{"text":[[{"start":7.22,"text":"It was a mind-blowing moment in Britain’s postwar financial history. On September 28 1976, Denis Healey, the chancellor of the exchequer, was at Heathrow on his way to the Commonwealth finance ministers’ meeting in Hong Kong and then to the IMF annual meeting in Manila. Sterling was in freefall and the country’s foreign currency reserves were draining away. Healey realised that if he took the plane he would be out of contact with London for 17 hours. He turned back from the airport and initiated an approach to the IMF for a $3.9bn loan — at the time the largest sum ever requested from the fund."}],[{"start":45.16,"text":"The management of the British economy was, in effect, outsourced to a posse of IMF bureaucrats who signed into Brown’s Hotel in Mayfair under false names. They extracted a heavy price in public spending cuts, which caused bitter arguments in cabinet. But Prime Minister James Callaghan and his dissident ministers acquiesced to IMF conditions because the alternatives — a siege economy with import controls or formal default on public debt — were unthinkable."}],[{"start":72.78,"text":"Back then I was the financial editor of The Economist. I vividly recall the profound sense of shock, post-imperial impotence and national humiliation. Newspaper headlines pronounced Britain “bust”."}],[{"start":85.22,"text":"Today, with another Healey — John — at the Treasury, the 50th anniversary has a certain resonance. Yes, in 1976 the country also experienced its hottest, driest summer in living memory while the oil price was spiralling. But the incoming Labour government’s economic inheritance from the Tories in 1974 was also dismal."}],[{"start":106.98,"text":"Since the Conservative chancellor Anthony Barber’s 1972 “dash for growth” Budget, the public sector borrowing requirement on which markets were fixated had soared, money and credit were out of control and Britain was in the grip of a wage-price spiral and a housing bubble."}],[{"start":122.42,"text":"Particularly damaging for British industry was the interaction of high inflation with the tax system. Corporation tax was levied on historic cost profits, which made no allowance for the soaring replacement cost of stocks, plant and machinery. So an overtaxed corporate sector was running out of cash."}],[{"start":139.3,"text":"In his March 1976 Budget, by which time inflation was running at over 21 per cent, Healey made matters worse by increasing the corporation tax rate from 50 to 52 per cent, raising income tax rates and, notoriously, introducing a top marginal rate of 98 per cent on investment income."}],[{"start":160.64,"text":"This was against the background of the worst stock market collapse since the war, with the FT 30 index falling 73.1 per cent from May 1972 to January 1975. House prices were plunging; union militancy was rampant; there was a seizure in the banking system; and people were beginning to question the durability of capitalism."}],[{"start":185.38,"text":"After the October 1974 collapse and state rescue of Britain’s leading machine tool manufacturer Alfred Herbert, Healey (to his great credit) got the message. In a mini-Budget the following month he introduced a stock appreciation tax break along with other measures to relieve industry’s cash squeeze."}],[{"start":204.66,"text":"Healey was addressing the greatest loss of confidence in the UK since the 1956 Suez debacle — a monumental liquidity crisis. Yet it was not a genuine crisis of solvency; 1976 was the year that North Sea oil revenues began to flow. And as Healey revealed in his autobiography, the Treasury was feeding the markets and the IMF with hopelessly over-pessimistic numbers for the public sector borrowing requirement. In the event, the IMF loan was never drawn in full and was repaid early."}],[{"start":236.66,"text":"The Labour government elected in 2024 inherited similarly flawed public finances from chaotic Tory administrations. Once again the bond market is ultra-suspicious. And while industry is far from bust, everyone agrees that the UK has problems with growth and youth unemployment, exacerbated by government measures such as increases in employers’ national insurance contributions."}],[{"start":261.02,"text":"National solvency is a far greater problem than in 1976. The debt-to-GDP ratio then was just under 50 per cent while today it is approaching 100 per cent. An ageing population imposes an ever-increasing welfare burden while the government urgently needs to increase defence spending."}],[{"start":278.62,"text":"And this time around, there is no deus ex machina to match North Sea oil unless you believe in AI miracles. So today’s Healey faces tough choices in pursuit of growth and stable public finances. He will be hard-pressed in his Budget on October 28 to lift the nation’s spirits."}],[{"start":297.34,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1790501505_1953.mp3"}