The Exchange Crisis of 1965

Abstract

The April budget created no great stir — at least not in Britain. The controversial new taxes on capital gains and corporate profits had already been discounted after their announcement in November. The increase in tax revenue proved just large enough to keep the market quiet. It was obvious, however, that trouble lay ahead. The pressure on the economy continued to mount and unemployment to fall. Wage-rates were rising at 8 per cent per annum and eating into competitive power. The balance of payments might have improved but there was still a small deficit on current account and a large outflow of capital that together made it necessary to offer support at the rate of £650 million a year out of borrowed funds.