Fifty years to the day after Britain was forced to seek an IMF bailout, Andy Burnham is walking into the same trap that caught Labour half a century ago, according to a Daily Express column by Harvey Jones.
On September 28, 1976, the UK had to approach the IMF for a $3.9 billion loan, the largest sum the fund had ever agreed for a member country, as the pound fell and foreign currency reserves drained. IMF technocrats were brought in to impose tough spending decisions that politicians could not make themselves.
Echoes of 1976
The column draws parallels between then and now. In 1976, Labour was in power, the chancellor was Denis Healey, and Britain had endured a long, hot summer with heatwaves and droughts. Today, Chancellor John Healey leads the government, and the country has just experienced record summer heat and hosepipe bans. Then, James Callaghan was Prime Minister; now, Andy Burnham holds that role. In both cases, Labour inherited a mess from the Tories and made everything worse, the article argues.
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 named the UK and the US as countries needing to take decisive action now. The government's response was to say nothing, the column claims.
Spending commitments continue
Instead, Burnham keeps announcing new spending commitments, including bus fare caps, electricity bill support, cuts to pub rates, and money for rough sleeping and high street regeneration. He is now planning tax rises to sort out social care, while cutting social security spending seems out of the question.
Borrowing reached £18.3 billion in August, much more than expected, and debt interest hit a record £8.8 billion, the highest August figure since records began in 1997.
Fiscal headroom collapsing
The Budget is a month away, on October 28, and John Healey's fiscal headroom is collapsing. He inherited £24 billion and is down to £8.5 billion. Ten-year gilt yields climbed to 5.4%, above Liz Truss levels, squeezing it further.
Some things were worse in 1976: inflation ran at 21%, Denis Healey hiked corporation tax to 52%, and introduced a top marginal rate of 98% on investment income. But today's national debt is almost £3 trillion, roughly the size of the entire economy, whereas it was below £55 billion then, just under half of GDP.
The population is getting older and sicker, North Sea oil is running out, Ed Miliband's net zero charge needs funding, and billions are needed to defend against Vladimir Putin. The column concludes that the IMF may be the only one able to make the tough decisions required to dig the country out of the hole again.
