The Rest Is History - 665. Britain in the 70s: The Bailout from Hell (Part 4)

Episode Date: April 29, 2026

How did the new British Prime Minister, Jim Callaghan, intend to keep Britain from bankruptcy in 1976? What extreme new step might have seen riots in the streets? And, would labour survive the greatest financial scandal in British history? Join Tom and Dominic as they reach the epic conclusion of their dramatic series on the most uproarious years of the 1970s in Britain, including the high point of the crisis, and the rise of punk. You’ve heard the story…now see it. Unlock the full History in Photos series at http://therestishistory.com _______ Join The Rest Is History Club: Unlock the full experience of the show – with exclusive bonus episodes, ad-free listening, early access to every series and live show tickets, a members-only newsletter, discounted books from the show, and access to our private Discord chatroom. Sign up directly at the⁠restishistory.com⁠ To read our new newsletter, sign up at: therestishistory.com/newsletters Advertise with us: [e-mail] _______ Twitter: @TheRestHistory @holland_tom @dcsandbrook Video Editors: Jack Meek, Harry Swan + Adam Thornton Social Producer: Harry Balden Producers: Tabby Syrett & Aaliyah Akude  Senior Producer: Callum Hill Executive Producer: Dom Johnson Learn more about your ad choices. Visit podcastchoices.com/adchoices

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Post. Taste. View and enjoy. Via Rail, love the way. They are punk rockers. The new craze, they tell me. They're heroes. Not the nice, clean rolling stones.

You see, they're as drunk as I am. They're clean by comparison. They're a group called the sex pistols, and I am surrounded by all of them. Now, I want to know one thing. Beethoven, Mozart, Bach and Brabts. They're all heroes of ours, isn't they? Really? What? What were you saying, sir? Oh, they're wonderful people.

Are they? Oh, yes. They really turn us on. Well, suppose they turn other people on. That's just they're tough shit. It's what? Nothing. A rude word. Next question. No, no. What was the rude word? Shit. Was it really? Good heavens, you frightened me to death. So that was an archive recording of the appearance by the punk rockers, the sex pistols, on the early evening TV show today, which went out

only in London, actually, not nationally, just before 7pm on the evening of the 1st of December 1976. And the presenter as voiced by Dominic was Bill Grundy. I mean, the poor man, he became completely defined by that one interview, didn't they? It's basically the only thing he's remembered for now. And he completely lost control of the interview. And for some inexplicable reason, he just kept kind of goading them into coming out with more and more foul language. I suppose the big question is, was he actually drunk as he said he was at the start of the show? It doesn't sound massively drunk, but maybe he was good at hiding it. Well, we discussed how I should do that beforehand, didn't we?

And you said I should do it slurring my words, obviously drunk. But actually, when you watch the clip, he isn't obviously drunk, I wouldn't say? I mean, it's just inexplicable why he goes them into more and more swearing, and we will come to this, weren't we? I mean, Sex Pistols thought he was drunk when they were asked about it later. They did, yeah. But he got through the rest of the program, okay, this is just at the very end of the program. And this is the moment when the Sex Pistols kind of... blowed on to national consciousness.

Yes, it is. So this is 1976, and the next day, they were on the front pages of all the newspapers, the great headline in the mirror, I think it is, the filth and the fury. And from that moment on, they became household names. It's a rocker-row spindle. So I would say that if you look back at the previous 20 years, only the Beatles and the Rolling Stones had matched that level of fame or notoriety. And here's the funny thing.

At this point, the Sex Pistols had not released a single record. It's Malcolm McLaren's masterpiece, isn't it? Yeah, that they are a media phenomenon in a way before they're a musical phenomenon. Anyway, we will come on to this interview later in the show, and maybe Tom will play another bit of that excellent archive footage. Because Susie Sue, as in The Banshees, is also there. I think it's the first TV appearance. I'm looking forward to hearing her.

Yeah. So what's so interesting about this is that this was broadcast on the very evening that one of the most humiliating political and economic dramas in modern British history was coming to a climax. So it's an intersection point between two different but arguably related things. So the first is the economic crisis that we've been tracing through this series. The pound and free fall, Britain staring into the economic abyss and the new Prime Minister, Jim Callaghan. he has been forced to go to the International Monetary Fund for a humiliating record bailout of almost $4 billion. So his cabinet is divided, and this very evening is the moment of decision.

And the second thing is that against the backdrop of the economic crisis, the inflation, the surge in youth unemployment, the sense of national failure and national breakdown, this new kind of music has come out of Britain's art colleges and pubs and clubs. It was initially called by the press Dole Cue. rock, better known as punk, and embodied by John Leiden or Johnny Rotten and his fellow sex pistols. And this is the evening that defines them forever as the ultimate 1970s folk devils. And so this is the story of today's episode, the intersection of these two stories, obviously

the primary focus being on the political one, and it's the climax of our series on 1975 and 1976. And we'll start with the main character in the drama, and now we introduced last time, top British Prime Minister, Jim Callaghan. So last time, Callaghan won the Labour leadership in the last episode, but we didn't really dig into his personality. And now at last, after 700 episodes of the rest is history or whatever it is, we finally get to talk about one of the undisputed Great Britons, and that is Sonny Jim.

So he was born Leonard James Callaghan in Portsmouth in 1912, in a working class house in the shadow of the Docks, the Royal Navy Docks. His father was a chief petty officer who died when Callahan was nine. Callahan was called Len, but when he became an adult, he renamed himself James, because James was his father's name. So it's a little sort of nod to his late father, which I think is very nice. It wasn't that he thought that James would he'd be likely to become Prime Minister? I don't think so, because Len Murray at the same time became head of the TUC.

Len is a union name. I think James is the Prime Minister name. I think he would still have been Prime Minister if he was called Len. So he is shaped by his father's background to some extent. So the big thing he gets from his father is his love of the Royal Navy. And we admire that, don't we, Tom? We respect that. Very much.

He adores the Navy. He adores its service, its duty, its patriotism, comradeship. Later on in life, he collects naval prints. Oh, like Keith Richards. Yes, exactly. He would have bonded with Keith Richards over Naval Prince. He sees the Navy, I think, as a model for the Labour Party and indeed for Britain. And then what he gets from his mother is his back.

Baptist faith. So his mother is a very strict Baptist. He went to Sunday school every week. He learned passages of the Bible and he was very comfortable with kind of biblical references. Actually, it's something he has in common with Margaret Thatcher. I was just thinking that. I was thinking how many of the leading politicians in this generation and period come from low church backgrounds and how the collapse of kind of low church backgrounds in politics, I think is a bit of a tragedy. I totally agree with you. It gives people a sort of moral core, doesn't it? And not just a moral core. It gives them a language, I think. Yeah, a sensibility. Exactly, all of that kind of thing, which Callaghan and Thatcher in their different ways, completely embody. And it gives him actually that, the Baptist

stuff and the Royal Navy gives him this profound cultural conservatism, which we'll talk about in a second. He left Portsmouth Northern secondary school when he was 17. He became a tax clerk, then trade union official. He served in the East Indies fleet in the Second World War. He became a very young Labour MP in 1945. And then he was a junior minister. at the age of 35, and through sheer sort of doggedness and resilience, he made it to the top. He was a useless chancellor in the 1960s under Harold Wilson. But then Wilson gave him another chance as Home Secretary. He was very sort of solid, I think.

He loved the police, so he sort of, home secretary suited him. Late 60s, is the period when the kind of permissive society is. Yeah, but he hates the permissive society, and the people love that. Yeah. He's very much into policemen cracking. students over the head. Or giving them a clip around the ear. I think that's what he would say.

Give them a clip around the year and tell them to get their hair cut. And the Tom Holland tendency shake their head sadly at that, but the Dominic Sam Brooks cheer and applaud and tears of pride spring to their eyes. So I think that's very much his vibe. And then he was Foreign Secretary in the early 70s. In his politics, he is the quintessential embodiment of the old Labour right. So the right of the party, but sort of backwards. looking, old-fashioned, moderate, pragmatic, patriotic.

