Currency of Great Britain

Pound sterling The pound sterling (symbol: Ј), commonly called the pound, is the currency of the United Kingdom, its Crown dependencies and the British Overseas Territories. It is subdivided into 100 pence.

Sterling is the third-largest reserve currency, after the US dollar and the euro. The pound sterling is also the fourth-most-traded currency in the foreign exchange market after the US dollar, the euro, and the Japanese yen.

The full, official name, pound sterling, (plural: pounds sterling) is used mainly in formal contexts and also when it is necessary to distinguish the United Kingdom currency from other currencies with the same name. Otherwise the term pound is normally used.

There is some uncertainty as to the origin of the term "pound sterling". Some sources say it dates back to Anglo-Saxon times, when coins called sterlings were minted from silver; 240 of these sterlings weighed one pound, and large payments came to be made in "pounds of sterlings". Other references, including the Oxford English Dictionary, say a sterling was a silver penny used in England by the Normans, and date the term to around 1300.

The currency sign is the pound sign. The Ј is written with a single cross-bar—this is the style used on sterling bank notes. The pound sign derives from the black-letter "L", an abbreviation of Librae in Roman . Libra was the basic Roman unit of weight, derived from the Latin word for scales or balance.

Since decimalisation in 1971, the pound has been divided into 100 pence. The symbol for the penny is "p.

History The origins of sterling lie in the reign of King Offa of Mercia, who introduced the silver penny. It copied the denarius of the new currency system of Charlemagne's Frankish Empire. At this time, the name sterling had yet to be acquired. The penny swiftly spread throughout the other Anglo-Saxon kingdoms and became the standard coin of what was to become England.

The early pennies were struck from fine silver (as pure as was available). However, in 1158, a new coinage was introduced by King Henry II (known as the Tealby penny) which was struck from 92.5% of silver. This became the standard until the 20th century and is today known as sterling silver, named after its association with the currency. Sterling silver is harder than the fine silver that was traditionally used and so sterling silver coins did not wear down as rapidly as fine silver coins. The English currency was almost exclusively silver until 1344, when the gold noble was successfully introduced into circulation. However, silver remained the legal basis for sterling until 1816. In the reign of Henry IV (1412-1421), the penny was reduced in weight

During the reigns of Henry VIII and Edward VI, the silver coinage was drastically debased. The result was a coin copper in appearance, but relatively pale in colour. In 1552, a new silver coinage was introduced, struck in sterling silver. Throughout this period, the size and value of the gold coinage fluctuated considerably.

In 1663, a new gold coinage was introduced based on the 22 carat fine guinea. As a consequence, silver flowed out of the country and gold flowed in, leading to a situation where Great Britain was effectively on a gold standard. In addition, a chronic shortage of silver coins developed. The Bank of England was formed in 1694, followed by the Bank of Scotland a year later. Both began to issue paper money.

The pound scots had begun equal to sterling but had suffered far higher devaluation until being pegged to sterling at a value of 12 pounds scots = 1 pound sterling. In 1707, the Kingdom of England and the Kingdom of Scotland merged to form the United Kingdom of Great Britain. In accordance with the Treaty of Union, the currency of the 'united kingdom' was sterling with the pound scots being replaced by sterling at the pegged value.

During the Revolutionary and Napoleonic wars, Bank of England notes were legal tender and their value floated relative to gold. The Bank also issued silver tokens to alleviate the shortage of silver coins. In 1825, the Irish pound, which had been pegged to sterling since 1801 at a rate of 13 Irish pounds =12 pounds sterling, was replaced, at the same rate, with sterling.

During the late 19th and early 20th centuries, many other countries adopted the gold standard. As a consequence, conversion rates between different currencies could be determined simply from the respective gold standards. The pound sterling was equal to 4.85 U.S. dollars, 4.89 Canadian dollars, 25.22 French francs (or equivalent currencies in the Latin Monetary Union), 20.43 German Marks or 24.02 Austro-Hungarian Krones. Discussions took place following the 1865 International Monetary Conference in Paris concerning the possibility of the UK joining the Latin Monetary Union and a Royal Commission on International Coinage examined the issues, resulting in a decision against joining monetary union.

The gold standard was suspended at the outbreak of the war in 1914, with Bank of England and Treasury notes becoming legal tender. Prior to World War I, the United Kingdom had one of the world's strongest economies, holding 40% of the world's overseas investments. However, by the end of the war the country owed Ј850 million (Ј30.7 billion as of 2010), mostly to the United States.

Sterling circulated in much of the British Empire. In some parts, it was used alongside local currencies.

In 1940, an agreement with the U.S.A. pegged the pound to the U.S. dollar at a rate of Ј1 = $4.03. This rate was maintained through the Second World War and became part of the Bretton Woods system which governed post-war exchange rates.

In the mid-1960s, the pound came under renewed pressure since the exchange rate against the dollar was considered too high. In the summer of 1966, with the value of the pound falling in the currency markets, exchange controls were tightened by the Wilson government. Among the measures, tourists were banned from taking more than Ј50 out of the country, until the restriction was lifted in 1979.

