CPI inflation is expected to hit 5% later this year due to higher energy and other utility bills that will continue rising by up to 15% in the summer and the autumn, along with much higher food costs.
This was the warning of the governor of the Bank of England, Mervyn King, as he went into reverse gear as far as the dangers of inflation were concerned.
Only days ago he postponed raising interest rates, on the grounds that the rise in inflation was cutting wages and that this was entirely progressive, and postponed the need for rate rises.
Yesterday it was man the barricades, with warnings of dangers ahead, and that a leap in inflation was coinciding with a decline in production, which meant that a deflationary cold shower was much closer, however much it damaged any prospect of an economic recovery.
A CPI rate of 5% will mean an RPI rate of up to 7% as the cost of living accelerates out of control, with wages already driven back to 1970’s purchasing levels – before the great leap forward in inflation begins.
Publishing the Bank’s latest Inflation Report, King said there remained strong downward pressures on economic growth, combined with its opposite, an upward pressure on inflation.
King then cut his expectation of a 2% rise in GDP in 2011 to 1.75%, while he admitted that there was ‘a great deal of uncertainty about the outlook for inflation’, and that ‘inflation may not fall back as strongly as expected’.
In fact, a further leap in inflation will place the British economy and the pound sterling in the same trench as the Greek, Irish, and Portuguese economies, as purchasing power collapses, unemployment rises and government revenues fall, leaving the UK as indebted as ever.
Currently Greece has borrowed 110bn euros, Ireland 85bn euros, and Portugal 78bn euros, while the UK has advanced over £1 trillion to prop up and guarantee its banks.
In Greece, the first general strike of both the public and private sector trade unions took place yesterday as workers demand that the austerity programme is abandoned and that the government resigns.
In the UK, faced with a worsening of the crisis workers will defend their wages, pensions and jobs, against a deflation of the economy and a huge inflation in prices and the cost of living.
There will be huge wage strikes, mass strikes to defend pensions and occupations to defend jobs.
A showdown between the ruling class and the working class is now absolutely unavoidable, and the ruling class can be relied upon to further sharpen the situation by rushing in new anti-union laws, with stipulations that will make all strikes and occupations to defend jobs illegal.
Workers must demand that the trade unions draw up their own cost of living index, and that their wages rise monthly to keep pace with rises in a trade union cost of living index to preserve the value of their wages, and also pensions and benefits.
This is the only way to see that the working class, the poor, and the unemployed are not destroyed by the crisis.
Above all, the trade unions must call a general strike to bring down the coalition and bring in a workers government that will put an end to capitalism and expropriate the bosses and the bankers.
Only a planned socialist economy based on the nationalisation of the means of production under workers’ control and management, can provide workers with a future.
This means building the revolutionary leadership of the WRP inside the trade unions and building the Young Socialists into a mass youth organisation that can mobilise the working class and the youth for a socialist revolution.
The struggle in the UK is no different in essence from the struggle in Greece, Ireland, Portugal or any country in the world where capitalism rules.
Capitalism as a world system of production is in absolute decline and is in fact in its death agony.
The revolutionary leadership of the Fourth International must be built in every country to lead the world socialist revolution to its victory.
