i n g in a B i l l t o m a k e p o s s i b l e the t r a n s f e r and s e c o n d m e n t of
p o l i c e f r o m f o r c e s i n G:.*eat B r i t a i n t o the R.UC.
T h e y a g r e e d with
the p r o p o s a l to a b o l i s h the USC; but thoy s h a r e d the u n e a s e of the
H o m e and D e f e n c e S e c r e t a r i e s about the p r o p o s e d defence f o r c e ,
to w h i c h t h e r e w e r e s e v e r a l c o g e n t o b j e c t i o n s .
But they a c c e p t e d
chat t h e r e w a s n o s a t i s f a c t o r y a l t e r n a t i v e w a y of providing f o r the
T
-4­
l o n g - t e r m protection of the border and of k e y i n s t a l l a t i o n s , g i v e n
that the B r i t i s h A r m y could not undertake the entire burden.
F u r t h e r m o r e , the f o r c e would be a n e c e s s a r y political counterweight
to the abolition of the USCf if nothing w e r e put in its p l a c e , it might
not be p o s s i b l e to contain the reaction by the P r o t e s t a n t s to the
abolition of the f o r c e on which they pinned euch r e l i a n c e .
So long
a s the e s s e n t i a l condition that the GOC, and through h i m the
W e s t m i n s t e r Government, controlled the new f o r c e was m e t , the
Cabinet reluctantly accepted that it w a s the b e s t solution i n a m o s t
d e l i c a t e and intractable situation. The Hunt Report had not g i v e n a
definitive a n s w e r to the p r o b l e m how to a s s o c i a t e the Northern
Ireland Government with the management of the new f o r c e in order
t o s e c u r e their c o - o p e r a t i o n .
The Home S e c r e t a r y , in consultation
with the Defence S e c r e t a r y , should have d i s c r e t i o n for t h i s
purpose i n working out an acceptable a r r a n g e m e n t , subject to
ensuring that the ultimate control of the f o r c e w a s safeguarded in
the manner which the Cabinet considered e s s e n t i a l .
The Cabinet ­
(l)
Took note, with approval, of the P r i m e
-^Si:i' Minister*s summing up of this part of their d i s c u s s i o n , :
(2)
;
Invited the Home S e c r e t a r y to p r o c e e d with the a r r a n g e m e n t s for introducing v the r e f o r m s of the RUC a s a g r e e d in d i s c u s s i o n , and t o bring in a B i l l to provide for the transfer and secondment of Great Britain p o l i c e , (3)
Invited the Home S e c r e t a r y , in consultation with the Defence S e c r e t a r y , to s e c u r e the best p r a c t i c a b l e a r r a n g e m e n t s f o r control of the n e w defence f o r c e , subject to the e s s e n t i a l requirements a g r e e d in d i s c u s s i o n , and to report to the Cabinet. (4)
I n v i t e d the D e f e n c e S e c r e t a r y , i n consultation with the Home S e c r e t a r y , to c o n s i d e r urgently the n e c e s s a r y l e g i s l a t i v e p r o v i s i o n in the United Kingdom P a r l i a m e n t f o r establishing the new defence f o r c e . T H E HOME S E C R E T A R Y said t h a t the two G o v e r n m e n t s had
r e c e i v e d r e p o r t s f r o m the t h r e e W o r k i n g P a r t i e s and the e c o n o m i c
m i s s i o n of officials which h e h a d i n i t i a t e d on h i s v i s i t to U l s t e r in
August,
The t h r e e Working P a r t i e s h a d e x a m i n e d the extent to
which the N o r t h e r n I r e l a n d G o v e r n m e n t s p r e s e n t p r a c t i c e o r
pledged c o m m i t m e n t s a d e q u a t e l y e n s u r e d the p r o m o t i o n of good
c o m m u n i t y r e l a t i o n s by m e t h o d s including the p r o h i b i t i o n of
i n c i t e m e n t to r e l i g i o u s h a t r e d ! the a v o i d a n c e of any d i s c r i m i n a t i o n
in a n y f o r m of p u b l i c e m p l o y m e n t ; and the f a i r a l l o c a t i o n of h o u s e s
by p u b l i c a u t h o r i t i e s .
The e c o n o m i c m i s s i o n h a d a s s e s s e d the
e c o n o m i c and i n d u s t r i a l p r o s p e c t s i n N o r t h e r n I r e l a n d in the light
of r e c e n t e v e n t s . He p r o p o s e d in h i s f o r t h c o m i n g v i s i t to d i s c u s s
what a c t i o n should follow f r o m t h e s e r e p o r t s .
The c o n c l u s i o n s of
the Working P a r t i e s on c o m m u n i t y r e l a t i o n s and on the a v o i d a n c e of
d i s c r i m i n a t i o n in p u b l i c e m p l o y m e n t w e r e c o m p r e h e n s i v e and
a c c e p t a b l e ; but he c o n s i d e r e d that the p r o p o s a l s of the " f o r k i n g P a r t y
on h o u s i n g a l l o c a t i o n - that r e l i a n c e should be p l a c e d on the new
a l l o c a t i o n s c h e m e s and on the C o m m i s s i o n e r f o r C o m p l a i n t s a s a
long s t o p - would n o t go f a r enough to s a t i s f y the H.orna.n C a t h o l i c
m i n o r i t y that t h e r e w a s no d i s c r i m i n a t i o n .
He a d v o c a t e d t r a n s f e r r i n g
a i l p u b l i c a u t h o r i t y h o u s i n g to the N o r t h e r n I r e l a n d H o u s i n g T r u s t ,
which h a d a r e p u t a t i o n for i m p a r t i a l i t y .