Patriotic is a key word, isn't it? The friend of the British working man, that's his thing. So he was the parliamentary spokesman for the Police Federation, and that really sums him up. He's a big guy, he's breezy, as we said, by law, you have to call him avuncular. He has this bruiser reputation, but he has flashes of self-doubt, because as we learned last time, The fact that he didn't go to university and that he's not an intellectual weighs quite heavily on him, his great rival was Roy Jenkins who absolutely despised him. Bailey, old man.

Roy Jenkins said later, there is no case I can think of in history where a man combines such a powerful political personality with so little intelligence. But only one man in British history, as we said last time, has been Chancellor, Home Secretary, Foreign Secretary and Prime Minister. And that man was not Roy Jenkins. it was Jim Callahan. However, Jim Callahan did not become European Commissioner. Yeah, he wouldn't have wanted to, I think. It's not really his vibe.

Yeah, I'm just saying, I'm just sticking out for Woy. Sometimes people say of Callahan, I think not unreasonably, he was the last true conservative to be Prime Minister, small C conservative. So his likes are rugby, the Labour Party, the trade unions, and like Harold Wilson, he loves the Boy Scouts. Did he wear tight trousers? I can't imagine him in tight trousers.

Never. He wore long, baggy, high-wasted trousers. He hates it when his lefty activists criticise the police or the armed forces or the queen. The queen, he loves the queen. He's a teetotler. He hates any hint of permissiveness or sexual misbehavior. He and his wife Audrey met when they were 17 and 16 respectively, and they're incredibly devoted. When he was prime minister, he told his staff, there's a lovely bit in Sir Bernard Donahue carried on working for Callaghan after Wilson left, so we get these fantastic diaries. And Callahan says at one point, he's embarrassed by nudity on TV or on the stage. So whenever he sees nudity on TV, he has to turn it off, even though he's in his 60s.

He said, he was completely unaware of homosexuality until well into adult life. This is a man who served in the Navy. Navy, exactly. He only found out about it when he became an MP. And he was amazed when some of his aide said to him, Some of you all are MPs are gay. He was like, what? I don't believe that.

And then at this point, in the same conversation, they're all sitting around, it's kind of in a circle, and one of the MPs tells the story about a very camp cook that he knew in the Royal Navy. Callahan is stunned by this. And he says, in the Navy, I never knew anybody like that when I was in the Navy. And they're all kind of smirking at this. They can't believe that he would be so innocent. And then he says to them brilliantly,

you won't tell these stories in front of Audrey, will you? She would be very shocked. So there's a sort of Puritanism to the Callagans. And the most common comparison when he becomes Prime Minister is with another absolutely top person. So the champion of our first historical Love Island, 1920s and 1930s Prime Minister, Stanley Baldwin. Everybody basically said, oh, it's like Stanley Baldwin's come back from the dead. Because although they're in different parties, they're both small sea conservatives, they're both pragmatic, they're both kind of good, humid, they're both nostalgic, and they're both really, really good. communicators.

And like Baldwin, Callaghan cultivates this yeoman image. So he bought a farm in East Sussex, and he would go and slightly ostentatiously spend his weekends inspecting his cows and trudging the fields under a sort of tweed hat. It's a bit like Mariantoinette in a very real sense. That's not a comparison. No. Improbable. That's a terrible comparison.

Because I think he's John Bull. That's exactly what he is. He's big, he's heavy, he's kind of slightly slow, he's very solid, he's very respectable. As PM, he wears these pinstriped dark suits and he has these colossal glasses. Oh yeah, we mentioned them in the previous episode. People love it. So actually, when you look at the opinion polls, he's consistently an extremely popular prime minister. And right to the end, he is far more popular than Margaret Thatcher.

Basically, if the 1979 election had been, you know, if you'd be able to mix and match what the British people actually wanted in 1970s. was the Conservatives to Wimba with Callahan as Prime Minister. I mean, would he have made a good Conservative Prime Minister? He's a monetarist. He doesn't like gay people. I don't think he dislikes gay people. He's just not aware they exist. He would have made a good frontman for a sort of national government.

He'd made a brilliant front man for a national government. But that said, he loves the Labour Party. I don't want to dismiss that element. He really loves the Labour Party and the British kind of working classes. More than Harold Wilson had done? Yeah, possibly. He's a, you know, people when they watch him out on the start, They say, God, he's so great with the public.

And I think it's partly his size. You know, he's a big bloke. And so people respect him and people are slightly frightened of him. And he uses that to his advantage. Anyway, on paper, his government isn't massively different from Wilson's. So he keeps Dennis Healy as Chancellor. We talked a bit about Healy last time. He's going to play a big part today.

Remember his eyebrows. He was the landing officer, Anzio, and he's got a hinterland. He's the only person in history to have a cultural and intellectual hinterland. And he likes effing and blinding and lesser mortals. So during all this period, you have to imagine Dennis Healy. He's getting increasingly fatter with every week that passes because he's basically trapped behind his desk the whole time, desperately trying to cobble together money.

He's incredibly red-faced. He's incredibly puffy. He looks like he's going to explode at any moment, but he's doing an amazing job. And actually, he and Callaghan worked brilliant together. It's one of the great partnerships between a prime minister and a chancellor, because usually prime ministers and chancellors end up hating each other and massively falling out and they don't.

And then there's a third person in their kind of training. Unverett, who is Michael Foot, who we talked about last time again, the radical pamphleteer and fan of Jonathan Swift and Byron and co. Foot is on the left, but basically Callahan brings him into the tent and says, will you be the leader of the House of Commons? So will he be in charge of keeping the Labour Party together? And Foote is absolutely brilliant at it. He's completely loyal to Callahan, even though he doesn't agree with him. He's really loyal to him. Callahan later described him as a true comrade during all this time. Callahan contrasted him. With who, Dominic? With our old friend Tony Ben. And Callahan described Tony Ben not as a true

corrade, but as, and I quote, a canting hypocrite. I mean, people think I'm very hard on Tony Ben, but actually I find Tony Ben immensely amusing. So I'm just quoting this in a good humoured, kind-hearted spirits rather than a condemnatory one. Now, Callahan's less famous than Wilson, but almost all of their ministers thought that Callahan was a better prime minister, that he was more decisive. He didn't take any nonsense. He was firm but fair. quite wily as well, isn't he? Yeah, he is quite wily. He conceals his whiliness beneath a kind of bluff exterior. Yeah, exactly. So in 1978, one of his young ministers called Bill Rogers gave an off-the-record interview with the journalist Hugo Young, and he said, Callaghan stands for stability, a stable style and a stable government. What he cannot abide is the long-haired intellectual on all his works.

To be fair, Michael Foote is a long-haired intellectual. He is, but he's also a true comrade and not a canting hypocrite. I think that's the key thing. If you're a long-haired intellectual, but you're not a counting hypocrite, then he'll... Then you're right, yeah. If you basically bend the knee and do Jim's will, then he will tolerate you. And actually, even the Tories, at the time in the 1970s, thought that he was good. So the future Thatcher minister, Peter Walker, said publicly in 1977, we have a prime minister who is good on television, who looks like Stanley Baldwin, who lives like Stanley Baldwin, and Stanley Baldwin, with the vote of the Labour Party

and North Sea Oil is a very formidable... opponent. I mean, he lives like Stanley Bullitt. I can't imagine James Callahan writing pornography. The key variable there is that he didn't go to Harrow, because Stanley Baldwin did that at Harrow. That's well remembered. Also, Stanley Baldwin gave a tenth of his fortune to pay off the national debt. Let's remember that. And married a cricketer. Yeah, married an excellent cricketer. Even Margaret Thatcher had warm words for Jim. She said he was a superb politician and in other circumstances would have been a successful prime minister. And what circumstances are those, Dominic? Well, you see, that's a very nice link,

isn't it? I wrote that as a segue into the circumstances. So first of all, he's got no parliamentary majority. We described last time. Labor have no majority in the House of Commons. So every vote now is knife edge. I mean, literally life or death. They are bringing people in. These were very famous scenes in the late 70s. They would bring elderly MPs in on ambulances to vote, and sometimes they would cheat. So there's one famous example where they basically, what they would often do, is you do a thing called pairing, where you would basically, there's some 90-year-old Labor MP who's dying, there's a 90-year-old Tory MP who's dying, and you'd say, well, they can't see each other out, and neither of them have to come in and vote. And you'd agree that beforehand.