With the breakdown of the Bretton Woods system—the pound floated from August 1971 onwards. It at first appreciated a little, rising to almost $2.65 in March 1972, from 2.42 when it had been fixed. The Sterling Area effectively ended at this time when the majority of its members also chose to float freely against the pound and the dollar.

James Callaghan came to power in 1976. He was immediately told the economy was facing huge problems, according to documents released in 2006 by the National Archives. Financial markets were losing confidence in sterling. The UK treasury could not balance its books. Callaghan was told there were three possible outcomes: a disastrous free fall in Sterling, an internationally unacceptable siege economy or a deal with key allies to prop up the pound while painful economic reforms were put in place.

The Conservatives arrived in power in 1979. Sterling fell sharply after 1980 At its lowest, the pound stood at just $1.03 in March 1985, before returning to the US$1.70 level in December 1989. On 8 October 1990 the Conservative government decided to join the European Exchange Rate Mechanism (ERM).

In 1997, the newly-elected Labour government handed over day-to-day control of interest rates to the Bank of England. The Bank is now responsible for setting its base rate of interest so as to keep inflation in the Consumer Price Index (CPI) very close to 2%.

As a member of the European Union, the United Kingdom could adopt the euro as its currency. However, the subject remains politically controversial.

Coins and banknotes At present, the oldest circulating coins in the U.K. are the lp and 2p copper coins introduced in 1971. Before decimalisation, change could contain coins aged one hundred years or more, with any of five monarchs' heads on the obverse.

In April 2008 an extensive redesign of the coinage was unveiled. The new designs were issued gradually into circulation, starting in summer 2008. The new reverses of the lp, 2p, 5p, lOp, 20p and 50p coins feature parts of the Royal Shield, and the new pound coin depicts the whole shield. The coins are of the same specifications as those with the old designs (which will continue to circulate).

The first sterling notes were issued by the Bank of England shortly after its foundation in 1694. From 1745, the notes were printed in denominations between Ј20 and Ј1000, with any odd shillings added in hand. Ј10 notes were added in 1759, followed by Ј5 in 1793 and Ј1 and Ј2 in 1797. The lowest two denominations were withdrawn following the end of the Napoleonic wars. In 1855, the notes were converted to being entirely printed, with denominations of Ј5, Ј10, Ј20, Ј50, Ј100, Ј200, Ј300, Ј500 and Ј1000 issued.

The pound is freely bought and sold on the foreign exchange markets around the world, and its value relative to other currencies therefore fluctuates. It has been among the highest-valued currency units in the world. As of 18 April 2010, Ј1 was worth US$1,496 or Ђ1.105.

Sterling is used as a reserve currency around the world and as at ranked third in value held as reserves.

The Parties The British democratic system depends on political parties, and there has been a party system of some kind since the 17th century. The Conservative and Liberal Parties are the oldest and until the last years of the 19th century they were the only parties elected to the House of Commons.

The Conservatives, often called the Tories, have always been the party of the Right, the party of big business, industry, commerce and landowners. It can broadly be described as the party of the middle and upper classes although it does receive some working class support. Most of its voters live in rural areas, small towns and the suburbs of large cities. Much of its financial support comes from large industrial companies. The party represents those who believe in private enterprise as opposed to state-owned undertakings. There is some division within the party itself: the more aristocratic wing and the lower-middle-class group. The Tories are the most powerful party and are often called a party of business directors. (The word "Tories" is an Irish name for thieves and was applied to the Conservatives by their opponents, but later they adopted the name to describe themselves).

The Tories were opposed by the Whigs, a rude name for cattle drivers. In the middle of the 19th century the Liberal Party (or the Whigs) represented the trading and manufacturing classes. Its slogan of that time was "Civil and Religious Liberty". During the second half of the 19th century many working people looked at the Liberal Party as an alternative to the Conservatives and their policy. At the end of the 19th century and in the first two decades of the 20th, the Liberals lost the support of working-class voters.

Around 1900 the Labour Party was formed as the political arm of the trade unions. It was the party that drew away working people's support. In 1906 the Labour Party managed to get twenty-nine representatives elected to Parliament, but it wasn't until 1945 that Britain had its first Labour Government. At this election the number of Liberal MPs was greatly reduced and since then Governments have been formed by either the Labour or the Conservative party. Usually they have had clear majorities — that is, one party has had more MPs than all the others combined. The Labour Party has always had strong links with the trade unions and receives financial support from them. While many Labour voters are middle-class or intellectuals, the traditional Labour Party support is still strongest in industrial areas.

In 1981 some Conservative and Labour MPs left their own parties to form a new "left-of-centre" party—the Social Democratic Party (SDP) — which they hoped would win enough support to break the two-party system of the previous forty years. They fought the 1983 election in an ^AA alliance with the Liberals, but only a small number of their MPs were elected. In 1987 the two parties of the Alliance agreed to merge to form a new party, the Liberal Democrats, although some Social Democrats preferred to remain independent.

There are also some other parties: The Green Party, the Communist Party, the National Front, the Scottish National Party, the Welsh National Party.