GOLD (WORLD PRICE) (Hansard, 28 March 1968)

§ Q4. Sir C. Osborne
asked the Prime Minister since the sterling rate has fallen below the new parity of 2.40, if he will discuss with the President of the United 1720 States of America the possibility of increasing the world price of gold and so reducing the pressure on both the dollar and sterling.

§ The Prime Minister
I would refer the hon. Member to the Statement made by my right hon. Friend the Chancellor of the Exchequer on 18th March.

§ Sir C. Osborne
The Prime Minister must be aware that tomorrow's Stockholm conference will depend largely for success upon co-operation from South Africa and Russia, the two great gold producers. Could he ask those two Governments whether they intend to sell their new gold at the free price, and whether they are still going to use the London market?

§ The Prime Minister
It is precisely because of the importance of the Stockholm meeting—my right hon. Friend has already left for Stockholm—I did not feel it right to add anything to what was said by my right hon. Friend on 18th March. The hon. Member is, I think, proposing an increase in the world price.

§ Sir C. Osborne
No, I am not.

§ The Prime Minister
He asked if I would discuss "the possibility of increasing the world price"—that is the Question—to reduce "pressure on both the dollar and sterling". My right hon. Friend on 18th March stated very clearly why he and we do not feel that that would be the right answer.

§ Mr. Barnett
While increasing the price of gold might be to our advantage in the short term, would it not be a tragic and arbitrary step in the wrong direction? Would that not lead to a sense of unwarranted optimism? Would my right hon. Friend consider perhaps dropping the S.D.R. scheme and going in for something more ambitious?

§ The Prime Minister
My hon. Friend will be aware of the unanimous decision taken in Washington, including of course the British delegation with the full support of Her Majesty's Government. That was a decision firmly to reject such proposals and to rebuff speculators who were talking about and gambling on an increase in the price of gold. In regard to Stockholm and with regard to S.D.R.s, my right hon. Friend the Home Secretary made a notable contribution to world agreement last year in his discussions in London and elsewhere. While of course 1721 all of us would like to go a good deal beyond what has been agreed in Rio and elsewhere, it would be a great mistake to throw away what has been achieved in the hope of getting, immediately or at an early stage, something better.

§ Mr. Tapsell
Does the Prime Minister agree that no fixed price for gold can long be realistic if the major countries, particularly the United States and Britain, do not overcome their inflationary situations?

§ The Prime Minister
I thought it was a clear indication of the Washington decisions that both countries were expecting to take all possible steps to reduce their overseas deficits. Immediately after that weekend came our Budget with very major steps towards that, and the hon. Member will be aware of the statement by the Government of the United States about steps in the same direction.

§ Mr. Cant
Should the machinations of the French destroy the future of the S.D.R. system, would my right hon. Friend bear in mind that there are certain allocative and reserves attractions of an increase in the price of gold even though the redistributive effects may not be so fortunate, and suggest to the world authorities that there is no need to panic in this particular respect?

§ The Prime Minister
Yes, Sir. On the question of the French, my hon. Friend will be aware of the wide, almost universal, support given last year for the special drawing rights scheme. This is still the position as far as the world is concerned. It would not be very productive to say that since the French Government still object to those proposals, we should drop them and have something more imaginative which obviously the French Government would dislike even more. As to panic, the action taken at the Washington conference was the very reverse of panic and showed the determination of the monetary authorities of the gold pool countries to hold the position firm and counter the very dangerous speculation that was going on.