With debt growing faster than everywhere except Botswana, the chances of Britain needing an IMF bail-out climb by the day, says ALEX BRUMMER

Published: 22:39, 8 June 2026 | Updated: 22:50, 8 June 2026 Just as all eyes in Westminster were on Labour's dispiriting leadership struggle last month, an inspection team from the International Monetary Fund delivered a withering verdict on Britain's finances. The Washington-based agency warned UK Government debt is 'highly elevated' at £2.9trillion, or 94 per cent of total national output, and said Labour has run out of rope when it comes to increasing taxes to pay for its spend-and-borrowing addiction. Since then, matters have become graver still. This weekend, the former chief economist of the IMF Ken Rogoff, a chronicler of financial meltdowns, warned there was a more than 50 per cent chance that by 2030 Britain would be required to call in the IMF for 'technical support' – in other words, an emergency bail-out from the world's lender of last resort. The grim reality is that Chancellor Rachel Reeves has squeezed the pips of business, enterprise and the consumer so hard, and with such an addiction to growth- destroying taxation (up £75billion since taking office), the cupboard is now bare. Tax levels are so high that further increases will only yield diminishing revenues. Unless the next prime minister is willing to confront the ballooning scale of public spending as well as Britain's welfare and social security budget, the UK will face a catastrophic financial collapse. The interest rate bill on national debt has already reached £100billion a year and is heading even higher. IMF figures this week revealed Britain's debt over the last 25 years has grown faster than any other country bar Botswana. We are in the most enormous fix, and are now looking at a doom loop: The more we spend and borrow, the less faith the markets have in our ability to pay it back. Rachel Reeves' high tax and spending-and-borrowing addiction is the backdrop to the UK's crippling debt problem, which IMF experts warned brings a more than 50 per cent chance of needing an emergency bailout by 2030 The bond markets, which lend the Government so much money, therefore demand the highest interest rates – bond yields – among the Group of Seven richest countries. Which only makes the situation worse. History tells us that when cowardly governments refuse to deal decisively with acute and obvious problems, the value of government bonds and sterling is savaged. In such cases, only the IMF, backed by its biggest shareholder the US, is sufficiently powerful to enforce the necessary harsh discipline. As a young economic journalist, I reported over several months on the 1976 sterling crisis. The then-Labour government of Jim Callaghan and Denis Healey was forced to go cap in hand to the IMF and accept the most humiliating terms for loans designed to restore stability to the pound and to Britain's fiscal and monetary affairs. The sheer panic and national disgrace is seared in my memory. But I fear that over the five decades since then, memories have faded. Successive governments have failed to live within their means. And unless there is a radical change of direction – which looks ever less likely – electric-shock treatment may be needed. That treatment will be searingly harsh if it comes. Emergency measures insisted on by the IMF would require savage cuts in the size of the state, a bonfire of regulation and strict control over the printing of money and the supply of credit. But the tough medicine does at least work, if history is any guide. Some two decades ago, Europe's so-called Club Med nations – Greece, Spain and Italy – became economic basket-cases as a result of decades of overspending, the 2008 financial crisis and political fractures in the Eurozone. Greece's debt crisis was so bad the EU and IMF launched rescue packages in return for draconian budget cuts, reductions in benefits as well as pensions and tax increases. Tens of thousands of government jobs were axed, banks went bust, the pay of doctors and other public servants was slashed, and state assets privatised. The country's healthcare system went into meltdown as state-run hospitals were forced to slash budgets by 50 per cent. Greece's debt crisis spiraled out of control, but after gutting of the size of government, the country has become the pin-up of the European Union with steady growth, falling unemployment, restored banks and overseas investment  Yet today, Greece has become the pin-up of the European Union with a steady growth rate of close to 2.5 per cent a year, falling unemployment, restored banks and booming overseas investment. Italy was long regarded as a European political and economic lost cause, despite the prosperity found in its north. Under the stewardship of populist prime minister Giorgia Meloni, the country was forced by the European authorities to take tough decisions that had been avoided in the past in exchange for an EU rescue package. Government borrowing has been cut in half, the heavy hand of state ownership of large swathes of the economy eased, tax collection improved and growth (until the current Gulf imbroglio) restored. Similarly, in Argentina the radical populist Javier Milei has lifted one of the world's least stable economies out of bankruptcy by taking a brutal meat axe to government. The massive scale of Britain's budgetary difficulties is no fantasy. Britain's national finances have been savaged by successive shocks dating back to Labour's 2008 financial crisis, Russia's four-year war against Ukraine and the prolonged conflict in the Middle East and Persian Gulf. Instead of tightening the nation's collective belt, governments have sought to spend their way out of problems, spreading cash, particularly among the less well off in society, like confetti. As popular as state spending on welfare and trade union pay settlements may be in Labour's ranks, it has proved deeply poisonous for the nation's wellbeing. This at a time when the UK desperately needs to bolster its defence spending to confront the strategic threat and the depleted state of our Armed Forces and national security. And yet our socialist government shows no sign of confronting the issue. Nor is there any prospect of change under an even more Left-wing Andy Burnham administration. Quite the opposite. Burnham revealed his complete lack of understanding of business and economics when he declared last year that 'the country has to get beyond this thing of being in hock to the bond markets'. He did not exactly explain where Labour would go to borrow the money in their absence for his radical nationalisation plans. Andy Burnham revealed his complete lack of understanding of business and economics when he declared last year that 'the country has to get beyond this thing of being in hock to the bond markets'. He did not explain how Labour would fund his radical nationalisation plans Labour's head-in-the-sand approach over the size of the British state was never better illustrated than by the recent email released in the Mandelson files in which Work and Pensions Secretary Pat McFadden talked of his encounters with Labour backbenchers: 'The question I hear at every meeting is, "Who can we tax in order to pay benefits to others?"' For fear of upsetting these backbenchers, Sir Keir Starmer and company refuse to countenance vital cuts to our ballooning £400billion welfare budget. Instead, his government doubled down on extra spending when it lifted the two-child limit on benefits for larger families. What actually triggers a fiscal firestorm is difficult to predict. But the risks of one are growing by the day, even though the solutions to Britain's problems are there for everyone to see. A drastic reduction in the size and scale of the welfare state is urgently required. Monetary policy must be kept tight to ensure the scourge of inflation is eliminated. Fat-cat pensions for government workers must be eliminated and the triple lock on state pensions reformed. The likelihood of Labour implementing any of this is negligible. Which means that Britain could soon be staring bankruptcy – and an IMF rescue package – in the face. The comments below have not been moderated. The views expressed in the contents above are those of our users and do not necessarily reflect the views of MailOnline. By posting your comment you agree to our house rules. Do you want to automatically post your MailOnline comments to your Facebook Timeline? Your comment will be posted to MailOnline as usual. Do you want to automatically post your MailOnline comments to your Facebook Timeline? Your comment will be posted to MailOnline as usual We will automatically post your comment and a link to the news story to your Facebook timeline at the same time it is posted on MailOnline. 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