Published: | Updated:
In my lengthy career in financial journalism no event is seared more strongly into my memory than the drama which unfolded 50 years ago on September 28, 1976.
asserted
which → publish → September
A Labour government in hock to the trades unions found itself under fierce fire on the foreign exchange markets with the pound in an uncontrollable fall and share prices in a downward spiral that seemed to presage the end of capitalism.
asserted
that → find → capitalism
As the markets opened that morning, sterling had fallen below $1.70 to the dollar for the first time and continued in free fall.
asserted
sterling → open → fall
The final straw had been the decision by Labour, then under James Callaghan as Prime Minister and Chancellor Denis Healey, to agree to an eye-watering, inflation-busting pay rise for the merchants’ seamen unions.
asserted
straw → agree → unions
As Healey, along with then governor of the Bank of England Gordon Richardson, travelled to Heathrow en route to a Commonwealth finance meeting in Hong Kong followed by the International Monetary Fund annual gathering in Manila, the pound sank to $1.62.
asserted
pound → travel → 1.62
The Bank of England’s foreign exchange department feared the currency could fall to an unbelievable $1.50.
uncertain
currency → fear → 1.50
This was a psychological tipping point (even though our currency has fallen a great deal further since, plummeting to $1.02 in 2022 after Liz Truss’s mini-budget).
asserted
currency → fall → budget
Denis Healey likened the IMF to a ‘mutual provident society to which Britain paid its dues’ and warned that unless we accepted its help, the country would face savage economic policies
The foreboding was palpable and even today I can remember the butterflies in my stomach and the anxiety in the newsroom.
In the City office, where I worked, instructions were barked out and the clatter of typewriters was off and running.
asserted
clatter → liken → typewriters
As Healey and his closest aides entered the airport’s gracious VIP lounge, normal calm was interrupted as those advisers ran to the yellow public phones for the latest bulletins from the currency markets.
asserted
advisers → enter → markets
Sterling’s plunge was getting worse.
asserted
plunge → get → ?
Healey conferred with Callaghan who was about to leave his hotel to deliver his leader’s speech to the Labour Party Conference in Blackpool.
asserted
who → confer → Blackpool
There was no choice, they decided, but for Healey to turn round and go back with his officials for a tense afternoon at the Treasury.
asserted
Healey → be → Treasury
Nerves were jangling and Britain’s reserves of overseas currencies, which had been used in a vain attempt to prop up and defend the pound, were exhausted.
asserted
which → jangle → pound
By late afternoon, a momentous decision had been reached.
asserted
decision → reach → afternoon
The United Kingdom would be the first great industrial nation to apply to the Washington-based International Monetary Fund for a loan and would seek a $3.9billion bailout – a gargantuan sum which is the equivalent of £36.44billion in 2026 money.
asserted
which → apply → money
Inflation stood at a staggering 16.4 per cent against 3.1 per cent in August this year.
asserted
Inflation → stand → August
Nevertheless, it is hard not to draw parallels.
asserted
it → draw → parallels
A socialist government was in power, taxes and public debt were sky high, global financial traders had lost confidence in the willpower of the government to confront rampant unions and energy markets were in turmoil following the Arab oil blockade of the Gulf and the 1973 Yom Kippur War.
asserted
markets → lose → Gulf
Then, as now, the Labour conference was in full swing and a Healey – Denis, as opposed to John today – occupied the Treasury.
asserted
Healey → oppose → Treasury
The stark lessons of 1976 are that, if things continue as they are and public spending and high taxation are not restrained under the Burnham government, we could again be in for one of the most humiliating episodes in our financial history.
uncertain
we → continue → history
In his broadcast address to the British people to explain the government’s decision to seek IMF help on that fateful day five decades ago, Denis Healey offered a rose-tinted version of events.
asserted
Healey → explain → events
He claimed he was sure Labour’s current economic policy would meet any conditions imposed by the IMF.
asserted
policy → claim → IMF
Healey likened the IMF to a ‘mutual provident society to which Britain paid its dues’ and warned that unless we accepted its help, the country would be faced with economic policies so savage there would be riots on the streets, an immediate fall in living standards and unemployment of three million.
asserted
country → liken → million
The Chancellor may have sought to show calm in the face of Britain’s biggest economic crisis since the nation left the gold standard in 1931, but he looked drawn, his eyebrows bushier than ever and his hair in disarray.
uncertain
hair → seek → disarray
The truth is nothing was more feared among leaders of troubled, deficit-stricken countries than the arrival of an IMF delegation to negotiate a ‘Letter of Intent’ laying out policies to be imposed as the price of rescue.
asserted
nothing → fear → rescue
If Labour thought Britain, with its special relationship with the US (the IMF’s biggest shareholder) would receive velvet-gloved treatment from Republican President Gerald Ford and the US Treasury they were badly mistaken.
asserted
they → think → Ford
The Americans were determined to teach a lesson to governments which threatened the stability of the financial system.
asserted
which → teach → system
If public spending and high taxation are not restrained under the Burnham government, we could face one of the most humiliating episodes in our financial history
The price insisted on by the IMF was extraordinarily high.
uncertain
price → restrain → IMF
A reluctant Labour government at first rejected its demands, made by its bureaucrats on successive visits to London, where they checked into Brown’s Hotel in Mayfair under false names.
asserted
they → reject → names
The IMF wanted ruthless cuts in the public sector borrowing requirement (the amount of money the UK would be allowed to raise on the bond markets).
asserted
UK → want → markets
Negotiations took months and the feeling of menace in Whitehall, the City and at Westminster was unmissable.
asserted
feeling → take → Westminster
On a bleak afternoon in early December, I received a call from the Guardian’s well-connected political commentator Peter Jenkins, who had just returned from seeing Denis Healey at No 11.
asserted
who → receive → No
Jenkins opened his notebook and read from his neat fountain-pen notes.
asserted
Jenkins → open → notes
He had been told by the Chancellor that the government would finally sign its ‘Letter of Intent’ the next day.
asserted
government → tell → Intent
He proceeded to read from his notes.
asserted
He → proceed → notes
Public spending would have to be slashed by £2.5billion (£23.4billion today) over two years.
asserted
spending → have → years
The government’s stake in BP must be sold.
asserted
stake → sell → BP
A new target for public borrowing to drop by a staggering £8.7billion (£81billion) over the next three years had to be set; and domestic credit expansion, the amount of money printed by the Bank of England, must be scythed by one-third.
asserted
expansion → drop → third
It was an amazing scoop, perhaps the biggest of my career, and handed to me on a plate.
asserted
It → hand → plate
Unemployment, already high, climbed to 1.6million people (six per cent of the workforce), growth slumped and government programmes, such as council-house building, ground to a halt.
asserted
programmes → climb → halt
…and 7 more, not listed.
The Aporia
