From Devaluation to Competition and Credit Control, 1967–71

On 17 November 1967, after a three-year battle to defend the pound, the British government finally admitted defeat and informed the International Monetary Fund (IMF) that sterling would be devalued from $2.80 to $2.40 the next day.2 The Fund’s Managing Director, PierrePaul Schweitzer, reacted ‘without surprise and with little comment’, dispatching a team to London that evening armed with a set of policy recommendations.3 This chapter shows how, in the aftermath of devaluation, the IMF provided the catalyst for the most thorough investigation into monetary policy in the UK since the Radcliffe Report. The conclusions reached by the Bank, and then the Treasury, appeared to offer an alternative to a monetary system tested almost to destruction by the post-devaluation lending controls. The result was the most radical overhaul of monetary policy since the Second World War, Competition and Credit Control (CCC), in 1971. Along the way, key Bank officials discarded some of their Keynesian principles for a system predicated on controlling the money supply. The process stalled several times. But in 1971, the Heath government’s refusal to raise interest rates in the face of rising inflation provided the final spur for the Bank to overhaul the system of monetary control.