253. Memorandum From the President’s Assistant for National Security Affairs (Scowcroft) to President Ford1
The following message from Prime Minister Callaghan has just been received:
“Dear Mr. President,
“I was very glad to have our telephone conversation last night and am most grateful for your continuing interest and our close contact during this difficult period.
“We had a long and difficult Cabinet Meeting this morning and I do not yet know whether I shall be able to carry all the Cabinet with me in accepting the final settlement. Nevertheless, Denis Healey has been authorized by a majority decision to put to the IMF an adjustment of one and a half billion pounds sterling which he and I had recommended. This would be achieved by the sale of assets worth half a bil [Typeset Page 795] lion pounds sterling and by fiscal changes—mainly public expenditure cuts—worth one billion pounds sterling. This would have the effect of reducing the PSBR in 1977–78 to 8.7 billion pounds sterling, a very substantial reduction. The IMF were asking for public expenditure cuts of one and a half to two billion pounds sterling but at the lower end of this range, there is a gap of half a billion pounds sterling between our position and their’s, as I forecast to you when we spoke. There is not a cat in hell’s chance of moving even an inch from this, and I am not positive that I can keep all the Cabinet on board even yet, until they see how the details of the savings are to be made. We are getting down to this next Monday. Denis Healey has been authorized to put the Cabinet’s position to the Fund, and I will of course keep you posted of developments should it not be possible to reach agreement. I must tell you that I am not sanguine, and I can only hope the IMF really understands the consequences.
“Assuming, however, that agreement can be reached with the Fund in the next few days, I hope we can make rapid progress on the safety net. I well understand your position that agreement with the Fund is an essential prerequisite and also that there is a Congressional angle that must wait for January. But I think you also understand that if I am to have the best chance of acceptance of the package firstly in Cabinet and secondly in the country, I shall need to be able to say when we announce it something fairly positive about the safety net.
“As you know, what we have in mind is a multilateral facility arranged between central banks on which we would be able to draw in respect of any net fall in sterling balances which involved a cost to our official reserves. It would help me a good deal if in the announcement we plan to make on or around 15 December, if all goes well about an agreement with the IMF, we could include something on the following lines:
‘President Ford has indicated to me that he will be recommending Congress to approve United States participation in this facility and I now expect that negotiations on it can be brought to a speedy conclusion.’
“We shall, of course, expect by 15 December to have secured the cooperation of the other countries involved.
“As regards import deposits, these were discussed at Cabinet today but no final decision was taken.
“Best wishes,
“Yours sincerely,
“Jim Callaghan”
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Summary: Scowcroft relayed a message from Callaghan on the UK negotiations with the IMF.
Source: Ford Library, National Security Adviser, ]Kissinger-Scowcroft West Wing Office Files, Box 25, UK (23). Eyes Only. A handwritten notation at the top of the memorandum reads, “President has seen.” Ford and Callaghan talked by telephone on December 1 from 11:25 a.m. to 11:39 a.m. (Ibid., White House Central Files, President’s Daily Diary) No memorandum of conversation on this discussion was found. In a December 1 memorandum to Ford, Scowcroft and Greenspan provided talking points for Ford’s telephone call with Callaghan. (Ibid., President’s Handwriting File, Subject File, Box 1, Countries—United Kingdom)
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