Other Cabinet papers showed Harold Wilson was warned in 1975 that Britain’s economy faced "possible wholesale domestic liquidation".
One minister told the Labour prime minister there could be constitutional crisis if inflation continued to rise.
Comment: The inflation then was around 22% and a specific branch called Inflation Accounting was vogue in further education circles then. How Government Policy has changed within Labour ‘then’ and ‘now’?
Documents show concerns a year before an International Monetary Fund loan was requested.
They also reveal Chancellor Denis Healey and Industry Secretary Tony Benn at odds over policy.
Further documents released this week reveal amongst other things:
# How British diplomats secretly floated the idea that Iraqi dictator Saddam Hussein – seen then as a figure to be courted – could be brought to the UK for a back operation.
"I am advised that, if Saddam is suffering from a broken disc pinching the sciatic nerve, there is an operation, by name a laminectomy, regularly and successfully undertaken in various hospitals in the UK, by which there is a very good chance of total recovery," Clark wrote.
"If the operation fails doctors usually advise a further operation, a spinal fusion. If the latter fails too, it usually means that there has been an erroneous diagnosis in the first place.
Comment: And should Saddam kick the bucket on the operating table – they would shrug their shoulders and declare, "We tried our best (to find & cut-out the silver amulet containg the secret where he’s hidden the WMD) but Inshallah, it was thus written & ordained."
He pretended to have drowned off Miami Beach in 1974, but was later found in Australia with a false passport.
Comment: No change there, then! Then & Now – Labour to New Labour but – business as usual.