Rachel Reeves’ tax-and-spend gamble is driving Britain towards a 1970s-style debt crisis and bailout from the International Monetary Fund, leading economists have warned. The Telegraph has more.
They have said the Chancellor’s handling of the economy risks a return to the years of high inflation and borrowing that ended with Britain being forced to borrow billions from the International Monetary Fund (IMF) 50 years ago.
It came as leading retailers sounded the alarm over the rising cost of taxes and red tape, which is pushing the country into an era of “stagflation”.
On Saturday night, Nigel Farage, the Reform UK leader aid the economic situation was like “the 1970s all over again”, while Kemi Badenoch, the Conservative Party leader, said that the surging cost of Government borrowing was “the price” of Labour’s “economic mismanagement”.
Ms Reeves is under huge pressure ahead of the autumn Budget, with forecasts showing rampant borrowing has created a £50 billion black hole.
She is widely expected to put up taxes again to cover the shortfall despite warnings that doing so will only further stunt Britain’s anaemic growth.
Prof Jagjit Chadha, who recently stepped down as the head of the National Institute for Economic and Social Research, claimed the economy was at risk of “collapse”.
He said the financial situation was “as perilous the period leading up to the IMF loan of 1976”, when Britain had to be bailed out by the global banking body.
He told the When the Facts Change Substack, written by the Telegraph columnist Liam Halligan: “I’m in a world in which I could imagine it [an IMF bailout] happening, and we’ll be bereft in that case.
“We will not be able to roll over debt, we will not be able to meet pensions payments, benefits will be hard to pay out.”
Andrew Sentance, a former member of the Bank of England’s rate-setting Monetary Policy Committee, also said the situation was “very reminiscent of the 1970s”.
He added: “Rachel Reeves is on course to deliver a Healey 1976-style crisis in late 2025 or 26. Like Healey, she has massively boosted public spending, borrowing and taxes – fuelling both demand-pull and cost-push inflation. Unless policies are reversed, we are heading for an economic crash.
“We’ve still got bond yields that are even higher than the US. In fact, we’re even higher than Greece when it comes to borrowing costs, which is an indictment of where the UK is at the moment, or where it’s perceived to be by the financial markets.”
Worth reading in full.
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