19 November 1967: Harold Wilson’s ‘pound in your pocket’ little white lie

On this day in 1967, Harold Wilson went on television to reassure viewers that the “pound in the pocket” would be unaffected by the devaluation of sterling.

In 1967, Britain suffered a balance of payments crisis, spending (importing) more than it was earning (exporting). That made it crucial to keep the pound strong. The hitch was that supporting the pound was fast becoming unaffordable: the Bank of England burned through £200m in gold and foreign currency reserves in just one day alone. And so in November, sterling was devalued by14.3% against the dollar.

It was a personal defeat for Prime Minister Harold Wilson. But on 19 November, he went on radio and television to reassure consumers that devaluation "does not mean, of course, that the pound here in Britain, in your pocket or purse, or in your bank, has been devalued". It didn't take an economist, however, to tell you that that was nonsense.

"That broadcast will long be remembered for that sentence", crowed Conservative MP and future prime minister Ted Heath in Parliament. "It will be remembered as the most dishonest statement ever made." Wilson had fibbed. The pound in your pocket is, of course, the same pound that is used to import food and other things from abroad. Prices were going to have to rise.

But while it was hoped that British farming and manufacturing would get a boost, not everything could be made or grown here. "Devaluation means moving resources from consumption to the balance of payments", wrote The Times. "It means an initial reduction in this country's living standards."

So, who was to blame for Britain's distress? "Candidates abound", said The Times' economic editor, Peter Jay. "Was it the fault of the gnomes, the moaning minnies, the selling-Britain-short brigade'? Or was it the wild-cat strikers, the tightly knit groups of politically motivated wreckers?" Perhaps the culprits were to be found abroad

Recommended

Cryptocurrency roundup: authorities tighten the screw
Bitcoin & crypto

Cryptocurrency roundup: authorities tighten the screw

Saloni Sardana looks at the cryptocurrency stories that caught our eye this week.
21 Jan 2022
Stockmarket crash: is the “superbubble” heading for a “superbust”?
Stockmarkets

Stockmarket crash: is the “superbubble” heading for a “superbust”?

America's Nasdaq stock index is down by more than 10% after soaring to all-time highs in a "superbubble". Are we about to see a "superbust" stockmarke…
21 Jan 2022
Inflation: now we really have something to worry about
Inflation

Inflation: now we really have something to worry about

We’ve been worrying about a sharp rise in inflation for years, says Merryn Somerset Webb – now, we finally have something to worry about.
21 Jan 2022
Share tips of the week – 21 January
Share tips

Share tips of the week – 21 January

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
21 Jan 2022

Most Popular

Ask for a pay rise – everyone else is
Inflation

Ask for a pay rise – everyone else is

As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why yo…
17 Jan 2022
US inflation is at its highest since 1982. Why aren’t markets panicking?
Inflation

US inflation is at its highest since 1982. Why aren’t markets panicking?

US inflation is at 7% – the last time it was this high interest rates were at 14%. But instead of panicking, markets just shrugged. John Stepek explai…
13 Jan 2022
Interest rates might rise faster than expected – what does that mean for your money?
Global Economy

Interest rates might rise faster than expected – what does that mean for your money?

The idea that the US Federal Reserve could raise interest rates much earlier than anticipated has upset the markets. John Stepek explains why, and wha…
6 Jan 2022