§ Treasury Chambers,
§ Great George Street,
§ London, S.W.1.
§ 9th May, 1966.
§ Dear Chairman,
§ In my Budget Speech on 3rd May I announced a Voluntary Programme to slow down for the next year or two the flow of investment overseas. I am now writing to you, as to many other chairmen of companies concerned with direct investments overseas, to ask you personally for your support and for the co-operation of your company in making a success of the Voluntary Programme.
§ I need not repeat what I said in my speech about the reasons for this appeal. It is part of a many-sided campaign to get our balance of payments right. Action is needed, and is being taken, in various fields.
§ In present circumstances the resources which the nation can afford for overseas investment are limited. For the time being we need to concentrate our efforts on those types of investment which will be of most immediate benefit to our balance of payments. Other types of overseas investments, desirable though they may be in the longer run, must be deferred—unless the funds for them can be raised abroad—until the nation can fully meet their cost. Otherwise we put ourselves increasingly in debt.
§ The Voluntary Programme applies to investments in the developed countries of the sterling area—Australia, New Zealand. South Africa and the Irish Republic. It embodies a general criterion by which investments financed from this country should be judged. This is that they should give promise of a quick, substantial and continuing benefit to the United Kingdom balance of payments. By quick I mean such as is sufficient to equal the cost of the investment in a comparatively 127W short period—say two to three years. The benefit may take the form of starting up a new and continuing stream of exports, or an exceptionally large and rapid return in profits earned and remitted from the investment, or a mixture of both. Details are given in the Press Notice issued by the Treasury on 3rd May, of which a copy has been sent to your company. I shall be grateful if you will examine your plans against this test.
§ In doing so I should like you to consider first whether you can postpone any of your plans for the time being. Second, I hope you will make every effort to find finance from outside this country for any projects which in your view cannot be postponed. Finally, when you have decided what plans you want to go on with, I would be grateful if you would consult the Bank of England before proceeding with anything involving capital expenditure, however financed, of over £25,000 a year. The Bank has opened a new office—the Overseas Investment Office—which is ready to give advice and to discuss your programmes of investment with you.
§ The Voluntary Programme is a new development in our economic policies. I have asked 128W the Bank of England to keep in close touch with the Treasury and to report to me any special difficulties that may be encountered. Meanwhile, I should be grateful for your cooperation and that of your company in the Programme and I look forward to hearing from you. With everyone's help the campaign will play an important part along with the other measures we are taking to achieve success in restoring and maintaining a healthy balance in our external accounts.