ABSTRACT
On 28 September 1976, hearing that sterling had fallen to a new low, the Chancellor of the Exchequer, Denis Healey, turned back from Heathrow Airport, returned to the Treasury, and announced that Britain was applying to the International Monetary Fund (IMF) for its largest ever loan.1 Thus began the denouement of a crisis that had been playing for six months, ever since a botched devaluation in early March had taken the pound below $2 for the first time.2 In certain respects, 1976 was just another in the long series of sterling crises that punctuates post-war British economic history (see Chapter 17). With a chronic shortage of foreign currency holdings, sterling was prone to speculative attack, and Healey’s announcement came shortly after the Bank of England experienced its largest ever loss of reserves.3 Nor was there anything new about turning to the IMF for assistance. Britain drew from the Fund on 10 separate occasions between 1947 and 1976.4
But while the crisis may have started with ‘the familiar tolling of the sterling bells’, 1976 was different.5 When Healey turned back, sterling was under attack because the British government had reached the limits of its credit, both at home and abroad. The crisis was resolved, not by further devaluing the pound, as in the past, but by providing Britain’s creditors with the reassurance that, under the IMF’s supervision, the government would finally get its borrowing under control. In modern parlance, 1976 was a sovereign debt crisis. The 1976 crisis was also different because, to an unprecedented degree, it played
out in and through the British press.6 The broadsheets provided the forum for an academic debate that helped to bring a reluctant Cabinet to a realistic negotiating position with the IMF by undermining the alternative strategy of widespread import controls. The press also helped to usher the negotiations to a practical conclusion that ensured the government’s survival by providing the outlet for
extensive high-level leaking and briefing. The IMF mission flew back to Washington in December 1976, having extracted far less than it had expected in return for a $3.9 billion loan and its ‘good housekeeping seal of approval’. This owed much to the role of the British press over three climactic months in 1976.
