Creating the Myth of Consensus: Public Opinion and Britain’s Return to the Gold Standard in 1925

The decision to restore sterling to the gold standard at its pre-war parity of $4.86, announced by Winston Churchill in a preface to his first Budget speech on 28 April 1925, was remarkable for more than one reason. In the first place, although ostensibly a confirmation of sterling’s renewed strength, the decision was taken when, as its proponents were aware, the currency was over-valued and exposed to almost certain downward pressure from the United States.1 One present-day authority has, not surprisingly, called the decision ‘a major historic error’.2 Secondly, Britain alone returned to its pre-war parity: most of the other European countries, having similarly been forced to abandon the gold standard upon the outbreak of the First World War, stabilised their currencies at sharply devalued rates, and then only when exchange rate relations among the major economic powers were clearer.3 Britain until 1928 was indeed doubly unique in being the only major European country to accompany its return to the pre-war gold parity with the resumption of specie payment, thereby incurring the additional burden of adjusting to fluctuations in world supply and demand for gold.