Britain risks bankruptcy and a humiliating bailout by the International Monetary Fund (IMF) because of Gordon Brown's borrowing, David Cameron said yesterday. With official confirmation that the economy has entered recession expected today, the Tory leader delivered his strongest warning yet: "If we continue on Labour's path of fiscal irresponsibility, at some point – and it could be very soon – the money will simply run out."The Tories are hitting Labour pretty hard with punches many would view as being below the belt. Late last year, Shadow Chancellor George Osborne warned that Labour's actions risked a "run on the pound." Although I believe that Britain is in dire straits, the Tory duo is certainly fanning the flames in a manner without historical precedent. Rough-and-tumble politics does not get any rougher than this. Are the Conservatives making things even worse for the electorate to hasten the inevitable? Unless something dramatic happens, I am convinced Labour will lose during the next round of elections. However, their statements may come back to haunt Cameron & Co. if things do not improve noticeably on their watch.
His speech to the Demos think-tank in London raised the spectre of the 1976 bailout, when James Callaghan's Labour government was forced to make deep public spending cuts in return for a £2.3bn loan from the IMF. His remarks are bound to provoke Labour accusations that he is running the country down. Mr Cameron insisted he was not predicting a date by which the Government would "end up back at the IMF". But he added: "What I am saying is that we are running the risk of those things happening and those are risks that no government should responsibly run."
The Tory leader added: "We are borrowing, according to the Government's current estimates, 8 per cent of our GDP in the next financial year. That is the same percentage that Denis Healey [the then chancellor] was borrowing when he went to the IMF in 1976."
Britain currently maintains a triple-A credit rating. Can Britain go quickly into such dire straits that a bailout becomes necessary? News of a larger-than-expected contraction in GDP certainly doesn't help, though I remain skeptical.