It owned 4 0 , 000 h o u s e s
(in c o m p a r i s o n with the l o c a l a u t h o r i t i e s which owned 76*000) and
it3 o r g a n i s a t i o n could be e x p a n d e d to u n d e r t a k e this e x t r a t a s k ,
Ke did not think that even the p r o p o s e d new e n l a r g e d l o c a l a u t h o r i t i e s
in N o r t h e r n I r e l a n d could be r e l i e d upon to a d m i n i s t e r h o u s i n g
without d i s c r i m i n a t i o n ; and he could s e e no g r o u n d s why h o u s i n g ,
any m o r e than e d u c a t i o n , should not be a d m i n i s t e r e d a s a c e n t r a l
s e r v i c e for the whole P r o v i n c e .
Ke w a s well a w a r e that h i s p r o p o s a l
wculd a r o u s e o p p o s i t i o n and that it would l e a v e the l o c a l a u t h o r i t i e s
with l i m i t e d f u n c t i o n s ; but this w a s a p r i c e w h i c h would h a v e to be
paid t o e n s u r e that the h o u s i n g p r o b l e m w a s p r o p e r l y d e a l t w i t h .
9
f
T h e e c o n o m i c m i s c i o n s r e p o r t v/as e n c o u r a g i n g for She
s h o r t t e r m ; but it c a r r i e d a w a r n i n g t h a t the l o n g e r t e r m effects
were potentially v e r y s e r i o u s .
Li the light of t h e i r r e p o r t , the
N o r t h e r n I r e l a n d G o v e r n m e n t p r o p o s e d i m m e d i a t e m e a s u r e s to
r e a s s u r e i n v e s t o r s a b o u t c o m p e n s a t i o n f o r f u t u r e r i c t d a m a g e and
to r e s t o r e r e l a t i v e l e v e l s of i n d u c e m e n t ; and t h e y p r o p o s e d that i\­
£?. m i l l i o n p r o g r a m m e of l a b o u r i n t e n s i v e w o r k s , d i r e c t e d in
p a r t i c u l a r a t the p e a k u n e m p l o y m e n t a r e a s of the w e s t , should b e
undertaken.
He d o u b t e d w h e t h e r t h e s e p r o p o s a l s would be
sufficient to solve the u n e m p l o y m e n t p r o b l e m o r to e n s u r e a n
a c c e p t a b l e f u t u r e r a t e of e c o n o m i c p r o g r e s s ; but h e Invited the
C a b i n e t to a g r e e t o t h e m in p r i n c i p l e so that h e could b a s e h i s
f o r t h c o m i n g d i s c u s s i o n s upon t h e m .
-6­
In d i s c u s s i o n there w a s gjjneral a g r e e m e n t with the Home
Secretary*s attitude to the r e p o r t s and to h i s p r o p o s a l s f o r acting
upon t h e m . It w a s pointed out however that h i s p r o p o s a l s for
public authority housing would make this a 100 per cent charge on
the E x c h e q u e r .
T h e r e would a l s o have to be financial d i s c u s s i o n s
b e t w e e n the T r e a s u r y and the Northern Ireland Ministry of Finance
on the p r o p o s a l to i n c r e a s e by £1 m i l l i o n the s p e c i a l capital
programme,
TO PRIME MINISTER, summing up this part of the
d i s c u s s i o n , said that the Cabinet endorsed the Home S e c r e t a r y ^
v i e w s on the reports of the three Working P a r t i e s and the economic
mission.
They authorised h i m to d i s c u s s action on them accordingly
with the Northern Ireland Government during h i s forthcoming v i s i t ,
subject to a full examination of the financial c o n s i d e r a t i o n s
mentioned in d i s c u s s i o n .
The Cabinet ­
(5) ; Invited the H o m e S e c r e t a r y to p r o c e e d a s proposed in C(69) 131, subject tc full consultations ao appropriate on the financial p o i n t s . Cabinet Office, S . W . 1 ,
9th October, 1969
The circulation of this paper has b e e n s t r i c t l y l i m i t e d .
' j
It is issued for the personal use of.:
TOP
SECRET
Copy No.
CABINET
C O N F I D E N T I A L ANNEX
CC(69) 48th C o n c l u s i o n s , Minute 2
T u e s d a y . 14th O c t o b e r , 1969 at 10,,30 a . m .
T H E H O M E S E C R E T A R Y , r e p o r t i n g on h i s v i s i t to
N o r t h e r n I r e l a n d , said that a full a c c o u n t of h i s d i s c u s s i o n s with
the N o r t h e r n I r e l a n d G o v e r n m e n t w a s given in the c o m m u n i q u e
i s s u e d on 10th O c t o b e r , c o p i e s of which he h a d c i r c u l a t e d to the
C a b i n e t w i t h C(69) 139. H e w a s convinced t h a t tne N o r t h e r n I r e l a n d
G o v e r n m e n t would do t h e i r b e s t to push the r e f o r m s t h r o u g h ,
b e c a u s e they r e c o g n i s e d m a t they could not go b a c k , and they
b e l i e v e d that t h e y could hold t h e i r P a r t y together,,
But he c o n f e s s e d
to a n I n n e r c o n c e r n and it r e m a i n e d to be d e e n w h e t h e r the
d i s t u r b a n c e s would build u p to a r e w peak or g r a d u a l l y die a w a y ;
the p r e v i o u s night had b e e n f a i r l y q u i e t .
