Rachel Reeves has been urged to drastically cut public spending in order to avoid Britain needing a 1970s-style bailout.
The Chancellor was warned by leading economists this weekend that her looming tax rises risk a return to the high inflation and borrowing that forced a previous Labour government to borrow billions from the International Monetary Fund (IMF).
In another blow to the UK, manufacturers have been left reeling by the shock imposition of US import tariffs on more than 400 products that contain even tiny amounts of steel or aluminium, ranging from motorbikes and children’s high chairs to shampoo and condensed milk containers.
On Sunday night Ms Reeves was blamed for causing almost 89,000 job losses in the hospitality industry – 53 per cent of all job losses since the Budget – as a result of the National Insurance hikes she placed on employers at her first Budget.
Tory leader Kemi Badenoch led the calls for the Chancellor to urgently change course, writing online: ‘Economists warn we could be heading for a 1970s-style cliff edge, as more tax rises come this Autumn.
‘All because Labour’s only answer is spend more and tax more.
‘When will they realise, the only answer is to live within our means and cut spending.’
And senior Tory Dame Priti Patel added: ‘Britain is suffering from Labour’s corrosive economic policies.
‘Britain must reduce public spending and Labour must stop attacking employers, businesses and hard-pressed families across the country with their reckless tax and spend policies.’
Rachel Reeves (above) has been urged to drastically cut public spending in order to avoid Britain needing a 1970s-style bailout
Tory leader Kemi Badenoch (above) led the calls for the Chancellor to urgently change course
Dame Priti Patel (above) said Britain has ‘suffered from Labour’s corrosive economic policies’
Ms Reeves is widely expected to be plotting fresh tax rises in her autumn budget to fill a £50billion black hole in the public finances, with rumours that she has middle-class homeowners in her sights.
Official figures showed that the Government is raking in record amounts of taxes as a result of her NI raid, but spending is also soaring as a result of the pay rises handed to the public sector and a bloated benefits bill.
Borrowing costs have hit their highest level in decades amid investor jitters over her plans, making it even harder for her to balance the books.
Experts said the toxic combination risked a repeat of the crisis in 1976 when her predecessor Denis Healey was forced to go cap-in-hand to the IMF for a bailout because of surging debt and a falling pound.
Andrew Sentance, a former member of the Bank of England’s rate-setting Monetary Policy Committee, told the Sunday Telegraph: ‘Rachel Reeves is on course to deliver a Healey 1976-style crisis in late 2025 or 26.
The Chancellor has been warned by leading economists that her looming tax rises risk a return to borrowing billions from the International Monetary Fund (IMF)
‘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.’
And Prof Jagjit Chadha, until recently head of the National Institute for Economic and Social Research think-tank, said of the prospect of an IMF bailout: ‘I’m in a world in which I could imagine it 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.’
But HM Treasury dismissed fears of a 1970s-style debt crisis as ‘unfounded’.
A spokesman said: ‘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.’
