Economy: Alan Walters diary (exchange rate) [pound falling below $2; MT being advised some intervention worthwhile; AAW advises against but she relents; Cabinet divided on Civil Serice pay rise] [released 2012]

Wednesday 3rd June 1981

MBC [Monetary Base Control] meeting with Jilstra (of Dutch Central Bank). Great supporter - stresses quantity [word illegible/incomplete

Called to [No.10] Flat to say what to be done about £ falling - below $2.00. She is being advised that some intervention may be worthwhile. I say none. She has great ideas then Thursday 4th June 1981[continuation of entry from 3 June]

for using the foreign exchange reserve to buy Trident etc. She was attracted by the idea of intervention because it would reduce £M3 - but I pointed out it would only be very transitory - and she would lose her shirt.

We win - no intervention - I hope we can hold this. But she relents and gives Governor £1 Bn to play with . Cabinet equally divided on 7% to Civil service - looks like there will be

a leak and so the unions will be encouraged to be militant etc.

The End?

General view in BBC and rest of press is that Gvt is firm and will win