Key points
- £50bn borrowing gap sparks alarm
- Experts compare crisis to 1970s
- Critics urge policy shift
ISLAMABAD: Leading economists have warned that Rachel Reeves’ tax-and-spend approach is steering Britain toward a 1970s-style debt crisis, potentially leading to an International Monetary Fund (IMF) bailout.
The chancellor faces increasing pressure ahead of the autumn budget, as projections show soaring public borrowing has created a £50bn fiscal gap. Despite this, she is expected to raise taxes again to plug the shortfall — a move critics claim will further harm economic growth, according to The Telegraph.
Reeves heading for IMF bailout! Economists warn of 70s-style debt crisis unless Chancellor changes course. pic.twitter.com/psvKvU2Lj5
— Leave.EU (@JustLEAVEeu) August 23, 2025
Warnings from experts suggest the UK may be repeating the mistakes that led to the 1976 IMF bailout under Labour Chancellor Denis Healey. At the time, rampant inflation and borrowing forced Britain to seek billions in emergency funding.
Economist Prof Jagjit Chadha likened the current situation to that era, saying: “I’m in a world in which I could imagine it [an IMF bailout] happening… 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.”
Boosting public spending
Former Bank of England policymaker Andrew Sentance also drew comparisons to the 1970s, stating: “Rachel Reeves is on course to deliver a Healey 1976-style crisis… Like Healey, she has massively boosted public spending, borrowing, and taxes.”
I doubt Reeves will need to go to the IMF.
The IMF would impose austerity (real austerity not 2010-2015 fake austerity) on us as a condition of any loan anyway so she may as well save herself the humiliation of a bailout and just start cutting budgets.
I struggle to see a… pic.twitter.com/tQqhkWcrhW
— Wolf 🐺 (@WorldByWolf) August 23, 2025
He warned that bond yields in the UK are now higher than those of the US and even Greece, reflecting market concerns over Britain’s financial direction.
Willem Buiter, another former Bank of England adviser, echoed these concerns, predicting market pressure “at least as effective as the pressure from the IMF was in the 1970s” unless policy is reversed. He added Reeves “will be forced” to break Labour’s manifesto pledges and raise taxes such as income tax and VAT to reassure investors.
Raising alarms
Retailers have also raised alarms. The British Retail Consortium’s chief executive, Helen Dickinson, said Reeves’ policies could keep food inflation above five per cent well into 2026.
In a joint article with Conservative mayor Lord Houchen, she urged the Chancellor to rethink planned business rate hikes. She warned: “A Budget that hits retail disproportionately hard… would keep food inflation stuck above 5 per cent well into 2026.”
ECONOMY – Stop moaning about welfare and look at the figures. The UK is going bankrupt. We are on track to IMF bailout territory by the end of 2025
Debt is growing faster than GDP, and at this rate, the UK will hit a 150% debt-to-GDP ratio by end of 2025, the danger zone where…
— Bernie (@Artemisfornow) March 19, 2025
Critics across the political spectrum have echoed the economic concerns. Nigel Farage described the current moment as “the 1970s all over again,” adding: “We are in a debt spiral and I expect Rachel Reeves’ Budget in the autumn will make it even worse… we’re not very far away from being in an economic doom loop.”
Government borrowing costs
Kemi Badenoch, Conservative Party leader, stated: “We’ve been here before… It will fall to us again.”
Government borrowing costs have surged, with 30-year gilt yields hitting 5.58 per cent — higher than during Liz Truss’s mini-budget crisis. UK debt now stands at 96.3 per cent of GDP, the fifth-highest among developed nations. Interest payments are expected to hit £111.2bn this year — £1 of every £12 spent.
Despite the criticism, a Treasury spokesman dismissed the concerns, saying: “This Government is taking the necessary decisions to stabilise Britain’s finances… Our Plan for Change will put more money in the pockets of working people.”