And then on one occasion, Labor completely shamed themselves, going back on their word, and bringing in this bloke on a trolley or whatever to vote. And that provoked a massive fight, like a physical brawl where people are like piling into each other. Of course, this is pre-television. And this was the occasion in which a young Michael Heseltine seized the mace and kind of whirled it around his head and made it spectacle of himself and then was called Tarzan forever because of that. It's the theme of a wonderful play by James Graham called This House. Really excellent. Amazing play. That's one circumstance and the other circumstance is the economic legacy. Inflation has actually now started to fall,

but it is still about 19%. And the bigger problem is that as we described last time, the international markets have now lost confidence in Britain's ability to run its economy, not least thanks to its massive borrowing. So when Callaghan has his first meeting with Dennis Healy, Healy says to him, look, the Bank of England have just spent $2 billion in currency reserves. That's a third of their entire reserves propping up the value of sterling. And this can't continue. And the next person who comes in to see him is the governor of the Bank of England.

It's called Gordon Richardson. He says to Callaghan, you know, we're still borrowing far too much. and this pressure from the markets is not going to ease anytime soon. There is a very good chance that we are going to run out of money. And when we do that, we will have to ask the International Monetary Fund, the IMF, for a loan. Now, the IMF had been set up in 1945. It's one of the great institutions of the New World Order. By John Maynard Keynes, who is British, so it's massively embarrassing.

Oh, the International Monetary Fund, some of their staff are British, some of their key figures are British. that the fact that Britain, of all people, will have to crawl to them. I think the technical term that you, again, by under UN regulations, you have to use for the IMF crisis, Britain goes cap in hand to the IMF. Because loans are meant to be given to bankrupt third world countries. Yes, exactly. A country like Britain, formerly the world's banker, should not be going to the IMF begging for cash. Now, a problem is the key contributors to the IMF are the Americans.

and politics in America at this point is well to the right. The consensus in Washington is well to the right of what it is in London. The Americans will undoubtedly ask for very stringent terms, probably cuts. They'll say you can have the money, but you have to sort your economy out. And for a Labour Prime Minister, this is obviously a nightmare. This is a massive embarrassment because there's nothing more likely to inflame your own activists than you bending the need to the forces of American international capitalism. Yeah.

And whenever people would say to Dennis Healy, Labor people would say to Dennis Healy, sort of Zach Pallansky star, they'd say, why are you taking orders from the money markets? Dennis Healy would say, well, I mean, if we don't want to take orders in the money markets, we just shouldn't borrow money from them. And in that case, we should manage our finances a bit better. You know, what are we going to do about it? We shouldn't have got into this mess in the first place. Well, when you put it like that.

Well, I mean, I agree with him, but it doesn't go down well with some of his own enthusiasts. Anyway, it takes two months for all this pressure to build, and by early June 76 it's really on. Now remember, there was a point in the last episode, the beginning of the week, when the pound was at $2.23. On the third of June, it is down to $1.70. I mean, that is an extraordinary plunge. It's lost a considerable fraction of its value, and it is still falling. And the Bank of England say to Healy, we've run out of reserves to defend it. You've got to talk to the IMF. He needs $5 billion to defend the pound. And he can probably get that informally

without having the humiliation of a proper application. So he talks to the IMF and they say, look, we've cobbled together some of the money, most of it from the US Federal Reserve. We can lend you the money, but there are conditions. The chairman of the Federal Reserve, Guy good Arthur Burns, describes himself as a Neanderthal Conservative,

and he wants Britain's lefty government to learn a lesson in discipline. And then the US Treasury Secretary, Gerald Ford's Treasury Secretary, is a guy called Bill Simon. He's even more hawkish. In his memoirs, he said, I was keen to help a US ally, but I'd no desire to play host to a parasite. That's harsh. He hates Britain. And Healy said of Bill Simon, he was far to the right of Genghis Khan.

Displaying his hinterland there. Yeah, very good. A witty historical illusion. His historical knowledge. Yeah. You wouldn't get that from politicians today, would you? Such an obscure reference from Dennis Healy. So anyway, the deal is this.

Britain will get its $5 billion, but it has six months to pay it back. And if Healy can't pay it back, or if he needs more, he will have to make a formal humiliating application. That would mean opening Britain's books to the IMF. IMF inspectors, basically auditors, would have to fly into London to look at our books and then they would tell us what cuts we had to do in order to get the money. I mean, that would be excruciating, excruciatingly embarrassing.

And obviously people want to avoid that. Anyway, for now he's got this $5 billion to tide him over. We're into the summer. The temperature is literally rising because this is the record-breaking summer of 1976. You surely must remember this. I do. Do you have amusing anecdotes? We went camping outside Porlock, our second cousins,

who we'd never met, came to meet us. They turned up, we didn't know who they were, and my brother threw a load of dry horse dung into their hair. Brilliant a story, and it reflects so well on your brother. Even then he liked war. Yeah, he did. Yes, you can take the boy out of that pit where they do the We Have Ways Festival, but you can't take the pits out of the boy.

So in those days, they used Fahrenheit, so it was 90 degrees day after day. There was no rain, there was a massive drought. The trains kept breaking down. The roads were literally melting because they were using the wrong tarmac or whatever. I know you love Star Wars, Tom. This is the point at which George Lucas and Co. were filming Star Wars at Elstree,

and it was so hot that the electricians in the gantry fainted from heat exhaustion. What about the poor bloke and the tubacca? Peter Mayhew, he collapsed with dehydration while they were filming. But the green cross coat guy, he was all right, even though he's wearing black. Darth Vader. David Prowse. Didn't you meet him or something?

I did in Salisbury Library. he came in. He came gliding in or then he said, hello boys and girls. It was not what we were expecting. No, not at all. So all that summer, as the heat is rising, Calhans ministers are arguing ferociously about the road ahead. On the one hand, Healy says, we're going to have to make these cuts. We're going to have to make them first before the IMF get here.

Basically, if we don't make them to appease the markets, the IMF will make them for us. And Healy wants to cut spending by more than a billion pounds, is basically two and a half percent of everybody's budget. Now, a lot of people don't agree, and they are led by our old friend Tony Ben. Are they using the word austerity at this point? Or is that a slogan of a later age? They're not using it. I think they might use it in passing every now and again, but they don't use it quite as much as would be used in the 2010s. It's not as common. But it's basically the same situation, isn't it? It's not a dissimilar situation. Now, Tony Ben says, we don't need to make any cuts at all. He has another idea, which was called

the alternative economic strategy with capital letters. And this was the cherished dream of the Labour left for about 15 years or so. And what this was was like capitalism is obviously terrible. Let's have a siege economy. We'll put up protectionist Trumpian tariffs. We'll have state controls. Stop British money going out. Stop foreign goods coming in.

The state should take over businesses and we should force those businesses not taken over to sign planning agreements with the government. I mean, if that sounds like a parody, I'll quote Tony Benn himself, a real labour policy of shaving jobs, import control, control of the banks and insurance companies, control of export, of capital, higher taxation of the rich, and Britain leaving the common market. Because of course this would be incompatible with European membership. When they argue about this, Dennis Healy says this is absolutely bonkers. This would destroy people's living standards. And Tony Ben says to him, no, this is the patriotic alternative to surrendering to international

capitalism. We should fight for our own people. The British establishment is now infected with the same spirit which afflicted France in 1940, the Vichy spirit of complete capitulation and defeatism. Of course, it's only what, what is it, 35 years since Vichy? But also since Haley had been storming the beaches at Antio. So Haley is absolutely outraged by this. Healy had fought. Tony Ben had been in the RF but didn't see any action.

