Economists have warned that Rachel Reeves’ tax-and-spend strategy risks pushing Britain towards a 1970s-style economic crisis and potential bailout from the International Monetary Fund.
Professor Jagjit Chadha, former head of the National Institute for Economic and Social Research, said the UK’s finances were “as perilous” as those leading up to the 1976 IMF loan, warning of a scenario where debt cannot be rolled over, pensions and benefits become difficult to pay, and confidence collapses.
Andrew Sentance, a former member of the Bank of England’s Monetary Policy Committee, echoed those concerns, telling The Telegraph that the situation as “very reminiscent of the 1970s”.
He said Reeves’ mix of high spending, borrowing and taxes risked a Healey-style crisis by late 2025 or 2026, adding: “Unless policies are reversed, we are heading for an economic crash.”
Markets are already signalling unease, with UK bond yields now higher than those of the US and even Greece.
Willem Buiter, another former MPC member, said Reeves may be forced to break Labour’s manifesto pledges on income tax and VAT to restore market confidence.
The warnings come as forecasts suggest a £50billon black hole in the public finances, increasing pressure on the Chancellor ahead of the autumn Budget. Reeves is widely expected to raise taxes again despite concerns this will further suppress growth.
Nigel Farage described the situation as “the 1970s all over again”, while Conservative leader Kemi Badenoch said the rising cost of government borrowing was “the price” of Labour’s “economic mismanagement”.
FTSE 100
The UK's flagship share index, the FTSE 100, was xxx at xxx shortly after opening this morning.
Brent crude oil futures were up 0.18% at $66.84 a barrel.
Companies reporting today
There are no FTSE 350 companies reporting today