Further devaluation may he necessary, banker fears

Press, Volume CXI, Issue 32525, 8 February 1971, Page 17

Further devaluation may he necessary, banker fears

(N.Z. Press Association—Copyright) LONDON, February 5. A warning that Britain might be forced to devalue the pound again this year, if inflation continued at last year’s rate, has been given by Sir Maurice Parsons, former Deputy Governor of the Bank of England.

He said the effects of a furthur devaluation on the economy, on many people’s standard of living, and on unemployment might well be “disastrous,” and .blamed the trade unions for failing to grasp the reality of inflation.

He also criticised Mr Wilson, the former Prime Minister, for not stating the truth about the consequences of the 1967 devaluation. Sir Maurice was speaking in London at a conference Chamber of Commerce, on the industrial and commercial consequences of Britain’s possible entry into the Common Market. He is a former alternate Governor for the United Kingdom of the International! Monetary Fund. He told the conference that,! at the time of the 1967 devvaluation, Mr Wilson failed

to state to the public that it had arisen because of inflation and inefficiency. It ought to have been understood that, if Britain was going to succeed in achieving industrial growth, improved living standards and a lowering of unemployment she must accept initially a moderate lowering of living standards. '■“The trade unions have clearly not understood this vital reality and therefore they have been pushing up wages at a fantastically rapid pace, and thereby pushing up costs and prices,” Sir Maurice went on.

“If inflation went on this year, mainly deriving, as in I last year, from very high wage rises, unassocitated I with equivalent rises in productivity, we could assume I that trade unions will have

generated a continuation of the decline in the value of money Which may make sterling over-valued. “A further devaluation in this year would create a strong disrespect for sterling, and it might cease to function, as an international trading currency. “If that occurred there would be a new massive outflow of capital and consequently a massive lowering of reserves.”

C.M.L approves 1:10 bonus

Consolidated Metal Industries, Ltd, Auckland on Friday held an extraordinary general meeting which unanimously approved a 1 for 10 bonus issue of ordinary $135,583 from the share premium reserve will be capitalised, and 271,166 ordinary 50c shares allotted to the shareholders in proportion to their present holdings. The new shares will rank as equal to the existing ordinary shares. Mr H. M. Gray, the company’s chairman, confirmed {that the issue would be free lof tax, and said that it can Ibe regarded as a return to I shareholders of part of cap-; ital moneys which have been subscribed by them in days I gone by. While the issue increases the capital on which dividends are payable, the directors are confident that last year’s rate of 121 per cent’ will be maintained. i