He w a s h o w e v e r s u r e
that t h e r e would have b e e n r e a l t r o u b l e had the C a b i n e t not d e c i d e d
to i n s t i t u t e a n e w l o c a l defence f o r c e to r e p l a c e the U l s t e r S p e c i a l
C o n s t a b u l a r y (USC); it w a s v e r y l i k e l y that the USC would h a v e
gone u n d e r g r o u n d .
A s r e g a r d s the Royal U l s t e r C o n s t a b u l a r y (RUC);,
h i s i m p r e s s i o n v/as that the change to a c i v i l i a n p o l i c e r o l e w a s
g e n e r a l l y w e l c o m e , e v e n a m o n g s e n i o r o f f i c e r s ; and he b e l i e v e d
t h a t the R U C would be p r e p a r e d - if need b e , t o a c t a g a i n s t the USC.
T h e new I n s p e c t o r - G e n e r a l , S i r A r t h u r Young, w a s off to a good
s t a r t ; and a s s o o n a s h e w a s well e s t a b l i s h e d t h e y should r e v i e w the
a r r a n g e m e n t s w h e r e b y the p o l i c e c a m e u n d e r c o n t r o l of the G e n e r a l
Officer C o m m a n d i n g (GOC), with a view to giving m e I n s p e c t o r G e n e r a l m o r e f r e e d o m of acuiom
H i s opinion should a l s o be g i v e n
full w e i g h t i n d e c i d i n g w h e n i t w a s safe to w i t h d r a w t r o o p s f r o m the
various areas.
T H E D E F E N C E S E C R E T A R Y said t h a t in h i s j u d g m e n t t r o o p s
w e r e l i k e l y to b e r e q u i r e d i n N o r t h e r n I r e l a n d f o r a c o n s i d e r a b l e
p e r i o d ; l i t t l e confidence would be p l a c e d in the l o c a l f o r c e s by
C a t h o l i c s u n t i l t h e y w e r e s e e n to be working efficiently and f a i r l y ,
p a r t i c u l a r l y In the m a t t e r of p r o m o t i o n , and that m i g h t take u n t i l the
He a g r e e d that the r e l a t i o n s h i p b e t w e e n the RUC
end of next y e a r
and the GOC should be r e v i e w e d ; indeed t h e r e w a s a need to look
a g a i n a t the a r r a n g e m e n t s w h i c h had been i m p r o v i s e d and to
0
i m p r o v e c o m m u n i c a t i o n s b e t w e e n the two G o v e r n m e n t s and the
a d v i s e r s s t a t i o n e d a t S t o r m o n t and with the GOC,
I n t e l l i g e n c e of
f e e l i n g a m o n g P r o t e s t a n t s w a s s t i l l p o o r , though it w a s i m p r o v i n g ;
but t h e Shankill R o a d r i o t s showed s i g n s of o r g a n i s a t i o n and ho had
l i t t l e doubt that s o m e m e m b e r s of the USC w e r e i n v o l v e d .
The risk­
that o r g a n i s e d e l e m e n t s of the USC would go u n d e r g r o u n d had f o r m e d
a l a r g e p a r t of the c a s e for e s t a b l i s h i n g fche p r o p o s e d new l o c a l
d e f e n c e f o r c e ; and h e h o p e d that it m i g h t be p o s s i b l e to s e t this up
a t the beginning of the New Y e a r , though i d e a s had s t i l l to be
clarified.
L e g i s l a t i o n of the United K i n g d o m P a r l i a m e n t would be
r e q u i r e d ! and he t h o u g h t that t h i s should be a n n o u n c e d in
T h e Queen*s S p e e c h .
In d i s c u s s i o n t h e r e w a s g e n e r a l a p p r e c i a t i o n of the skill
s h o w n b y the Home S e c r e t a r y in n e g o t i a t i n g w i t h the N o r t h e r n
I r e l a n d G o v e r n m e n t , which had done m u c h to a l l a y f e a r s e x p r e s s e d
by s o m e m e m b e r s of the Cabinet d u r i n g the p r e v i o u s d i s c u s s i o n , ,
E v e r y effort should be m a d e to s e t t l e p o l i c y on the new l o c a l defence
f o r c e b e f o r e the D e b a t e on the A d d r e s s ^
The a i m should be to
i n t r o d u c e l e g i s l a t i o n for t h i s p u r p o s e and to f a c i l i t a t e the t r a n s f e r
and s e c o n d m e n t of G r e a t B r i t a i n p o l i c e d n r i n g N o v e m b e r ; the
O p p o s i t i o n w e r e not l i k e l y t o o b s t r u c t i t s p a s s a g e ,
T H E PRIME MINISTER, s u m m i n g up fche d i s c u s s i o n , said
[hat h e w i s h e d on behalf of the C a b i n e t to c o n g r a t u l a t e fche
H o m e S e c r e t a r y on h i s s u c c e s s in a c h i e v i n g the o b j e c t i v e s on which
t h e y h a d a g r e e d d u r i n g the d i s c u s s i o n on 7th O c t o b e r .
The Home
and D e f e n c e S e c r e t a r i e s ' s h o u l d c o n s i d e r u r g e n t l y , in c o n s u l t a t i o n
with t h e L o r d P r e s i d e n t , what p r o v i s i o n s needed to be included in
the p r o p o s e d l e g i s l a t i o n a n d should r e p o r t b a c k to the C a b i n e t ,
T h e Cabinet ­
(1)
Took n o t e , w i t h a p p r o v a l , of the P r i m e M i n i s t e r s s u m m i n g up of t h e i r discussion. (2)
Invited the H o m e and Defence S e c r e t a r i e s , i n c o n s u l t a t i o n with the L o r d P r e s i d e n t of the C o u n c i l , t o c o n s i d e r u r g e n t l y the c o n t e n t of t h e p r o p o s e d l e g i s l a t i o n and to r e p o r t to t h e C a b i n e t . C a b i n e t Office, S. W . l .
