History is about to repeat itself. In the most shocking and astonishing way.
Andy Burnham is walking into the same trap that caught Labour 50 years ago (Image: Getty)
It’s now 50 years to the day that Britain was forced to go “cap in hand” to the IMF for a loan to bail us out. This unforgettable moment of national humiliation came on September 28, 1976, and showed just how low the UK had sunk. The pound was in freefall, our foreign currency reserves were draining away, and we had to tap up the IMF for $3.9billion, the biggest sum it had ever agreed for a member country. Its technocrats were smuggled into the UK to force through tough spending decisions that our own politicians were too scared or stupid to make themselves.
The Labour Party was in power then. Remarkably, the chancellor was also called Healey, in this case Denis. In another echo, Britain had just been through a long, hot summer, marked by heatwaves and droughts. Today, we have Chancellor John Healey, and have just endured record summer heat and hosepipe bans too. In 1976, “Sunny Jim” Callaghan was PM, and now we have jolly Andy Burnham. In both cases, Labour inherited a mess from the Tories, and made everything worse. Today, 50 years on, we seem to be heading for the same financial hell.
The IMF is worried. Last week, IMF head Kristalina Georgieva warned that as global interest rates rise, government debt servicing costs may spiral out of control. She openly named the UK, along with Donald Trump’s even more profligate US, as countries that need to take decisive action now. It was a much-needed wake-up call. And what was the government’s response? To say nothing whatsoever.
Instead, Andy Burnham keeps reeling off new spending commitments. So far we’ve had bus fare caps, electricity bill support, cuts to pub rates and money for rough sleeping and high street regeneration. Now he’s plotting tax rises to sort out social care. Cutting social security spending seems out of the question.
Our plight gets worse by the day. We borrowed another £18.3billion in August, much more than expected. Debt interest hit a record £8.8billion, the highest August figure since records began in 1997.
The Budget is exactly a month away, on October 28, and John Healey’s fiscal headroom is already collapsing. He inherited £24billion and is down to £8.5billion. This morning, 10-year gilt yields climbed to 5.4%, way above Liz Truss levels, squeezing it further. So will we end up back at the IMF?
Some things were madder in 1976. Inflation was running at 21%, Denis Healey had just hiked corporation tax to 52%, roughly double today, and introduced a top marginal rate of 98% on investment income. Even Rachel Reeves wasn’t that unhinged.
But one thing today is much worse. Our national debt is now almost £3trillion, roughly the size of our entire economy. Back then it was below £55billion, just under half of GDP.
Our population is getting older and sicker, North Sea oil is running out, we have Ed Miliband’s net zero charge to fund, and somehow need to find billions to defend ourselves against Vladimir Putin. Maybe AI can save us. I’m not holding my breath. And I’m not holding my breath for Sunny Andy to make the difficult decisions required to bail us out.
Some on the left point out that we didn’t need all that IMF cash in the end. They say Britain technically can’t go bust, because we can always print our own money. As if that’s some kind of solution. Perhaps we need the IMF after all. It’s the only one able to make the tough decisions required to dig us out of the hole we’ve got ourselves into. Again.