1967 sterling devaluation facts for kids
The 1967 sterling devaluation was when the value of the British pound was officially lowered. On November 18, 1967, the pound's value changed from $2.80 to $2.40. This big change happened after a long period of money troubles for Britain, which had started in 1964.
Contents
Why Did the Pound Change Value?
When Harold Wilson and his Labour government won the election in 1964, they promised to fix Britain's economy. But right away, they found a huge problem: Britain was spending much more money on things from other countries than it was earning from selling its own goods. This is called a balance of payments deficit, and it was about £800 million at the time. Imagine your family spending way more than they earn – that's what was happening to the country!
Many experts thought the best way to fix this was to make the pound worth less. This is called devaluation. If the pound is worth less, British goods become cheaper for other countries to buy, which can help sell more and earn more money.
However, Prime Minister Wilson didn't want to devalue the pound at first. He worried that people would always remember his party as the "party of devaluation," especially since they had done it before in 1949. He also thought it would hurt people with less money and poorer countries that used the pound.
What Was Done Instead?
Instead of devaluing, the government tried other ways to fix the problem:
- They added a special tax on things brought into the country (an "import surcharge"). This made foreign goods more expensive, hoping people would buy more British products.
- They also tried to slow down how much people were spending in the country. This was meant to reduce the demand for imported goods.
For a few years, other countries and banks helped Britain by lending money. This support kept the pound's value at $2.80. But because Britain's money problems didn't really get better, these loans just meant that the Bank of England used up its savings of other currencies, like dollars.
What Happened After the Devaluation?
The devaluation in 1967 was a big moment for Britain. It showed that the country was finding it hard to keep its important role in the world's money system.
After the pound's value was lowered, the IMF (a big international organization that helps countries with money problems) offered Britain a large loan of about £1.4 billion.
Unlike a previous devaluation in 1949, the 1967 change didn't really make Britain's economy much better. The Bank of England even started to make its money figures look better than they were, just to seem stronger to other countries and markets.
See also