14th O c t o b e r , 1969
-2­
i m p r o v e c o m r n u n i c a t i o n s b e t w e e n the two G o v e r n m e n t s and the
a d v i s e r s s t a t i o n e d at S t o r m o n t and with the G O C ,
I n t e l l i g e n c e of
feeling a m o n g P r o t e s t a n t s w a s s t i l l p o o r , though it w a s i m p r o v i n g ;
but the S h a n k i l l Road r i o t s showed s i g n s of o r g a n i s a t i o n a n d ho had
l i t t l e doubt that s o m e m e m b e r s of the USC w e r e involved.
The r i s k
that o r g a n i s e d e l e m e n t s of the USC would go u n d e r g r o u n d h a d f o r m e d
a l a r g e p a r t of the c a s e f o r e s t a b l i s h i n g the p r o p o s e d new l o c a l
defence f o r c e ; and he hoped that it m i g h t be p o s s i b l e to s e t this up
at the beginning of the New Y e a r , though i d e a s h a d s t i l l to be
clarified.
L e g i s l a t i o n of the United K i n g d o m P a r l i a m e n t would be
r e q u i r e d ! and he thought that t h i s should be a n n o u n c e d in
The Queen*s S p e e c h .
In d i s c u s s i o n t h e r e w a s g e n e r a l a p p r e c i a t i o n of the s k i l l
shown by t h e H o m e S e c r e t a r y ir. negotiating w i t h the N o r t h e r n
I r e l a n d G o v e r n m e n t , which had done m u c h to a l l a y f e a r s e x p r e s s e d
by s o m e m e m b e r s of the C a b i n e t d u r i n g the p r e v i o u s d i s c u s s i o n .
E v e r y effort should be m a d e to s e t t l e p o l i c y on the new l o c a l defence
f o r c e b e f o r e the D e b a t e on the A d d r e s s ^
The a i m should be to
i n t r o d u c e l e g i s l a t i o n for t h i s p u r p o s e and to f a c i l i t a t e the t r a n s f e r
and s e c o n d m e n t of G r e a t B r i t a i n police d u r i n g N o v e m b e r ; the
Opposition w e r e not l i k e l y t o obstimct its p a s s a g e .
T H E P R I M E MINISTER, s u m m i n g up the d i s c u s s i o n , said
that he w i s h e d on behalf of the Cabinet to c o n g r a t u l a t e the
H o m e S e c r e t a r y on h i s s u c c e s s in a c h i e v i n g the o b j e c t i v e s on which
t h e y had a g r e e d d u r i n g the d i s c u s s i o n on 7th O c t o b e r .
The H o m e
and Defence S e c r e t a r i e s should c o n s i d e r u r g e n t l y , in c o n s u l t a t i o n
w i t h the L o r d P r e s i d e n t , w h a t p r o v i s i o n s needed to be included in
the p r o p o s e d l e g i s l a t i o n and should r e p o r t b a c k to the C a b i n e t .
The Cabinet ­
(1)
T o o k n o t e with a p p r o v a l , of the P r i m e
M i n i s t e r s s u m m i n g u p of t h e i r discussion. (2)
I n v i t e d the H o m e and Defence S e c r e t a r i e s , in c o n s u l t a t i o n with the L o r d P r e s i d e n t of the C o u n c i l , to c o n s i d e r u r g e n t l y the c o n t e n t of the p r o p o s e d l e g i s l a t i o n a n d to r e p o r t to the Cabinet. s
C a b i n e t Office,
S.W.I.
14th O c t o b e r , 1969
-2­
NO CIRCULATION RECORD CC(67) 25th C o n c l u s i o n s
(Sunday, 30th A p r i l , 1967 - 10.30 a . m . )
frr OF
I INTO T H E
PEAN
l
M I C
[ilNITY O N
PITED
JOM
NCE OF
Ints
T h i s note r e c o r d s a p a r t of the d i s c u s s i o n b y the Cabinet,
which i s not included i n the c i r c u l a t e d r e c o r d , of the note by the
S e c r e t a r y of the C a b i n e t (C(67) 61) on the effects of e n t r y into
the E u r o p e a n E c o n o m i c C o m m u n i t y (EEC) on the United Kingdom
b a l a n c e of p a y m e n t s .
It w a s a r g u e d that it w a s a m a j o r p r e m i s e of the
m e m o r a n d u m b e f o r e the Cabinet that we should not e n t e r the
E E C u n l e s s our e c o n o m y w a s fully c o m p e t i t i v e , with a
r e l a t i v e l y good l e v e l of efficiency - w a g e s and a s u r p l u s on the
b a l a n c e of p a y m e n t s sufficient to e n a b l e us to take the s t r a i n s
of e n t r y .
But we w e r e s t i l l s o m e way f r o m such a condition; and
if w e w e r e to e n t e r in any w e a k e r s t a t e , the c o n s e q u e n c e s would
be g r a v e .
In f u r t h e r a n c e of our e x i s t i n g b a l a n c e of p a y m e n t s
o b j e c t i v e s , it had a l r e a d y b e e n n e c e s s a r y f i r s t to a r r e s t , and now
to continue to r e s t r a i n , the r a t e of g r o w t h of the e c o n o m y ; to
m a i n t a i n an u n d e s i r a b l y high l e v e l of u n e m p l o y m e n t ; and to c u r t a i l
d e s i r a b l e social expenditure.
