Office of the Historian

254. Memorandum From the President’s Assistant for National Security Affairs (Scowcroft) to President Ford1

Washington, December 9, 1976.

The following cable has just been received from Prime Minister Callaghan:

“Dear Mr. President,

“I am glad to be able to tell you that I have now secured the agreement of the Cabinet to the fiscal adjustments which Denis Healey and I thought necessary, and that we have heard from Dr. Witteveen today that he is content with these adjustments.

“You will understand that these decisions go against the grain of the Party and have not been taken without considerable political difficulty. I have now to persuade the trade unions and our supporters in Parliament to accept these measures and to carry conviction in the country as a whole. I can best succeed in this if we can make a concurrent announcement about a safety net for the sterling balances. Such an arrangement would give the country a real assurance that we shall be better able to manage our economy in a way which will give our policies for moving resources into investment and exports a real opportunity of success without being wrecked by speculative pressures on the exchange rate. There have already been useful preparatory discussions between the central banks about a safety net. These are to be carried forward at Basel over the forthcoming weekend and I hope that with your agreement we shall be able to include an appropriate passage in the statement which will be made to Parliament on Wednesday, 15 December.

“You will probably have heard from Bill Simon that we considered the necessity for introducing a scheme of import deposits. The Cabinet has decided to take the risk of not including this in our package.

“Finally I want to thank you once again for all your support and understanding. We are not on firm ground yet, but I now think we can get there and your help has been invaluable.

“With best wishes. Yours sincerely,

“Jim Callaghan”

  1. Summary: Scowcroft relayed a message from Callaghan on the UK negotiations with the IMF.

    Source: Ford Library, National Security Adviser, Scowcroft Daily Work Files, Box 14. Secret. The memorandum is a copy without Scowcroft’s initials.

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