Sterling devalued from $2.80 to $2.40 against US dollar.

Outgoing Chancellor, James Callaghan, pledges that ‘the growth of the money supply will be less in 1968 than the present estimate for 1967’ when applying for an IMF loan.

Chief Cashier, John Fforde, calls for ‘thorough review’ of monetary policy within the Bank of England, prompting formation of the internal Money Supply Group.

Monetary policy seminar with IMF officials.

Chancellor, Roy Jenkins, commits to a £400 million domestic credit expansion ceiling (including a £250 million target) in IMF Letter of Intent.

‘The importance of money’ published in the Bank of England Quarterly Bulletin.

General election: Ted Heath (Conservative) elected with a thirty-one-seat majority, embarks upon a strategy of rapid economic growth.

Budget: Chancellor, Anthony Barber, states that ‘there would be dangers for liquidity and employment if we sought immediately to reduce the growth of money supply to much below 3 per cent per quarter’.

Government Broker withdraws liquidity in gilts of more than twelve months’ maturity to facilitate control of the money supply.

Bank of England Governor, Leslie O’Brien, announces that ‘we have increasingly shifted our emphasis towards the broader monetary aggregates − to use the inelegant but apparently unavoidable term: the money supply’.

US President, Richard Nixon, suspends convertibility of US dollar into gold.

Sterling floats.

Competition and Credit Control becomes operational. Clearing bank cartel dissolved.

Sterling fixed at $2.60.

Three-day week begins.

‘Dash for growth’ Budget: Barber announces 5 per cent real GDP growth target and agrees to unpublished 20 per cent M3 target.

United Kingdom repays outstanding IMF debts.

Sterling enters the European currency ‘snake’; fluctuations limited to 2.25 per cent.

Sterling exits the ‘snake’ and floats.

United Kingdom draws $630 million (equivalent) from IMF gold tranche to repay central banks for failed sterling support in June.

Minimum Lending Rate replaces Bank Rate.

United Kingdom joins European Economic Community.

OPEC raises price of oil following Yom Kippur War.

Stage 3 of Heath’s incomes policy becomes effective: wage rises indexed to inflation.

Barber unveils the ‘corset’ in his mini-Budget.

Bank launches the ‘Lifeboat’ operation to rescue the secondary banks.

Three-day week begins (again).

General election produces hung parliament.

Harold Wilson forms minority Labour government.

Three-day week ends.

First Budget of new Chancellor, Denis Healey, implies M3 growth ‘below money GDP growth’.

General election: Wilson wins a three-seat majority.

Margaret Thatcher wins Conservative Party leadership election.

Budget: Healey ‘abandons’ Keynesianism, raises basic rate of income tax by two percentage points to 35 per cent.

‘Yes’ vote on continued UK membership of EEC.

Reintroduction of incomes policy prompts monetary policy review within the Bank.

RPI growth peaks at 26.9 per cent.

Healey applies to IMF for remaining gold tranche, first credit tranche and oil facility loan.

Government announces that more than 50 per cent of public spending will be constrained by cash limits.

IMF board agrees to UK loans.

Sterling falls below $2 for the first time.

James Callaghan succeeds Wilson as Prime Minister.

Consortium of central banks announces $5.3 billion loan for United Kingdom.

Healey announces 12 per cent M3 target.

Healey’s ‘about-turn’ at Heathrow. Further IMF application announced the next day.

Healey’s mini-Budget announces PSBR and DCE ceilings and £M3 target range of 9 to 13 per cent.

IMF board agrees to $3.9 billion stand-by credit.

The Labour government forms a pact with the Liberals after a series of parliamentary defeats.

Bank concludes that ‘there is no obvious simple, single equation, demand for M3 balances’.

Sterling uncapped, rises 5 per cent versus dollar; exchange controls relaxed.

Callaghan reveals 5 per cent earnings target in New Year broadcast.

Budget: Healey lowers £M3 target range to 8 to 12 per cent, reaffirms £8.5 billion PSBR ceiling.

TUC conference rejects 5 per cent wage guideline, precipitating the ‘winter of discontent’.

Callaghan government loses confidence vote.

General election: Margaret Thatcher elected with forty-three-seat majority.