If we w e r e to e n t e r the E E C , the
s u b s t a n t i a l l y a d v e r s e effects on our b a l a n c e of p a y m e n t s would
add to t h e s e p r e s e n t d i f f i c u l t i e s .
It would not be a c c e p t a b l e ,
h o w e v e r , to m e e t this a d d i t i o n a l b u r d e n s i m p l y by intensifying
p r e s e n t d e f l a t i o n a r y p o l i c i e s with t h e i r u n p a l a t a b l e e c o n o m i c
and s o c i a l c o n s e q u e n c e s ; and it would t h e r e f o r e be n e c e s s a r y to
consider major policy changes.
T h e r e w e r e two m a i n
p o s s i b i l i t i e s - f i r s t , a m a j o r change in f o r e i g n p o l i c y which
would p e r m i t c u t s in d e f e n c e e x p e n d i t u r e o v e r s e a s g r e a t e r than
t h o s e now in c o n t e m p l a t i o n (a c o u r s e which would b e e n t i r e l y
c o n s i s t e n t with e n t r y into the E E C ) ; s e c o n d , a change in the
p a r i t y of s t e r l i n g .
In p a r t i c u l a r , without s o m e d e g r e e of
d e v a l u a t i o n we w e r e u n l i k e l y to s e c u r e the f u r t h e r shift of
r e s o u r c e s into e x p o r t s and i m p o r t s u b s t i t u t i o n , over and above
that n e c e s s a r y to r e s o l v e our p r e s e n t d i f f i c u l t i e s , which would
be r e q u i r e d to m i t i g a t e the a d v e r s e effects of e n t r y on the b a l a n c e
of p a y m e n t s .
But a d e c i s i o n to d e v a l u e s t e r l i n g could be
d i s c u s s e d only by a v e r y s m a l l n u m b e r of M i n i s t e r s ; and both
the d i s c u s s i o n and the d e c i s i o n would have not only to r e m a i n
s e c r e t b u t , if n e c e s s a r y , to be denied until the d e c i s i o n had been
announced.
It w a s t h e r e f o r e r i g h t that t h e r e should be s o m e
d i s c u s s i o n of d e v a l u a t i o n b e f o r e a n y d e c i s i o n w a s taken which
m i g h t , a s a c o n s e q u e n c e , l e a d to c i r c u m s t a n c e s in which
d e v a l u a t i o n could not b e r u l e d out.
THE P R I M E MINISTER said that the points w h i c h had
b e e n r a i s e d w e r e r e l e v a n t in the p r e s e n t c o n t e x t .
Nevertheless,
the C a b i n e t would a p p r e c i a t e that t h e r e w e r e g r e a t d a n g e r s in
any d i s c u s s i o n of a change in the p a r i t y , a s w a s shown b y the
e x p e r i e n c e s of l a s t J u l y when a g r a v e r u n on s t e r l i n g had
r e s u l t e d f r o m a p o p u l a r belief that the G o v e r n m e n t had a n
a d j u s t m e n t of the p a r i t y u n d e r c o n s i d e r a t i o n .
It m u s t a l w a y s
be open t o any C h a n c e l l o r of the E x c h e q u e r to c o n s i d e r
d e v a l u a t i o n a t the p r o p e r t i m e and in full s e c r e c y .
In the
context of e n t r y to the C o m m u n i t y , h o w e v e r , t h e r e would p r o b a b l y
be s t r o n g r e s i s t a n c e in F r a n c e to a B r i t i s h d e v a l u a t i o n .
During
the v i s i t which he and the F o r e i g n S e c r e t a r y h a d r e c e n t l y paid to
P a r i s M . P o m p i d o u h a d d i s c l a i m e d the s e n t i m e n t s a t t r i b u t e d to
h i m l a s t J u l y and h a d s p e c i f i c a l l y s t a t e d that we had b e e n r i g h t
not to d e v a l u e at that t i m e .
Whilst d e v a l u a t i o n r e m a i n e d an
option w h i c h w a s open to u s , it w a s not a p n e - w a y option; it
could h a v e e c o n o m i c c o n s e q u e n c e s no l e s s u n p l e a s a n t than t h o s e
of d e f l a t i o n .
The Cabinet m i g h t wish to d i s c u s s the subject
f u r t h e r f r o m this p o i n t of v i e w .
But it would be i m p e r a t i v e that
any s u c h d i s c u s s i o n should r e m a i n s t r i c t l y s e c r e t and should not
be i m p a r t e d to any o t h e r i n d i v i d u a l , w h e t h e r M i n i s t e r i a l , official
or a d v i s o r y .
T H E CHANCELLOR OF THE E X C H E Q U E R said h e a g r e e d
that it w a s r i g h t that h e should give the C a b i n e t h i s v i e w s on this
q u e s t i o n in the s t r i c t e s t s e c r e c y .
He w a s bound to say a t the
o u t s e t t h a t d e v a l u a t i o n w a s not a n option which w a s open to h i m
p e r s o n a l l y - he had given too m a n y p l e d g e s to h o l d e r s of s t e r l i n g
for t h a t .
N e v e r t h e l e s s , i t m u s t be r e c o g n i s e d that d e v a l u a t i o n
r e m a i n e d both an option open to us and a c o u r s e which m i g h t be
f o r c e d upon u s .
It w o u l d , h o w e v e r , p r e s e n t u s with f u n d a m e n t a l
d i f f i c u l t i e s , of which the m o s t i m p o r t a n t w a s the p r o b l e m of
c h o o s i n g the r i g h t r a t e to w h i c h to d e v a l u e .
