These fears, expressed by UK Secretary of State for Business and Trade Kemi Badenoch, stemmed partly from fears that the UK would need to seek a bailout from the International Monetary Fund (IMF). This could be reminiscent of the National crisis our country saw in 1976. Speaking to reporters, she stated, “A lot of the indicators are pointing in that direction,” reflecting her worries about the escalating economic challenges facing the nation.
As Badenoch pointed out recently, borrowing costs for the UK have reached a 27-year high, making this issue all the more painful. She called this increase in borrowing costs “yet another sign” of the UK’s worsening economic crisis. The yield on 30-year long UK government bonds — called gilts in the UK — has been increasing sharply over the last three months. It’s taken a half step back in just the past few days. Even with this short-lived minor reprieve, Badenoch was forced to describe the ongoing fiasco as a “crisis” in UK bond prices.
We are not growing enough,” Badenoch declared, making the case for deepening the plan for economic growth, which she called “the bedrock requirement for good government.” Her comments come as a handful of economists have begun to raise the alarm. They caution against a potential reliving of the great 1976 sterling crisis. In early 1976, the Labour government led by Jim Callaghan negotiated a $3.9 billion (£2.9 billion) emergency IMF lending to address the crisis. This once-innocent decision, now comic, has become a fabled cautionary tale in the climate of today’s economic policy discourse.
Badenoch made the case for a joint agreement with Labour leader Sir Keir Starmer to focus on these immediate priorities. In fact, she made targeted calls for cuts to welfare spending. She pointed to her Conservative Party’s plan to keep the controversial two-child benefits cap. She highlighted their proposed increases in welfare cuts. She slammed Labour’s economic approach – accusing them of having no clear plan for growth.
“Labour does not have any plan for growth.” – Kemi Badenoch
Badenoch, the former equalities minister, had been speaking out as political tensions escalated. Her party is today being hammered for its economic stewardship. A source from the Labour Party accused Badenoch’s Conservatives of having “crashed the economy and sent mortgages spiraling.” At that point Badenoch fired back, arguing that Labour had been too idealistic. They thought their policies would magically or immediately produce results the minute they were sworn in to office.
She explained that they thought everything would just fall into place after they took control. They mistakenly believed that their ties to Labour and faith in the rightness of their cause would do the trick. She congratulated legislators for passing a bipartisan budget and urged them to work on a plan that would lay the groundwork for greater economic development. Otherwise the UK would face grave consequences, she cautioned.
“That is not working – they need to get a plan to grow our economy, otherwise we will end up going to the IMF cap in hand.” – Kemi Badenoch
Andrew Sentance, a former member of the Bank of England Monetary Policy Committee, welcomed Badenoch’s willingness to raise these issues. He suggested that the kind of crisis we saw in 1976 might not be inevitable. He noted, “The UK may not end up calling in the IMF,” offering a more tempered perspective on the current economic challenges.
Badenoch makes a compelling case. Badenoch is unwavering in her conviction that swift action is essential. She says it’s essential to avoid an impending fiscal disaster. She is deeply convinced that misguided policies pursued by this administration will bring terrible misery across the country. She is committed to raising awareness of this urgent problem.
“If we do get that sort of crisis because of their bad decisions, we’re all going to suffer.” – Kemi Badenoch