Editing James Callaghan (section)

===IMF loan===
Callaghan came to office at a troubled time for the British economy, which was still recovering from the [[1973–1975 recession|1973–75 global recession]], and was beset by double-digit [[inflation]], and rising unemployment. Within months of entering office, his government was [[1976 sterling crisis|faced with a financial crisis]], which caused the Chancellor [[Denis Healey]] to ask the [[International Monetary Fund]] (IMF) for a large loan of $3900 million in order to maintain the value of [[pound sterling|sterling]]. The IMF demanded large cuts in public spending in return for the loan, which caused consternation among Labour's supporters. The Cabinet was split on the issue, and the left of the party led by [[Tony Benn]] put forward an [[Alternative Economic Strategy]] as a proposed alternative to the loan, which involved [[protectionism]], but this option was ultimately rejected. After tough negotiations, the government was able to negotiate a reduction in the proposed public spending cuts from £5000 million to £1,500 million in the first year, and then £1000 million a year over the next two years. In the event, it turned out that the loan had not been necessary, as it was based on an overestimation of the [[Public Sector Borrowing Requirement]] by the [[HM Treasury|Treasury]]: The government only had to draw on half of the loan, and it was paid back in full by 1979. By 1978, the economic situation showed signs of improvement, with unemployment falling, and inflation falling to single digits. Healey was able to introduce an expansionary budget in April 1978.<ref name="Thorpe70s"/>

Callaghan was widely judged to have handled the IMF crisis skilfully, avoiding any resignations from the Cabinet, and negotiating much lower spending cuts than had been originally demanded.<ref name="Thorpe70s"/>{{sfn|Conroy|2006|p=100}}