And Tony Ben describes in his diary as he says, Dennis sat there, Scarlet. He always blushes when he's in difficulty. I don't think he's in difficulty. Hewereth. Puse with rage. But actually, the cabinet agreed to support Healy. Fine, we'll cut a billion pounds in spending.

The question is, will it be enough? So, we come to late August, which is the holiday season. Jim Callaghan has his holiday on his Sussex farm bringing in the harvest, which is Thomas Hardy's idea of fun. So that's what he's doing. Dennis Healy's idea of fun is James Boswell and Dr. Johnson's idea of fun. Oh, going to Scotland? He goes on a Scottish tour with his wife.

They drive all the way up to the Isle of Sky, and then they end up in Ullapal, which is in the sort of far northwest of Scotland. And I imagine he's reading a bit of Boswell, a bit of Burns, a bit of Scott with his hinterland. He's got the Russians with him. He's probably got some Balzac, and he's very performatively piling them up at the breakfast table. Anyway, they get to this hotel at Ullupal on the key.

They go to bed, Haley and Edna, his wife. And late at night, there's a call and he goes downstairs and it's a special branch. And they said there's an IRA death threat against you. We're sending agents. He says, fine. So he goes back upstairs to bed. Phone rings again. He goes downstairs.

And it's the treasury this time. They say, we've got terrible news. The pound has been tanking. It's been a dreadful day. You're going to have to come back to London or something. Fine. He goes back upstairs to bed. Phone rings again.

He goes down. It's the Bank of England. Let's say we want permission to spend 150 million pounds to defend the pound. Yeah, fine. And by the time he gets back to London, the news has got worse. The publicity for Britain is terrible. So on the 3rd of September, more than 20,000 British Leyland car workers. We haven't really talked about car strikes.

Or British Leyland? In this series, I think people should just imagine that all this time, there have been constant car strikes, and the major and faulty towers has been getting very cross about them. As Red Robbo turned up? Red Robbo is the Union Convees. at Longbridge at the giant car plant in Birmingham. Do you know who loved Red Robbo?

It was the two Ronnie's. They couldn't get enough of car strikes at British Leyland. Yeah, I mean, I've written a whole chapter about Red Robbo and Car Strikes at British Leyland, and I'm very happy to do. I don't feel that that would be an episode for our overseas listeners, frankly. We can indulge ourselves. To give you a little soupsaint, a little taste of what that chapter might involve, the 20,000 car workers have walked out because of a demarcation.

discussion about who is responsible, and I quote, for pressing the buttons on a new control panel. And this is the kind of thing about which, you know, tens of thousands of people would go out and strike and millions and millions of pounds would be lost. And this is the 11th major strike at Longbridge in six months, which gives you a flavour of the efficiency and the ruthlessness of the British car industry. So that was on what? Was that the third of September? On the 7th of September, Labor's National Executive votes for the government to nationalize the four biggest banks. Now obviously the government are going to ignore this, but this again doesn't play well with Britain's creditors. You say obviously, if Labour Party just voted for it, why aren't they doing it?

Well, Tony Ben joins us now on the rest of its history. This is exactly what Tony Ben would say. Tony Ben would say the party has just told you to nationalize the four biggest banks. You're in government. You know, you should be doing the bidding of the party. Why are you ignoring the party? And James Callaghan and Dennis Healy would say, I don't care what the party says. We'll do what we're like. That's mad. And this was a constant problem for the Labour Party, and it reaches ahead in the early 1980s when basically Ben and the activists launch a revolution against their own leadership and seize control of the party machinery from them, effectively, at the Labour Party Conference. And they said, not unreasonably, we keep voting for these things, and you just keep ignoring it, and ripping up the manifesto and doing capitalist things.

Callaghan would say, well, the reason we do that is because your ideas are mad. and this is probably not a recipe for harmony with inside, you know, a major political party. Anyway, not surprisingly, the markets are losing faith in the government's ability to govern. So the Bank of England spends another 175 million pounds in an hour on the 8th of September, another 50 million pounds in 10 minutes on the 9th, and the pound keeps on falling. And on Monday, the 27th of September, it hits $1.63, its lowest level yet. Now, on the same day, Monday the 27th, the Labour Conference opens in Blackpool. You can well imagine what a happy occasion that's going to be, given what's just happened.

The heat wave is over. It's absolutely pouring with rain. Because they had appointed a minister for drought, hadn't they? And then it immediately started bucketing down. Yeah. They appointed a minister for drought, and he did a rain dance, and then immediately it started. And shared his bath with his wife, didn't he? Yes, he encouraged people to save water.

exactly. So they all arrive in, they've been incredibly hot and sunburned and parched. And they arrive in Blackpool, which I know you love Blackpool. I'm not a massive fan, frankly. It's pouring with rain and they're all really damp and miserable. The activists are furious with the government. So speaker after speaker gets up and denounces Dennis Heed's cuts and says, we want tariffs immediately, we want protectionism, we want nationalization of the banks, who wants all this. Bernard Donahue, who's gone up with Callaghan, writes in his diary. It was really terrible. Everybody was depressed. Jim said to me it was worse than ever before. But Tony Ben is in his pomp. He loves it. He says to the conference, we are paying the price for 20 years in

which we've played down our criticism of capitalism. It's time to fight back against the blunt and inhuman force of the market economy. And people are sobbing with joy. Yay, brilliant. Yeah, brilliant. Love it. On day two of the conference, Callahan gives his leader's speech, his first as prime minister. And this is actually one of those few speeches in modern British history that's really consequential and important. He was written by his son-in-law, Peter Jay, who was the economics editor of the Times, and was a convert to monetarism. And it's a celebrated speech, and I think one of the bravest speeches ever given by a British party leader, because Callahan gets up and he says to his party, his own party, you are totally wrong. Like we have been completely wrong. He says, and I quote, for too long we've been living on borrowed time, for too long, for too

long this country, all of us, yes, this conference too, has been ready to settle for borrowing money abroad to maintain our standards of life instead of grappling with the fundamental problem of British industry. And then he goes on to say, the cozy world of the post-war consensus has gone. We used to think that you could spend your way out of a recession and increase unemployment by cutting taxes and boosting government spending. I tell you in all candor that that option no longer exists. And insofar as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step. In other words, what we've been doing is wrong. And it didn't work

and it's been inflationary and Keynesian economics, which is basically you spend when things are going badly to create jobs for people and stuff. Pay people to dig a hole. Pay people to dig a hole. Stop paying people to dig a hole. You're just creating to great inflation. We can't print money. We've been paying ourselves more than the value of what we produce. It's a constant. cold hard world out there. We need to cut our costs, tighten our belt, work harder and earn our place in the world. Now, you can imagine how well this goes down with his listeners. So, very unusually, right? Very unusual for an incoming prime minister in his first conference. Many of his own national executive refused to clap him. There's no standing ovation. But the other

party's papers, the Tory papers say, what a good speech that was. You know, Jim speaks sense. Jim's facts of life, I think the Express called it. Milton Friedman, the godfather of monetarism, said a few months later, it was one of the most remarkable speeches which any government leader has ever given. Today, historians say, well, this is a massive kind of waystation on the road to thatcherism. Callahan is basically anticipating thatterism. Actually, Callahan, and he's obviously not thinking that far ahead. He's thinking, as he said to his biographer, Kenneth Morgan, he said,

I was sick of the extremism and economic illiteracy of my party activists. I wanted them to face up to reality. But reality is about to confront all of them, in fact, about to punch them all in the face very hard. Because that same day, the 28th of September, Dennis Healy is about to fly off. The chancellor, he's not there. He's going to fly off to Hong Kong for a Commonwealth finance minister's meeting.

And after Hong Kong, he's going to go to Manila for a meeting of the IMF, ironically. And all that morning, before Callaghan gates the speech, the pound has been falling. So Healy gets in the car from the Treasury to go to Heathrow Airport for his flight to Hong Kong. And during the journey from central London to Heathrow, the pound falls by another two cents. By the time he gets to the VIP lounge at Heathrow, he's in a massive dilemma. If he gets on the plane, he'll be out of communication for 17 hours. So if the pound falls more, no one will be able to talk to him or ask his advice.