Too s m a l l a
d e v a l u a t i o n would l e a d to the e x p e c t a t i o n of f u r t h e r s i m i l a r
m e a s u r e s a n d so to r e n e w e d s p e c u l a t i o n .
It would a l s o confer
no sufficient a d v a n t a g e , e . g . in t e r m s of i m p o r t d e t e r r e n t s a n d
export incentives.
On the o t h e r hand, too g r e a t a d e v a l u a t i o n
would i n v i t e o t h e r c o u n t r i e s to follow o u r l e a d not only in o r d e r
to s t a y on c o m p a r a t i v e l y f a v o u r a b l e c o m p e t i t i v e t e r m s with u s
but p e r h a p s a l s o in c e r t a i n c a s e s for r e t a l i a t o r y r e a s o n s s t e m m i n g
f r o m u l t e r i o r m o t i v e s in the i n t e r n a t i o n a l m o n e t a r y field - the
F r e n c h h o s t i l i t y to the d o l l a r a s the m a i n r e s e r v e c u r r e n c y w a s
a c a s e in point.
The c h o i c e of r a t e would t h e r e f o r e be a v e r y
delicate one.
If we c h o s e the r i g h t r a t e , our i m p o r t p r i c e s
would n o t r i s e to the full e x t e n t of the d e v a l u a t i o n , b e c a u s e s o m e
of o u r s t e r l i n g a r e a s u p p l i e r s , for e x a m p l e , would d e v a l u e
p a r i p a s s u with u s .
N o r would our e x p o r t p r i c e s fall in r e a l
t e r m s b y the full e x t e n t of the change in p a r i t y , b e c a u s e s o m e
of o u r e x p o r t e r s would take the opportunity to i n c r e a s e t h e i r
p r o f i t m a r g i n s w h i l s t m a i n t a i n i n g o r i n c r e a s i n g t h e i r volume
of s a l e s .
In g e n e r a l , h o w e v e r , it could be a s s u m e d that, while
d e v a l u a t i o n would c a u s e s u b s t a n t i a l s h o r t - t e r m d a m a g e to the
b a l a n c e of p a y m e n t s , its l o n g - t e r m i m p a c t should be m u c h m o r e
than offset b y the e x p a n s i o n of e x p o r t s a n d the c o n t r a c t i o n of
i m p o r t s w h i c h it should s t i m u l a t e .
A final a s s e s s m e n t of the
total effect, h o w e v e r , w a s v e r y difficult to f r a m e b e c a u s e of the
p r o b l e m s of q u a n t i f i c a t i o n which had b e e n u n d e r l i n e d in a n o t h e r
c o n t e x t d u r i n g the p r e s e n t d i s c u s s i o n s .
Nevertheless, a
t e n t a t i v e a n a l y s i s of the o v e r a l l effects h a d b e e n m a d e in the
light of the e x p e r i e n c e of the F r e n c h d e v a l u a t i o n s of 1957 and
1959, on the b a s i s of the m o s t f a v o u r a b l e a s s u m p t i o n s which
could be m a d e a s to the c h o i c e of r a t e and other f a c t o r s .
On
that b a s i s the b e s t e s t i m a t e w a s that in the f i r s t y e a r a f t e r a
"SO d e v a l u a t i o n we could r e a s o n a b l y a i m a t an i m p r o v e m e n t of at
l e a s t £300 m i l l i o n in our b a l a n c e of p a y m e n t s .
T h i s , with the
f u r t h e r i m p r o v e m e n t s w h i c h m i g h t be e x p e c t e d in l a t e r y e a r s ,
should offset any d a m a g e to our b a l a n c e of p a y m e n t s which might
r e s u l t f r o m o u r e n t r y into the C o m m u n i t y .
A t the s a m e t i m e ,
s i n c e the i n i t i a l d a m a g e to the b a l a n c e of p a y m e n t s that would
b e c a u s e d by d e v a l u a t i o n w a s a l s o put a t about £300 m i l l i o n ,
the t o t a l shift of r e s o u r c e s t h a t would be r e q u i r e d in the f i r s t
y e a r would be s o m e £600 m i l l i o n .
P a r t of t h i s d i v e r s i o n of
r e s o u r c e s would be a c h i e v e d by the d e f l a t i o n a r y effect of h i g h e r
i m p o r t p r i c e s , which would, of c o u r s e , entail a h i g h e r c o s t of
living.
But it would a l s o b e n e c e s s a r y to i m p o s e a d d i t i o n a l
t a x e s to t h e e x t e n t r e q u i r e d to e n s u r e that sufficient r e s o u r c e s
w e r e a v a i l a b l e to m e e t the i m p r o v e m e n t in our e x p o r t s which
the d e v a l u a t i o n would m a k e p o s s i b l e .
The a m o u n t of this
a d d i t i o n a l t a x a t i o n w a s put a t about £400 m i l l i o n .
These
c a l c u l a t i o n s a s s u m e d that w e should m a i n t a i n a r a t e of
u n e m p l o y m e n t of the o r d e r of 1. 8 p e r c e n t , i. e . s o m e w h a t l e s s
than we now h a d .
In s h o r t , we should need to d i v e r t a t l e a s t
£600 m i l l i o n of r e s o u r c e s f r o m d o m e s t i c u s e to e x p o r t s ; and
a d d i t i o n a l t a x a t i o n of p e r h a p s £400 m i l l i o n would h a v e to be
r a i s e d in t h e f i r s t y e a r .
