IMF rebuke has echoes of 1976 – but this crisis could be much worse

Today’s crisis is financially worse than Britain’s last brush with the IMF, as Sean O’Grady explains

Denis Healey was forced into mini-Budgets (Getty/Hulton Archive)

For those with extra-long memories, there are terrible echoes of 1976 reverberating around our minds right now. Not, sadly, the long hot summer, but the great IMF crisis that tested the early days of James Callaghan’s Labour government.

Then, as now, there was a flight from the pound. It was caused by a lack of confidence in the government’s management of the public finances, endemic inflation, and seemingly intractable problems of poor productivity, uncompetitiveness and slow growth – intermittent stagflation.

It wasn’t triggered by one particularly disastrous “fiscal event”, but then chancellor Denis Healey was too often pushed into having to present mini-Budgets to get things back on track. In those days, $1.50 was the psychological barrier and the pound had been sinking on and off for years. It had stood at $2.80 a decade previously. Funnily enough, the crisis happened around the same time of year, and disrupted the Labour’s annual conference. Healey had to turn around at the airport on his way to an IMF summit to deal with the collapse in sterling. A background of strikes, crumbling infrastructure and an air of national malaise complete the unhappy sense of deja vu.