But if he doesn't go, the markets might completely panic, so he doesn't know what to do. And he rings Callahan and Blackpool. Callahan's about to give that speech. And Callahan, he says, I don't know what to do. And Callahan says, don't get on the plane. Forget the Far Eastern trip. Get back to the Treasury. So 15 minutes before the plane is about to leave, Healy's aides start loading his bags back off the plane and into the car in full view of the press.

An hour later, he is back at the Treasury. The trip is off. What an extraordinary thing. He's turned around at the airport. The press of course go absolutely berserk. What's going on? The Chancellor changes his plans. I mean, literally at the last minute when the plane was about to leave. And the next morning, the Treasury confirms that Healy has, after all, applied to borrow the maximum possible $3.9 billion from the IMF. This is going to be one of the great humiliations in British history. And that night, Healy goes on TV and he says to the audience, we've applied for this loan. If we don't get the loan,

the alternative would, and I quote, be policies so savage, I think they would lead to riots in the streets. So massive stakes, Dominic? Massive. Couldn't be higher. So is he going to get the money? How is Tony Ben going to take it? Will the Labour Party tear themselves apart? Can sunny Jim cling on? And most importantly, of all, will the sex pistols be back? Only one way to find out, come back to us after the break. It's never too early to plan your summer story in Europe with WestJet, from rolling countryside to cobblestone streets. Begin your next chapter.

Book your seat at westjet.com or call your travel agent. WestJet, where your story takes off. There's something else here now, something new. From exclusively on Paramount Plus, it's the series Stephen King calls Scarious Hell. Everything here is impossible. But it's also real. Sci-fi vision calls it the best show streaming right now.

We're running out of time and we still don't know the rules. Don't miss what the movie blog calls something you need to watch. Saving those children is how we all go home. From Binge All Episodes exclusively on Paramount Plus. Are you worried or just enjoying yourself? Enjoying myself. I've always wanted to meet you. We'll meet afterwards, shall we?

You dirty sod. Dirty old man. Well, keep going, Chief. Keep going. Go on. You've got another five seconds. Say something outrageous. You dirty bastard. Go on again. You dirty f***. What a clever boy.

What a f*** rotter. Well, that's it for tonight. Brilliant. Thank you, Dominic. Thank all, should I say, Bill Grundy. Welcome back to the rest of history. That was more archive footage from the Sex Pistols. controversial appearance on the Today Show on the early evening of Wednesday, the 1st of December, 1976.

And we'll be coming back to the Sex Pistols, won't we? But for now, there is high drama in the dimension of international finance. Top Emily Dickinson quota, Dennis Healy, with his big eyebrows. He'd been about to fly off to Hong Kong, but he's cancelled it because the economy is tanking, and now he's announced that Britain is going to have to apply to the IMF for a loan. Yes, exactly. So the timing is horrendous because the Labour Conference, of course, are meeting in Blackpool. The activists are not happy anyway, so what are they going to make of this latest surrender

to the forces of international capitalism? Now, Healy had turned back at the airport on Tuesday, the 28th of September. He made the official application on the Wednesday. Now on Thursday, the 30th, there's luck-would-have-it. The conference, which is now in total sort of tumult, is due to debate economic policy. Healy wants to fly up to the conference and make his case, personally to the activists. And Callahan says to him, no, don't. It'll just inflame the delegates. They hate you already. And actually, under the Labour Party's slightly bizarre rules, if you're not

a member of the National Executive, you won't be allowed to speak from the platform. You'll have to speak from the floor like everybody else. And so Healy says, well, fine. Well, I've made the application now. I've got nothing to do. So because he's got a great hinterland, I don't think we've mentioned that, because of his hinterland, he says, I'll spend the day at the National gallery looking at paintings from the Dutch Golden Age and I'll pick some out from my office. He goes to the National Gallery and when he's there, an official rushes in and says, Callahan's changed his mind. He wants you to go to Blackpool after all. And he's got a plane waiting at RAF North Holt to fly you to Blackpool. It's the 70s, so the plane is massively

delayed because of rain. And Saheli doesn't arrive in Blackpool's winter gardens until 3 o'clock and he's completely sodden and he walks in, he's incredibly red-faced. and as soon as he walks into the hall, the members of his own party start booing him, which is kind of a bad sign. He sits at the back, and the cameras are on in the whole time. And as he sits there, I mean, it's beyond parody.

The conference are literally debating their plans to take Barclays Bank, Lloyd's Bank, the Midland Bank, which is now HSBC, and Nat West, into public ownership. And Healy's just sitting there, shaking his head in horror and sort of scribbling notes. And then it's his turn to speak. he is the Chancellor of the Exchequer, amid one of the worst financial crises in British history,

but he's not allowed onto the platform, and he's told he's got no more than five minutes to make his case. And when he watched the clip, I mean, he goes up to the front and he's not allowed onto the very top level. And he's incredibly red-faced, his tires all to skew. He looks like he hasn't slept in a week. So he's reassuring international investors in Britain, in other words. Definitely he is. And people are jeering him and shaking their fists at him and stuff. and he basically has to shout to be heard above the jeers and he says to them, I come from the battlefront and all this stuff.

And then he just gets, he slams the left. He says, there are some people who would like to stop the world and get off. They say, let us go to a siege economy, but they want a siege economy of a rather odd type. They want to stop the imports coming in,

but to get total freedom for exports to get out. Is that true? Kind of is. Because that's never going to work. I thought that Tony Ben was saying, no, we don't, you know, we won't have any imports. No, we won't have any imports, but they never really contemplate what that means in terms of your exports.

Because there's no world, right, in which you say to your trading partners, we're not going to have your imports, but you have to keep buying our stuff. I mean, that obviously doesn't happen. That's never going to happen. As Healy says, I've never heard of a siege in which you keep the enemy out of your castle, but the enemy allows you to come and go as you please. And he says that, and of course, that really inflames people because they don't like being laughed at. They don't like him talking down to them. There's great howling from them at this. And then he says, I'm going to negotiate with the IMF based on my existing policies and people

are screaming at him, Tory policies, because they think he's a Tory, see? And he says, but when I say existing policies, I mean things we do not like as well as things we do like. It means sticking to the very painful cuts on public expenditure on which the government has already decided. And people are screaming at him, no, resign, you're a Tory and all this kind of thing. And his five minutes are up. And so he just says, that's what it means. That's what I'm going to negotiate for. And I ask the conference to support me in this task. It's redder face than ever. He goes back to his seat. As he goes back to his seat, loads of people are sort of shaking their fists at him and shouting and all this kind of thing. Are they spittle-flecked? Spittles. There's a lot of spittle. Tony Ben says in his diary, I couldn't clap him. His speech was so vulgar and abusive. It's great footage. Great TV. It's the kind of thing that basically you would never see now in British politics. But it's great fun.

It's terrible publicity for Britain. A few days later, the Treasury and the Bank of England had to put up interest rates to 15%, which was the highest level in history. I repeat, 15%, you know, on your borrowing, on your mortgage, whatever. This is horrendous for the economy. And the most obvious price that is paid for this is unemployment. Unemployment had started rising in the late 60s. At the end of 1971, it had reached 1 million.

and at the time, this was under Ted Heath, people had said, God, this is the end of the world, this is the Great Depression all over again, a million people unemployed, unthinkable. And that's why Heath had thrown so much money around in an attempt to deal with it. Now under Callagham, it's more like one and a half million and nudging upwards. And it's worse for young people. So by 1979, almost half of all under 25-year-olds are out of work. So the unemployment that we associate with Thatcher and Thatcherism had already begun. And so what are you to do in that situation except become a punk rocker?