The r e s u l t i n g a u s t e r i t i e s would
t h e r e f o r e b e a d d i t i o n a l to t h o s e which we w e r e suffering a t p r e s e n t .
It w a s a l s o n e c e s s a r y to take into a c c o u n t the e x t e r n a l
effects of d e v a l u a t i o n .
F i r s t , t h e r e would be the effects of
i m i t a t i o n of, and r e t a l i a t i o n a g a i n s t , our d e v a l u a t i o n of which
he had already spoken.
T h e r e would a l s o be a l o s s of confidence
b y the h o l d e r s of s t e r l i n g , who would i n e v i t a b l y d r a w down t h e i r
b a l a n c e s if we d e v a l u e d .
T h e r e would be a f u r t h e r r e a c t i o n
upon confidence in the d o l l a r , opening up the p o s s i b i l i t y of a
flight into gold and a c o n s e q u e n t i a l r e d u c t i o n in w o r l d l i q u i d i t y ,
w h i c h in t u r n would r e a c t upon our e x p o r t m a r k e t s .
The device
of a floating r a t e which had b e e n put f o r w a r d a s a way out of
t h e s e difficulties w a s not a s o l u t i o n .
It would not be a t t r a c t i v e
to h o l d e r s of s t e r l i n g , who would b e bound to take the view that
we h a d a l l o w e d the r a t e to float in o r d e r that it should float
d o w n w a r d s r a t h e r than u p w a r d s ; and this a s s u m p t i o n would
c r e a t e the c o n d i t i o n s in w h i c h the r a t e would b e bound to fall
progressively.
In s u m the e x t e r n a l c o n s e q u e n c e s m i g h t well
l e a d to a r e t u r n of those d i s o r d e r s in w o r l d t r a d e and p a y m e n t s
which the I n t e r n a t i o n a l M o n e t a r y F u n d had b e e n e s t a b l i s h e d to
c o u n t e r ; a n d they would i n e v i t a b l y r e s u l t in a p e r i o d of
c o n s i d e r a b l e confusion b e f o r e i n t e r n a t i o n a l s t a b i l i t y w a s
eventually r e s t o r e d .
The a l t e r n a t i v e w a s t o follow a policy d e s i g n e d to
o v e r c o m e t h e i n t e r n a l d i s a b i l i t i e s f r o m which our e c o n o m y had
been suffering.
We w e r e now s e t on this c o u r s e , which would
n o t b e e a s y to follow but would n e v e r t h e l e s s be within o u r
capacity, a s r e c e n t discussions had confirmed.
It followed
t h a t , w h i l s t a t h e o r e t i c a l c a s e could be c o n s t r u c t e d in favour
of d e v a l u a t i o n a t the point w h e n we e n t e r e d the E E C , i t would
u n l e a s h s u c h p o w e r f u l a d v e r s e f o r c e s beyond o u r c o n t r o l and
would involve a b r e a c h of s o m a n y p l e d g e s w h i c h he h a d given
to h o l d e r s of s t e r l i n g that h e could not r e m a i n C h a n c e l l o r of the
E x c h e q u e r if t h i s c o u r s e w e r e a d o p t e d .
In d i s c u s s i o n it w a s a s k e d why, if the c o n s e q u e n c e s of
d e v a l u a t i o n would be so u n f a v o u r a b l e f o r u s , the F r e n c h a p p e a r e d
to h a v e benefited f r o m i t .
In r e p l y it was pointed out that the
F r e n c h (who h a d had to d e v a l u e twice) had had no p r o b l e m of franc
b a l a n c e s on the s c a l e of the s t e r l i n g b a l a n c e s .
Moreover, their
d e v a l u a t i o n s h a d b e e n a c c o m p a n i e d by p r i c e i n c r e a s e s and
c o m p u l s o r y wage s t a b i l i s a t i o n ( e s t i m a t e d to have p r o d u c e d an
8 p e r cent r e d u c t i o n in r e a l w a g e s ) , which had b e e n m a d e p o s s i b l e
only by the p e r s o n a l a u t h o r i t y of G e n e r a l de Gaulle and the
w e a k n e s s of the F r e n c h P a r l i a m e n t .
It did not s e e m p o l i t i c a l l y
f e a s i b l e that, e . g . P a r t IV of the P r i c e s and I n c o m e s A c t , should
b e r e i n t r o d u c e d and r e i n f o r c e d not only in o r d e r t o hold down
i n c o m e s but a l s o to effect a s u b s t a n t i a l reduction i n t h e m .
It w a s a l s o a s k e d w h e t h e r the i m p r o v e m e n t in the b a l a n c e
of p a y m e n t s w h i c h d e v a l u a t i o n m i g h t be expected to s e c u r e in, say,
the t h i r d y e a r would not offset the d i s a d v a n t a g e s w h i c h it w a s
e s t i m a t e d would be c a u s e d in the f i r s t y e a r .
In r e p l y it w a s
s t a t e d that it w a s not p o s s i b l e to m a k e an effective quantification
of t h e s e a d v a n t a g e s b e c a u s e of the u n c e r t a i n t i e s of a s s u m p t i o n s
a b o u t s u c h f a c t o r s a s the e l a s t i c i t y of demand for e x p o r t s and
imports.
In the t h i r d y e a r the b a l a n c e of p a y m e n t s should
c e r t a i n l y show a n i m p r o v e m e n t ; b u t to r e a c h that point the
G o v e r n m e n t would f i r s t h a v e to s u r v i v e the initial i m p a c t .
