263. Telegram From the Department of State to the Embassy in the United Kingdom 1

11232. For the Ambassador. President received today following message from Prime Minister.

“In my message to you last night,2 I purposely said nothing about our current economic problems because I was going straight into a full discussion with the Cabinet, on the basis of the very drastic studies made to give effect to my statement of last Thursday.

My colleagues and I have now examined these in detail and I shall be making a further statement about them in the House this afternoon. So I now write to let you know how I see the basic issues and how we propose to tackle them. I need not trouble you with the details. John Stevens will go over these with Francis Bator.

We all realize the basic problem that confronts us, namely that our spending and our costs must be brought under control; and that this will mean some real suffering for both the public and the private sectors. To do the trick, the package of measures which I am announcing must have—and will have—a very hard disinflationary impact. In particular, we have decided on a total standstill for the next six months on prices and incomes and on a further six months period of very severe restraint in that field. Of course, no one in Britain will like these measures, especially the wage freeze. But I am convinced that public opinion here now accepts the need for drastic sacrifice and that, in this mood, it will rise to the challenge.

But if we are to ask the British public to cooperate willingly over the sacrifices essential to put our economy to rights, they must equally be satisfied that they are not being asked to carry a disproportionate share of the general cost of Western defense. We cannot, in imposing these measures at home, avoid also reducing our Government expenditure overseas, civil and military and including defense expenditures in Germany as well as elsewhere. But I am telling Parliament that any cut of this nature should not affect the basic lines of foreign policy on which the defense review was founded. This means that they must be consistent with our international commitments and with our common policy in defense of Western interests throughout the world. I hope we [Page 545] can discuss the problem together in this spirit when we meet next week.”

  1. Source: National Archives and Records Administration, RG 59, Presidential Correspondence: Lot 67 D 272. Secret; Immediate; Nodis. Drafted and approved by Walsh.
  2. The message reported on Wilson’s talks in Moscow with Kosygin. (Ibid.) He discussed his visit to Moscow in The Labour Government, 1964-1970, pp. 254-255.