Well, this is the thing. This is the social context for the rise of punk. So the look of punk and the style of it, the kind of ripped clothes, the hair, the sort of aggression. They're there in embryo in pubs and clubs in 1975, maybe even in 1974. But it's no accident, I think, that it ceases public attention in the summer and autumn of 1976 at precisely the point when the economy is tanking, when Britain's going to the IMF, and all the newspapers are full of laments about rising unemployment and there being no future, the Sex Pistols Great Refrain.

So the pistols themselves had first been mentioned by the NME in December 1975. They're all about 12 years old and they're going to be the next big thing. I left that 12 years old. But then the first really big article is by Charles Shah Murray. He reviewed my first book. That's an honour. He called me the hoodie historian. Oh, brilliant.

Throwing whatever passes for gang signs at the University of Sheffield. What an honour. Well, anyway, Charles Charles Charmurie wrote the first big article on the Sex Pistols. Their music is coming from the straight out of school and onto the dole death trap, which we seem to have engineered for our young, the 76 British Terminal Stasis, the modern urban blind alley. You wanted sex pistols and now you've got them. Trouble is they look like they aren't going to go away.

Now, at this point, as we alluded to earlier, they haven't actually released a record. So Anarchy in the UK didn't come out until the end of November. But just as the Beatles, in the second half of 1963, the Beatles are perfectly cast, really, to seize the moment. The newspapers love the Beatles because they seem to reflect all sorts. sorts of other trends, you know, sort of meritocracy, the northern cheekiness, all of this kind of thing that are very fashionable in 1963 and the optimism, nojolity and all the, in an age

when the economy is booming. The sex pistols seem perfectly cast to capture the mood in 1976. So Tony Parsons in the NME in early October says, they're the quintessential product of the United Kingdom in the 1970s. The music they play reflects their times, no more, no less. And then they get their first appearance a week later in the national newspapers in The Sun. The Sun did a double page spread and it illustrated it with handcuffs and swastikas. It described them as hell's angels in a clockwork orange nightmare. And it had a nice quote from John Leiden, Johnny Rotten. We want chaos to come.

Life's not going to get any better for kids on the Dole until it gets worse first. It's quite like David Bowie. David Bowie in the fascism. There's a sort of nihilism, I think, in British. popular culture in the mid-70s. We want to see everything get worse, and only then will it get better? And a sort of exasperation, I think people of that generation looked at your Callahan's and your healies and your kind of trade union leaders and stuff, and they just thought, I have

nothing in common with these people. I'm sick of them going on about the war. I'm sick of their massive glasses and their beer and sandwiches and their pay deals. I just want to smash everything up. And I guess you could argue they got the Prime Minister that they deserved somebody who did smash everything up. Anyway, Johnny Rotten said he wanted everything to get worse and frankly it looks as though he's going to get his wish. Because at the beginning of November, the six-man IMF team fly into London. And this is seen in the newspapers and in the media generally, and I think by the public, as a moment of overwhelming national disgrace.

It's like Britain is an incompetent business that's gone into administration. and all the newspapers are on profiles of these six people. There is an Englishman, an Australian, an American, a German, a New Zealander, and a Greek. So basically, it's the cast of a terrible, very, very inappropriate 1970s joke. They're all staying at Brown's Hotel under false names, excitingly. They go to see Dennis Healy and Downing Street. Remember, he now has to open the books. He has to show them Britain's accounts.

And he says, you know, the books aren't ready. You'll have to hang around. so they're just hanging around London waiting for the books to be ready. Well, in Brow, I mean, that's quite nice. It's a nice hotel. It's lovely. Having tea in Browns? I mean, what a nice thing.

But actually, the real drama isn't Britain versus the IMF. It's Callaghan's government against each other. So the issue is whether they're going to make these cuts. And this sounds like a very dry technical thing. But to any Labour government, this is absolutely existential. And there's history here. In 1931, Ramsey MacDonald's Labour government had come under similar pressure in the Depression. They too had been put under pressure to make cuts,

the pound beleaguered, and the cabinet had split, and Ramsey McDonnell, the Prime Minister, had ended up basically leaving his own party, the Labour Party, to lead a Tory-dominated coalition. And he was seen as the great traitor of Labour Party history for doing this. And the Labour Left are obsessed with this. And Tony Ben starts, at this point, he starts going to meetings with the, he gets the minutes from the cabinet meetings from 1931 and he starts performatively walking around with them under his arm, putting them out on the table for everyone to see. Because he's basically saying to Jim Callahan,

you're Ramsey-Modonald, I know what you're like, and all this kind of thing. And also Tony Benn has lost patience with Callaghan because Callahan, he thinks, has really let himself down and let the Labour movement and socialism down. Because when Chairman Mao died, Callahan refused to have a moment of reflection. Ben was absolutely appalled that Callahan wouldn't pay tribute to Chairman Mao in British

Cabinet. He says in his diary, Mao merited a moment of reflection. He will undoubtedly be regarded as one of the greatest, if not the greatest figures of the 20th century. He certainly towers above any other 20th century figure I can think of in his philosophical contribution and military genius. And the fact that Calahs He refuses to see this, he says, is a sign that Jim is just a Tory. So I think listeners can make up their own minds about this. You know, are you with Chairman Mao or you're at Jim Callahan? I know who you're with, Dominic.

Are you with Chairman Mao? I'm not with Chairman Mal. I hate Chairman Mao. Chairman Mao is a terrible man. He's an absolutely terrible man. He made war on birds. And this sign of Tony Ben's terrible, terrible judgment. I mean, I like Judge Callaghan.

Yeah, he's great. I like the fact he's from Hampshire, I like the fact he had a farm, I like the fact that he approved the Royal Navy. No, I like him. So, Callahan and He'll have a problem with Tony Benn. He despises them now for their lack of affection for Chairman Mao, but also their enthusiasm for cuts. The other person they have to worry about is the Foreign Secretary, who is called Anthony Crosland. I mentioned him briefly. Oh, the lounge lizard.

Lounge lizard. Actually, I basically fell down a rabbit hole of looking at photographs online of Tony Crosland, trying to find the appropriate terminology. He looks uncannily, I think, like David Cameron. He's like a sort of more lounge lizard-esque David Cameron. Kind of fleshy? He's become quite fleshy, Rubicund. He's much more baggy-faced by this point

because he's proving we've been drinking a lot more on smoking and stuff. He was the great intellectual of the Labour Party in the 50s. He wrote a book with The Future of Socialism. And he basically said Britain should become a Scandinavian social democracy with American lifestyle. So massive tax. says huge fridges. His dream has been overtaken by events, but he still hankers after this sort of 1950s, 1960s, 1960s, Keynesian dream of like, let's tax and spend loads and all this.

And he also sees Heli's arrival, and he wants to use this against him. So his argument is, it's mad to have any cuts. We've got a million people unemployed. What are we thinking? It'll provoke loads of strikes. Just tell the AMF that are being stupid. A cat, Crosland, like Healy is incredibly arrogant. He says, just tell the IMF, they're fools. Just done they're wrong and they'll have to listen. So Callahan has this problem. He has got the foreign secretary against him. He's got Ben against him and he's got the IMF. How is he going to handle this and keep his government together? And the answer is that he actually handles it brilliantly. It's one of the great examples of prime ministerial management in British history. I think it was cited by Daniel

Finkelstein in the Times as an example that Kirstama could learn from. That's high praise. Because you know, Danny Finkelstein, do you know what one of his enthusiasms? It's a podcast called The Rest Is History. He's a big fan of The Rest is History. Hello, Danny. I hope you enjoyed that mention. Yeah, he should write another column in The Times. About how good we are.

That's exactly what he should write two columns. One about how good Jim Callahan is and one about how good we are. And everyone will enjoy that. So what Callahan does in the next two months, he has 26 cabinet meetings. And he basically says to his ministers, fine, you talk this out. You taught yourselves into exhaustion. and I'll be the umpire. And that's what he does. And basically Healy, the Chancellor, has to do 26 of these meetings where he allows his colleagues to argue with him, and he basically

has to fight back. And he's working these punishing days. He's redder than ever. He gets shingles. But he puts up a tremendous performance, because this is what he's all about, basically fighting off. He loves a fight. He loves a bare-knuckle intellectual brawl. Does he have any time off to read Emily Dickinson? No. He's having a terrible time. He's starting work at six and working until midnight, almost like our routine. Yes, that'll be about to.