Sir Geoffrey Howe’s first Budget cuts incomes tax, raises VAT to 15 per cent, further relaxes exchange controls, lowers £M3 target range to 7 to 11 per cent (annualised and applied from June 1979 to April 1980) and raises MLR by two percentage points to 14 per cent.

Howe abolishes remaining exchange controls.

MLR raised to 17 per cent.

Budget: Howe launches MTFS; four-year series of declining £M3 target ranges and PSBR ceilings.

‘Corset’ abolished.

MLR lowered by one percentage point to 16 per cent to ease pressure on the corporate sector, despite £M3 growth above target range.

Cabinet agrees to cut public expenditure by £2 billion.

‘Difficult’ meeting between Thatcher and senior Bank officials on monetary policy (MTFW 113138); Annualised £M3 growth at 26 per cent.

HM Treasury meeting discusses ‘the possibility of a package of measures as “cover” for a reduction in interest rates’ (MTFW 128330).

Thatcher tells Conservative Party conference that ‘the lady’s not for turning’.

Thatcher asks Sir Douglas Wass ‘to explore ways of mitigating the adverse conditions in which British industry is operating, so that good and viable companies like ICI should not be driven to the wall’.

Sterling peaks at $2.4645 against US dollar.

Cabinet reneges on agreement to cut public expenditure by £2 billion.

Wass suggests a ‘modest’ two percentage point cut in MLR (MTFW 113271).

CBI Director General threatens ‘bare-knuckle fight’ with the government.

Thatcher agrees to cut MLR by two percentage points (MTFW 113270).

£M3 target taken ‘out of action’ until 1981 Budget (MTFW 113205).

Autumn Statement: Howe raises employees’ National Insurance contributions, imposes a supplementary petroleum duty and £1 billion of spending cuts to reduce PSBR estimate for 1981/82 from £11 billion (4½ per cent of GDP) to £9 billion (versus implied MTFS ceiling of £7½ billion) and lowers MLR two percentage points to 16 per cent despite M3 growing by annualised 20 per cent.

Alan Walters joins No. 10 Policy Unit.

Jürg Niehans’ ‘bombshell’: tight monetary policy rather than North Sea oil is the cause of the strong pound.

Howe reveals updated £11 billion PSBR estimate for 1981/82 at Chequers meeting; Thatcher ‘not amused’.

Roy Jenkins, David Owen, Bill Rogers and Shirley Williams announce intention to leave the Labour Party and form the forerunner of the Social Democratic Party.

HM Treasury meeting concludes that the Budget should reduce the PSBR estimate for 1981/82 by a minimum of £1½ billion, to around £10 billion (MTFW 127452).

Howe informs Thatcher that the PSBR estimate for 1981/82 has risen to £13 billion while ruling out spending cuts in the Budget.

Tim Lankester informs Thatcher that the PSBR estimate for 1981/82 has risen to £13¾ billion (MTFW 114003); Howe suggests that a PSBR below £11 billion is not ‘politically feasible’.

Thatcher willing to contemplate an increase in the basic rate of income tax to achieve a PSBR of less than £11 billion.

Thatcher presses Howe for a PSBR of £10½ billion to justify lowering MLR before agreeing to £11¼ billion; Walters excluded from meeting.

HM Treasury meeting agrees to a £10½ billion PSBR estimate for 1981/82, by freezing the income tax allowances, and a two percentage point cut in MLR (MTFW 127482); Walters describes freezing the allowances as ‘stupid politically, indefensible morally and economically’ (MTFW 128829).

Walters complains that the final Budget measures are ‘too little and the wrong kind’ (MTFS 114026).

Treasury and Civil Service Committee criticises government’s monetary policy.

Budget: Howe raises taxes and lowers MLR from 16 per cent to 14 per cent. £M3 growth in 1980/81 overshoots by eight percentage points.

364 economists’ letter reported in The Times.

Financial Secretary, Nigel Lawson, recommends UK membership of the Exchange Rate Mechanism.

Polls show Thatcher to be the most unpopular Prime Minister since records began.

Budget: Howe relaunches MTFS by raising £M3 targets.

Argentine surrender ends Falklands War.

General election: Thatcher wins 144-seat majority.

Chancellor, Nigel Lawson, suspends £M3 target.

Lawson reintroduces £M3 target.

Lawson begins shadowing the deutschmark.