The IMF crisis, 1976.
- By 1976 Government spending was getting out of control once again
- Taxes were at eye watering levels. Unemployment was rising again, to a level higher than that which had caused Heath to undertake his U Turn.
- Inflation was running at 16% per annum.
- Interest rates were at 15% and the value of the pound was sliding. By 1975 Britain’s balance of payments deficit was GBP 1billion.
- In September the pound came under huge pressure again in the face of massive selling on the international markets and Callaghan and Healy decided they needed another massive loan to prop it up.
- This time the only body who was still willing to lend more to Britain was the IMF ;had been set up to help failing third world countries, and thus appealing to it was a national humiliation.
- The Chancellor, Dennis Healy, negotiated a loan of £3 billion, in return for a promise to cut public spending.
- caused outrage among the unions and many inside the Labour Party.
- Healy was only partially successful in persuading them to accept the necessities of the cuts, and they were in the national interest.
- showed that the divisions between the left of the party and the centre were as deep as ever
- . It was an argument over the country versus the ideological and pro union stance of the traditional Labour Party.
- Callaghan, managed to cut GBP 2 billion from government spending, but this, along with growing inflation, meant…