So they have all these meetings. I guess the key one is the 23rd of November. Not only in the arguing with each other, they're arguing with the IMF. And Healy has persuaded the IMF to moderate their demands, so Britain will have to make one and a half billion dollars of cuts next year and another $3 billion in 1978, 79. Healy says to his colleagues, look, this will be very painful, but the IMF will approve it, the Americans will approve it, it'll be good for a image, it'll be good for confidence, let's do this. Crossland then speaks up and he says, this is mad.

He says, and I quote, tell the IMF the Americans and the Germans, if you demand any more of us, we should put up the shutters, wind down our defence commitments and introduce a siege economy. Now this, Crosland says, this will frighten them. They need our troops in West Germany. And they don't want us to have a siege economy and to be a North Korea. off the coast of France. So they will blink. They will give us the money and they won't demand any cuts

and we'll be laughing. So it's a bit Brexit. It's very Brexit. It's very Brexit. It's basically we'll blackmail the IMF. They need us more than we need them. Now, we tried that with the European Union in the late 2010s, didn't we?

And I don't feel it worked out brilliantly, personally. I'm not expressing a view about Brexit. I'm expressing a view about a negotiating strategy. And I feel like the claim that German carmakers, We were so important that they would come to our rescue. That was not realized. Anyway, there was obviously no way the IMF would give in to this blackmail. This is absolutely mad.

But a lot of Callahan's ministers quite like this because they will do anything to avoid the cuts. Again, Callahan plays it very cleverly. He says, look, take a week to think about it. We'll come back in a week. We'll come back next Wednesday and we'll make up our minds one way or the other. And over the weekend, he and Crosland have to go to the Hague for some European meeting. And on the way back, Callahan says to Crossland, whatever happens, I'm going to side with Dennis. I'm telling you now, I'm siding with Dennis.

And the implication is, if you keep fighting, you will bring down this government. And none of us want that. So the week goes by and we get to the decisive day, which is Wednesday, the 1st of December. Callahan's ministers arrive at number 10. They're told there's a half-hour delay, which is very unusual for a cabinet meeting. And the reason is that Callahan has been locked in the upstairs room, or not locked, in, but he's been in an upstairs room. If he was locked in, that'd be a bit weird.

Oh, by Hester Thrail. Yeah, yes, exactly. Barcy Williams has come back and lock them in the room so they can't have lunch. With the managing director of the IMF, who's flown in from Washington, and Callahan has persuaded him to drop the one and a half billion cuts to just one billion cuts in the first year. So that's a bit of a win. A win for Britain.

Callahan finally comes downstairs. It's 10.30. He says, we'll go round the table and we'll decide what we're going to do. He starts with Tony Ben of the critics. and Tony Ben says, let's have a siege economy. Come on, let's become North Korea. And this completely backfires because basically Callahan's staff have secretly been preparing ammunition to use against Tony Ben. And they've distributed it to Callahan's younger loyalist ministers who are people like Shirley Williams and Bill Rogers. He go on to form the breakaway Social Democratic Party in the 80s.

And they get absolutely stuck into Ben. The questions that you were asking, Tom, who's going to be? going to lend us any money if we have a siege economy. How many people will lose their jobs because no one's buying our exports? What do you think our trading partners will do if you ban their imports? They're not going to buy British goods anymore. What are you going to do about that? And Ben has to admit that he doesn't know the answers to these questions. And it's very sad. People start laughing at him. They start laughing at him and making fun of him in the meeting. And Callahan actually has to intervene and to tell them to listen to him with respect because they're

being nasty to Tony Ben. So that's Tony Ben, and then it's Croslin, the Foreign Secretary. Croslund wants his blackmail plan. He says, let's threaten a siege economy, or talk about our role in Cyprus or our troops in Germany or our membership of the EEC, and then Schmidt, the German Chancellor and Ford, the US president, will soon give way. But in the last week, people have been talking about this, and they've lost some of their former enthusiasm.

You know, the more he sort of says, it'll be fine, they'll give him. Of course they'll blink. people think, were they really? Probably they won't. And so that night, the night of Wednesday, the 1st of December, loads of ministers come to Crosland's room in the Commons. They say, we're not going to support you. We're going to support Dennis.

And actually, Crosland himself finally cracks, and he goes to see Jim Calhann. He says, I'm still right, but I guess I'll go along with you. Now, while this has been going on in the House of Commons, there's been another dramatic development. because that evening Thames TV's early evening

family friendly today show was going to feature everyone's favourite band Queen but Queen pulled out because Freddie

had to go to the dentist is that right he had to go to the dentist that's a good fact so their publicists at EMI said to the bookers at Thames we've got another group join our other group instead

and they said, sure, what could possibly go wrong? And this was the sex pistols. This was the genesis of their interview with Bill Grundy. So listeners will now have heard the original archive footage, weren't they? And so you, listening to this, will be able to make up your own minds about what was going on. The pistols, as you say, Tom, thought that Bill Grundy was drunk. I don't think he seems that drunk when you actually see the real archive. But he, I mean, maybe he's such a kind of consummate drunk that he can get away with it.

I mean, Michael Parkinson said he was always drunk. Yeah, I know lots of people said he was a big drinker. But if so, then he would have been drunk and done loads of today programs. It's hard to work out exactly why he loses it so completely. Because actually, although people always used that, or used it at the time, the newspapers said, oh, the pistols are scum and all this kind of thing, the swearing, it's kind of not their fault because he goes them. He tells them to do it.

Go on, Chief. Say something outrageous. and all this kind of thing. The result is this massive media furori. So I'm going to read a line that I've used so often in my books, but I don't really know what it means. The switchboard is jammed. I never know what that works.

How many calls must you get? And I also how many people realistically are ringing TV companies? Anyway, 10 people are ringing terms of TV, whatever. The switchboard is jammed. And the next day's papers go completely berserk. we have these tremendous headlines. The filth and the fury. Fury at filthy TV chat.

And the BBC get the blame, don't they? Even though it wasn't on the BBC. I love this. Daily Express published a long editorate explaining why this was all the BBC's fault. Even though it wasn't on the BBC and the BBC had nothing to do with it. But the Express aren't going to let a little thing like that get in the way. No, the Express said it's the BBC's fault because the BBC panders to the ignorance and tastelessness. of those who enjoy the noises of punk rock.

I love that, the noises of punk rock. Anyway, it completely changed the lives of the sex pistols this interview because it made them household names. Their plasters across the newspapers. It meant that from this point onwards, it would be impossible for them ever to be judged on the basis of their music.

And they've got Silver Jubilee coming up. They've got the Silver Jubilee. Perfect timing. Exactly. And they become this, even though their music is not that popular. they become a genuine public phenomenon. They become the supreme emblems of the breakdown and nihilism of the 1970s. And this before they've ever really had a hit.

And as for Bill Grundy, Tom, a terrible fate, Bill Grundy. A warning from history. A warning from history. He literally ends up being banished to present a books podcast. So the next morning, the 2nd of December, as Callahan's ministers assemble for another meeting, the papers are full of the pistols. but I'm happy to say there is no filth and fury in Downing Street. Very good.

Look at that, that's elegant writing. So good. So Callahan and Healy of Wom. Crosson throws in the towel. Ben's grumpy about it, but the cabinets will take the deal. Britain will cut public spending by a billion pounds next year and one and a half billion pounds the year afterwards, and in return it'll get $4 billion right now to defend the pound.

It is at once a total humiliation for, Britain and a great political achievement by Callahan because he hasn't lost a single minister. He's kept his government together. This was a crisis that was brewing before he became PM and he's somehow come out of it with his reputation enhanced. And even Tony Ben, who is usually, what did he Callahan call him? A canting hypocrite. And Tony Ben who is usually so scathing about any other Labour politician. Yeah, Harold Wilson's birthday, odious. Odious. In his diary, he wrote afterwards, Jim is a much better Prime Minister than Wilson. He's much more candid and open with people.

