Rachel Reeves 'pushing Britain towards 1976-style IMF bailout and economic collapse'

Professor Jagjit Chadha, the former head of the influential National Institute for Economic and Social Research (NIESR) has said that the economy has reached the brink of "collapse".

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He told Liam Halligan's "When the Facts Change" blog: "I'm in a world in which I could imagine it [an IMF bailout] happening, and we'll be bereft in that case.

"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."

Mr Halligan himself delivered a sobering assessment of Britain's financial health to GB News on Friday.

"I'm generally an optimistic person and I generally believe in the entrepreneurial vigour of the British people, but the economy is in a bad way," he said.

Recent NIESR forecasts have shown that skyrocketing borrowing has left Ms Reeves facing a new £50billion "black hole" - more than double the size of the deficit Labour says it inherited from the Tory Government.

As a result, the Chancellor is poised to hike taxes in a bid to cover the shortfall.

"We need to talk about the fiscal dangers the UK faces," Mr Halligan added.

"If you try and meet a hole in the Budget by just raising tax rates, as Labour like to do, you pull a tax lever and you get no tax revenue, because you kill enterprise."

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Andrew Sentance, who once served on the Bank of England's Monetary Policy Committee (MPC), said the situation was "very reminiscent of the 1970s".

"Rachel Reeves is on course to deliver a Healey 1976-style crisis in late 2025 or 26," Mr Sentance said.

"Like Healey, she has massively boosted public spending, borrowing and taxes - fuelling both demand-pull and cost-push inflation. Unless policies are reversed, we are heading for an economic crash."

Britain's borrowing costs are now higher than Greece's, he added - which he dubbed an "indictment of where the UK is".

Fellow ex-MPC member Willem Buiter issued Ms Reeves a dire economic ultimatum.

Unless the Chancellor changes course, Mr Buiter said, she would face a level of market scrutiny which "will be at least as effective as the pressure from the IMF was in the 1970s".

"I think there's no realistic alternative to basically breaking the commitment not to raise key taxes, personal income tax, VAT, during this Government's term in office. So she will be forced to do that," he added.

Reform UK leader Nigel Farage, meanwhile, told The Telegraph: "I have a sense of deja vu. It is the 1970s all over again, it's just that our social position is even worse than it was then.

"We had terrible times in the '70s economically, but at least we were fairly united as a country, as a culture. This time we have bad economic times here, worse coming, in a nation that is bitterly divided, so it's not a happy formula.

"We are in a debt spiral and I expect Rachel Reeves's Budget in the autumn will make it even worse. In fact, we're not very far away from being in an economic doom loop."

A Treasury spokesman, however, branded warnings of a 1976-style crisis "unfounded".

"This Government is taking the necessary decisions to stabilise Britain’s finances and kick-start economic growth, backed by a fiscal strategy that has been endorsed by the IMF," No11 said.

"Our plan for change will put more money in the pockets of working people and our ironclad commitment to our robust fiscal rules has helped cut interest rates five times since the election.

"We're also driving down Government borrowing so that we can invest in better schools, hospitals and services for working families."