Much like Life on Mars, Liam Halligan’s writing seems trapped in
economic limbo, endlessly replaying the same “Remember 1976” column until it functions almost as a fossil record of Britain’s post-Bretton Woods confusion. The names change. The geopolitical crises change. The inflation scare changes. But the framework remains untouched: governments “borrow money” from markets, markets may lose confidence, and Britain must constantly reassure “international creditors” or face another 1976-style humiliation.

The problem is that the historical analogy itself is badly misunderstood.

The 1976 IMF crisis was not a demonstration that Britain had “run out of money” in its own currency. Nor was it proof that bond markets ultimately dictate fiscal policy to sovereign governments operating floating exchange rates.

It was, in large part, the consequence of British policymakers still behaving as though the Bretton Woods system existed after it had already collapsed.

The post-war order had depended upon managed exchange rates anchored ultimately to the dollar. Even after Nixon ended gold convertibility in 1971, much of the British establishment remained psychologically committed to defending sterling externally. Policymakers treated exchange-rate weakness as a national emergency requiring international discipline and foreign support.

That mindset led the Labour government into a series of increasingly desperate efforts to stabilise sterling through orthodox credibility measures and foreign currency borrowing, including substantial dollar-denominated support operations.

Once a state accumulates obligations in a currency it does not issue, an actual financing constraint emerges. You now need access to foreign exchange. The IMF episode was therefore primarily a foreign exchange crisis tied to external dollar liabilities and exchange-rate management, not evidence that Britain could not spend pounds.

That distinction matters enormously.

Halligan presents 1976 as though it were an eternal lesson about fiscal irresponsibility. But the more accurate lesson is almost the reverse: the danger lay in trying to preserve an obsolete exchange-rate regime and subordinating domestic policy to external financial approval.

Britain today operates under a fundamentally different monetary system. Sterling floats. The government spends through the Bank of England. Public liabilities are almost exclusively denominated in sterling. The UK does not promise convertibility into gold or dollars at fixed rates. It does not require foreign currency reserves to make domestic sterling payments.

Yet Halligan still writes as though Denis Healey is waiting at Heathrow clutching an IMF application for US dollars.

The irony is that his own article begins by describing a perfectly recognisable real-resource shock. War in the Gulf disrupts hydrocarbons, shipping routes and fertiliser supplies. Energy prices rise. Industrial costs rise. Supply chains tighten. Inflation follows.

This is not mysterious. Nor is it primarily financial.

You cannot solve an oil shock by reassuring bond traders. You cannot repair damaged infrastructure through fiscal austerity. If inflation emerges because physical energy supplies are disrupted, then the constraint is material and logistical before it is monetary.

But establishment commentary almost always performs the same manoeuvre. Real economic disruption is immediately reframed as a morality play about government borrowing.

Bond yields rise and suddenly the old liturgy resumes: markets are alarmed, Labour has “lurched Left”, investors are “calling time”, and Britain risks “another 1976”.

One senses less analysis here than institutional reflex.

For decades Britain’s political and media classes have treated financial markets as the ultimate arbiters of democratic legitimacy. Governments may govern only within parameters approved by creditors. Fiscal policy becomes an exercise in market signalling. Entire political programmes are ruled out in advance by invoking “confidence”.

It is as though the Parliament Act has been quietly superseded, and the veto over money bills has re-emerged in the form of an informal chamber of financial markets.

Yet the operational realities tell a rather different story.

The British state does not obtain sterling from bond markets before it can spend. Government spending credits bank accounts and, via Bank of England operations, increases settlement balances in the banking system. Gilt issuance then changes the composition of those balances, exchanging reserves for interest-bearing securities. This is a monetary operation, not a household financing exercise.

Even the idea that long-term gilt yields represent an unavoidable market verdict is questionable. The maturity structure of government liabilities is itself a policy choice. Britain could issue shorter-term debt. It could rely more heavily on reserve balances. It could stop issuing long-duration gilts altogether if it wished.

Japan has spent decades quietly demonstrating that a sovereign currency issuer does not mechanically become hostage to bond vigilantes, despite endless predictions to the contrary.

But acknowledging this would undermine the deeper ideological function of Halligan’s framework.

Because the language of “markets calling time” is ultimately about discipline. It narrows democratic possibility by presenting contingent institutional arrangements as immutable laws of economics. It tells voters that public priorities must always remain subordinate to financial sentiment.

And after thirty years of this argument, the results are difficult to celebrate.

Britain systematically underinvested in infrastructure, housing, transport, energy resilience and productive capacity while obsessing over fiscal optics and debt ratios. Public services were squeezed in the name of “credibility”. Monetary policy inflated asset markets while productive investment stagnated.

Now genuine supply shocks arrive and the same commentariat offers the same prescription it always has: reassure markets, cut spending, restore confidence.

The strange melancholy of Halligan’s article is that it belongs intellectually to a world that no longer exists. Its assumptions were formed in the dying years of Bretton Woods and preserved through decades of City orthodoxy. The language remains confident, but it increasingly feels like ritual repetition rather than explanation.

Britain left the monetary world of 1976 a long time ago.

Much of its economic journalism never did.

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