[1] As soon as Harold Wilson's newly elected Labour government took power after winning the 1964 general election, vowing to end the Conservatives' "stop-go" economic policies,[1] sterling came under pressure because the market feared that Labour would devalue the currency so as to be able to implement a looser monetary policy, favouring growth.
Wilson wrote in his autobiography that the life of his government was "dominated by an inherited balance of payments problem which was nearing a crisis at the moment we took office".
[2] Wilson also believed that a devaluation would disproportionately harm low-income Britons with savings and poorer Commonwealth of Nations countries in the sterling area.
Nevertheless, in the absence of improvements to the fundamental economic situation of the United Kingdom, delaying the devaluation only served to reduce the Bank of England's dollar reserves.
[6] According to Catherine Schenk, the 1967 devaluation became "emblematic of the inability of the Labour Party to cope effectively with the reduction of sterling's international role".