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Britain, under a Labour government, considered ditching (giving up) its nuclear deterrent as a way of making crucial savings to help pave the way for an International Monetary Fund-backed rescue package during the sterling crisis of 1976, according to previously secret documents. The crisis at the highest level of government and the British lobbying of international allies for assistance are revealed in Whitehall papers released to the National Archives, under the 30-year rule, covering the months after James Callaghan became prime minister in April 1976. he succeeded Harold Wilson who made his resignation announcement on March 16 after grappling unsuccessfully for months with an economic crisis. The papers reveal the extent of the panic in 1976 as Britain was forced to go to the IMF to bail out the economy. The crisis was a defining moment, destroying confidence in Labour’s economic competency and paving the way for Margaret Thatcher’s rise to power. The cabinet agreed to request a ￡2.3bn loan, then the biggest the IMF had made, and demanded massive spending cuts. A memo by Sir John Hunt, the cabinet secretary, on December 5 warned there would have to be a review of defence spending. He explained that withdrawing from Germany would be strongly resisted by the US while "abandoning the deterrent or at least scrapping its improvement would cause much less concern to our allies". The threat to ditch the nuclear deterrent came after months of discussions and protracted cabinet haggling over departmental cost-cutting. The severity of the country’s problems was spelt out on April 5, two days after Callaghan took office, in a stark report from Sir John. It said the world had been through the most serious boom and slump and the worst inflation since the war as a result of the oil crisis. "The going is likely to be rough indeed.., we are sailing in an unknown sea.., there is a serious imbalance in our economy.., unless action is taken there will be either a continuation of an unacceptably high level of unemployment or a balance of payments deficit which will be beyond our ability to finance," Sir John warned. The ensuing months saw sterling slide further, forcing the abandonment of the Labour programme of 1974, and the acceptance that the nation could no longer spend its way out of a recession, in spite of strong political resistance. Towards the end of September, Callaghan told the Trades Union Congress conference that things would never be the same again. He then rang Gerald Ford, then US president, whom he regarded as an inevitable broker of an IMF deal. A briefing note prepared for Callaghan ahead of the conversation underlined Britain’s precarious poison as well as the threat to international stability; "This week I have resisted pressure at the party conference... But I cannot be sure of continuing to do this if our policies are undermined by pressure on the pound which we do not have the resources to resist. In that case our value and partner in the western community would be put gravely at risk." In his conversation. Callaghan spelt out further the political tightrope he was walking, trying to fight off the left of his party while reaching an agreement with the international community. In a letter, Callaghan warned Ford that without a solution to the sterling crisis "we would be forced into action which would put at risk this country’s contribution as an ally and a partner in the western alliance and its value as a member of the international trading community". Separately, Callaghan set about lobbying Helmut Schmidt, the German chancellor, asking for a loan facility, led by the US and Germany. In November, he called Schmidt, telling him he was going to go for an IMF deal. This is an extract of the conversation. Callaghan: ’Tm going ahead with this. We either conquer or we die.," Schmidt: "... I have told our mutual friend on the other side that in my view the whole situation comes very near to a Churchillian situation in 1940. I am quite convinced that you would act with the same amount of vigour. I have no doubt about it." While Schmidt was privately sympathetic by the end of 1976 no safety net had been agreed by Germany and the US. A month later, the British government considered Sir John Hunt’s advice to scrap the nuclear deterrent, amid protracted cabinet haggling over cost-cutting. The cuts turned out to be less than forecast, an IMF deal was brokered--and Britain’ remained a nuclear power into a new century.

What was the German Chancellor’s attitude toward the 1976 crisis in Britain