In f u r t h e r d i s c u s s i o n , it w a s suggested that d e v a l u a t i o n
w a s i r r e l e v a n t to c o n s i d e r a t i o n of our e n t r y into the E E C , since
i t s effects would be c o n c e n t r a t e d in the s h o r t t e r m , w h e r e a s the
a d v e r s e c o n s e q u e n c e s of e n t r y , p a r t i c u l a r l y a s r e g a r d s a c c e p t a n c e
of the c o m m o n a g r i c u l t u r a l policy would involve a l o n g - t e r m
w o r s e n i n g of the t e r m s of t r a d e and a r e d u c t i o n in t h e s t a n d a r d
of l i v i n g .
T h e s e l o n g - t e r m effects could not be a l t e r e d by
devaluation.
On the o t h e r hand it w a s u r g e d that the a d v e r s e
c o n s e q u e n c e s of e n t r y m i g h t well c r e a t e conditions w h e r e
d e v a l u a t i o n w a s f o r c e d upon u s ; a n d it was t h e r e f o r e r i g h t to
c o n s i d e r w h e t h e r we should f o r e s t a l l this situation b y d e v a l u a t i o n
before entry.
If we e n t e r e d the C o m m u n i t y without devaluing
a n d s u b s e q u e n t l y found that we had m i s c a l c u l a t e d , w e m i g h t not
b e a l l o w e d , a s m e m b e r s of the C o m m u n i t y , to devalue our
currency.
But in that event the only a l t e r n a t i v e would b e s e v e r e
d e f l a t i o n , which in t u r n would offset the a d v a n t a g e s of e c o n o m i c
e l a n which it w a s c l a i m e d we might s e c u r e a s a c o n s e q u e n c e of
e n t r y , b u t only if we w e r e to e n t e r v e r y quickly. A s a g a i n s t
t h i s , h o w e v e r , it w a s wrong to i n t e r p r e t the a n a l y s i s which had
b e e n put b e f o r e the C a b i n e t a s r e p r e s e n t i n g devaluation and
deflation a s a l t e r n a t i v e s .
Devaluation itself would r e q u i r e to
b e r e i n f o r c e d by s h a r p deflation.
In the context of the t i m e ­
s c a l e of e n t r y to the E E C the a d d i t i o n a l shift of r e s o u r c e s
r e q u i r e d to offset the e x t r a s t r a i n w h i c h e n t r y m i g h t p l a c e on
the b a l a n c e of p a y m e n t s amounted t o no m o r e than -j of 1 p e r cent
of the e s t i m a t e d a n n u a l g r o w t h r a t e , s t a r t i n g in a b o u t 1970, and
t h e r e a f t e r making itself felt only g r a d u a l l y over a t r a n s i t i o n a l
p e r i o d of five y e a r s o r m o r e , so t h a t the full s t r a i n would not
b e f e l t until 1975 or l a t e r .
M e a n t i m e , we should h a v e had the
o p p o r t u n i t y , a s full m e m b e r s of the C o m m u n i t y , to influence the
c r i t i c a l d e c i s i o n s of the E E C on s u c h r e l e v a n t m a t t e r s a s the
c o m m o n a g r i c u l t u r a l p o l i c y and the h a r m o n i s a t i o n of e c o n o m i c
policies.
M o r e o v e r , the s a v i n g s on defence and f o r e i g n p o l i c y
w h i c h w e r e l i k e l y to e m e r g e f r o m the f o r t h c o m i n g d e c i s i o n s on
the D e f e n c e Review should p r o d u c e s u b s t a n t i a l savings in
f o r e i g n e x c h a n g e by 1975.
We should a l s o h a v e d i s c h a r g e d o u r
r e m a i n i n g d e b t s to the IMF by 1970. F u r t h e r , only f r e e a c c e s s
to the l a r g e r m a r k e t of the E E C would g i v e B r i t i s h i n d u s t r y the
n e c e s s a r y s t i m u l u s f o r i n v e s t m e n t and g r o w t h , the effects of
w h i c h would be an i n c r e a s i n g f o r c e in o u r f a v o u r in the y e a r s
1970-75.
T H E P R I M E M I N I S T E R s u m m i n g up this p a r t of the
d i s c u s s i o n , said it h a d b e e n r i g h t to c o n s i d e r the i s s u e of
d e v a l u a t i o n in the c o n t e x t of the a p p r o a c h to E u r o p e .
Devaluation
m u s t a l w a y s be one of the options open to the G o v e r n m e n t , w h e t h e r
they e n t e r e d the E E C or n o t ; and it was a l w a y s p e r m i s s i b l e f o r
the C h a n c e l l o r of the E x c h e q u e r to r a i s e this i s s u e in the
a p p r o p r i a t e way at the r i g h t t i m e .
There were, however,
e x t r e m e l y powerful o b j e c t i o n s , a s outlined by the C h a n c e l l o r
of the E x c h e q u e r and in d i s c u s s i o n , to d e v a l u a t i o n a s a w a y out
of o u r p r e s e n t and p r o s p e c t i v e d i f f i c u l t i e s .
It w a s of the
h i g h e s t i m p o r t a n c e , t h e r e f o r e , that no h i n t should be g i v e n
outside the Cabinet t h a t the q u e s t i o n of d e v a l u a t i o n had b e e n
u n d e r d i s c u s s i o n ; if any d i s c l o s u r e w e r e m a d e , the c o n s e q u e n c e s
could be e x t r e m e l y g r a v e .
The Cabinet should now r e s u m e the
m a i n t h e m e of t h e i r d i s c u s s i o n of C(67) 61.
C a b i n e t Office, S. W . l .
30th M a y , 1967