1976 sterling crisis
[2] James Callaghan's Labour government had to borrow $3.9 billion[a] from the International Monetary Fund (IMF),[4] with the intention of maintaining the value of sterling.
This budget led to a brief period growth known as "The Barber Boom," followed by a wage-price spiral, high inflation and currency depreciation, culminating in the 1976 sterling crisis.
The crisis came to a head during James Callaghan's term as Prime Minister,[7] and caused the Bank of England to withdraw temporarily from the foreign exchange market.
[8] After the defeat of the public expenditure white paper in the House of Commons in March 1976 and the resignation of Harold Wilson, many investors became convinced sterling would soon lose value due to inflation.
Denis Healey, the Chancellor of the Exchequer at the time, went on to state that the main reason the loan had to be requested was that public sector borrowing requirement figures provided by the Treasury were grossly overstated.
Government borrowing for debt (10-year bond) increased to over 15% in the 1970s and early 1980s.