He doesn't try to double talk them as Wilson did. Wilson has simply disappeared from sight. Nobody thinks about him anymore. So, 10 days before Christmas, they unveil the deal to the House of Commons. There are going to be big cuts to all the budgets. There's going to be higher charges for things like gas and telephones, which of course in these days in the 70s are public utilities. But the Labour Left don't rebel. Amazingly, Callahan and Healy have got away with it. There's a little twist to the story. It actually turned out that because the Treasury had got their figures wrong, Britain was borrowing less money than everybody thought.

So Healy only needed half of the loan and was able to repay it early. Now, of course, people don't know that initially. And at the time, people saw this as the whole business was seen as an abject national humiliation. And on the left, as well as on the right, there's a brilliant editorial in the Sunday Mirror. Perhaps the politicians who have got us into our present mess would like to know what the British people are fed up with most of all. Not the fall in the pound, not ever-rising food prices, not the erosion of their pay packets, not even the weather.

What the British people are fed up with most is feeling ashamed. Oh, that's terrible, isn't it? As for the political significance of this moment, historic significance, it depends where you stand. So if you're like Tony Benn and you're on the left, you see this moment, the IMF bailout, as the definitive moment in British history when socialism was betrayed. So in the 1980s, the left of the Labour Party, lots of Labour activists, said, Callahan and Healy were the people who prepared the way for Margaret Thatcher, and they never forgive them for it.

Well into the 80s, when Healy would get up to give a speech, activists would scream, IMF, at him. They'd kind of chanted at him. Now, if they hadn't won, what if Tony Benn had got his way? And we had had a siege economy. I mean, I think it's very unlikely, but I don't think the result would have been very good. I think it had been high inflation, tanking living standards. I think there would have been a surge in unemployment, and there probably have been an even

greater swing to the right eventually. And actually, François Mitterrand tried something a little bit similar in France, in the 1980s. He gave it up after two years or something, didn't he? And he got Jacques Delors in to sort out his finances and to a swing to the right towards austerity. So the French did try it, and it did. really work. And I don't think it would have worked in Britain. However, I think Ben is right

in one respect. I think this was a big turning points, and I think he's actually right that Callahan and Healy do prepare the ground for Margaret Thatcher to some degree, because in the space of a few months, what they've basically done is they've ditched tax and spend Keynesianism, they've abandoned the idea of full employment, and they're moving towards what later seen as monetarism. So a year later, a year after this, 1977, Healy said to his cabinet colleagues, he said, we'll never again live in a Britain where everybody has a job.

Canaanism has failed. And in 1979, there's a telling exchange which Ben records in his diaries between him and Callaghan about globalisation. So Ben says, how is it that British businesses are allowed to order coal from Australia and ships from Japan just because they're cheaper than British

products. That shouldn't be allowed. And Callahan says to him, we mustn't be insular, Tony. You know, the state can't do anything about this. If those goods are cheaper, we should buy them from wherever they come from. And of course, in our lifetimes, we have grown up thinking that he was right and that, you know, free trade and globalization of the way forward. But we now, in the 2020s, find ourselves in an age when the US president, I'm guessing, would have said that Tony Ben was right and that you should always put your own country first. and that who cares. You know, if tariffs are what you need, then tariffs is what you do.

Though Tenny Ben wouldn't have approved of attacking Iran, would he? No, I think that's probably the only respect in which they would be singing from the same hymn sheet, I guess. Anyway, Tony Benn much less orange. And I don't think Donald Trump has been stung on his penis by a wasp. That fact that may not even be true. Of course it's true, Dominic. Well, it's on the rest of history, so it must be. It's the single most important fact of postal British politics.

So anyway, this whole story ends with Britain a lot closer to Thatterism, the end of 1976 than it was when we began at the beginning in 1975. To Thatcherism, but not to Thatcher. Because people may be wondering, you know, they started the series with Margaret Thatcher becoming leader, where has she been in all this? And the truth is, she's not been relevant. She's not part of the story. She's been Tory leader all this time, but she's been struggling in the House of Commerce.

still. Callahan is brilliant at dealing with her in a very, I have to say, a very sexist way. He basically pats her on her head when she gets up to oppose him. And at one point he actually uses the expression, now, now little lady to her, which drives her mad, but everybody kind of laughs. He is miles ahead in polls of who people would prefer as Prime Minister, even with the Tory press. He's remarkably popular. And that Christmas, the rabidly right-wing Daily Express says, perhaps we are quite lucky in old Jim Callahan. But his luck is about to run out because we will come back to the 1970s later on, not immediately, but later on, in a third and final series, which will come to the Winter of Discontent, the election of 1979,

and Margaret Thatcher's transformation from an ugly duckling into an Argentine smiting swan. And that is all ahead. But Dominic, just because people are going to have to wait a year now for more 1970s Britain doesn't mean that there is going to be any lack of history in the intervening months. So we have coming up, the Mona Lisa, Battle of Marison, First World War, the Tudor Cold War, the Odyssey, loads and loads of stuff to come. And if you are an Athelstan, then we have an unbelievable treat for you because coming up is going to be the opportunity to win not just a copy of Dominic's great book, Seasons and

the Sun, but a signed copy. So if you're in Athelstown and you want to be in with a chance of winning, just add your email address to the form in the episode description. But for now, Dominic, thank you. No one better in the whole world to talk about. Britain in the 1970s and you. So what a treat it's been. Thank you everyone for listening. And we will be back with the Mona Lisa. next week. Bye-bye. Bye-bye. We have reached the thrilling climax to our epic mini-series about photography and history, which is exclusively for our Restis History Club members.

So we thought we would give you one last taste of this series that we're doing with the great photographer Chris Floyd. And in this, the climactic episode, we're looking at the story of technology and photography. How inventions like the Lyca and Polaroid, the Flash and the strobe have transatlantic transformed the way we see the world and the way that we understand modern history. It really is a richly fascinating and colourful episode,

and we're going to give you a little snippet of it right now. And that's what Kodchrome does. It allows you to bring out the colour. So suddenly the world, I always think this makes such a difference in the way we view the recent past. We think of it in terms of black and white and colour. We find it hard, I think, to empathise for people who live in a black and white world rather than the colour one. They just seem old-fashioned and stuffy. the Kaiser or something because he's black and white they move in a jerky way in the film of the

time and we feel very distance from them whereas as soon as you see something in color i don't know vietnam war or something it feels like it could be today yeah and it affects the way that we think about the recent past so much of the way we see that period in our sort of collective memory from the say the 40s to the 70s um is defined by the look of kodachrome it's kodachrome that makes us think about that. So when you go into the 50s, you have a photographer called Ernst Haas, who documented New York in color, all on Kodochrome. How we think of New York in the 50s, when we think of it as a color prospect is defined by the colors of Kodakram. You have these deep, rich reds, opposites, the reds and they don't bleed into each other and leak. They remain really sharply defined.

Well, you get that in these photos of farmers in the Depression. They're, I mean, they really, really don't look like 1930s photographs. You can see the texture. of the skin, you can almost see every pore. There's a kind of, almost a kind of high definition look to them. Do you know what I think? Yeah. And they also look like us. I mean, they look like people we would know.

I mean, they are, you know, they look like people that live in. Where do they live? I would say they live in somewhere like Endstone. Really, near us? Yeah. In North Oxfordshire. Yeah. They look like Endstone people.

Wow. Toiling in the fields of Enstone between Woodstock and Shipping Norton. Okay. Well, that's a niche reference there for the listeners. Thank you so much for listening to that. Now, if you want to hear that episode, the preceding three episodes in this epic series and our other mini-series, The Rest is History Club, then all you need to do is to head to the rest is history.com. Find the sign-up page. It's right there. It's dead simple. You can join in just a couple of quicks. It's amazingly good value. So on that bombshell, thank you very much for listening and goodbye.