Bank of England demands wage cuts to keep businesses and the government from going bust

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The Office for National Statistics (ONS) released figures yesterday on the average pay across the UK, which they claimed saw an increase of 6.2% in the 12 months up to December last year.

According to the ONS, this is the smallest increase in over a year, but for the Bank of England even this modest rise in average wages is still too high.

Failure to see wage increases driven down to levels acceptable to the Bank means that they will be reluctant to carry out the cuts to the interest rates on the grounds that wage increases are responsible for inflation, and only by driving down wages can ‘inflationary pressures’ be extinguished for good.

The Daily Telegraph reported yesterday that Jack Finney, an economist at the financial consultancy firm PwC, said: ‘The lingering concern for the Bank of England will be that the labour market has not cooled sufficiently to achieve a sustainable return to the 2% inflation target.’

The 2% inflation target is the holy grail for the bankers, bosses, and the Tory government.

The current level of 5.25% makes borrowing and debt expensive, causing a massive crisis for the debt-ridden companies struggling to pay the interest on their loans.

30,000 UK businesses are predicted to go bust this year following the 24,000 that crashed into bankruptcy in 2023 crushed by high interest rates on the mountain of debts they took on when near-zero interest rates made them affordable.

It is also a massive crisis for the UK government, which is drowning in a record national debt of over £2.7 trillion – roughly the same as the value of all goods and services produced in the UK (GDP).

During the 2022-23 financial year, the Tories spent £108 billion on debt interest repayments – more than it spent on the entire education system.

Speaking last week, a senior Bank of England official, Sarah Breeden, spelt out that bringing inflation down to 2% meant British workers had to accept lower pay deals saying: ‘Some combination of moderation in pay pressures and firms’ margins will be required for service inflation to return to more normal rates.’

The policy of the Bank of England has long been to blame workers’ pay as the real cause of the inflationary spiral, and the solution is to hold wages down to poverty levels.

In fact, the inflationary spiral has been driven by the decades-long policy of the central banks to print trillions of worthless paper money to prop up the banks after the banking crisis in 2008, backed by near zero level interest rates.

But today it is workers’ wages that are blamed along with the ‘economic inactive’ – the 9.2 million people who are out of work including 2.8 million not working due to long-term sickness.

The demand from the capitalist class is for the Tories to ramp up the war on workers’ wage demands through implementation of the anti-strike laws, and at the same time cutting benefits to the sick and unemployed to force them back to low paid jobs.

Commenting on the ONS report yesterday, Paul Nowak, TUC general secretary, said that the figures show that real wages are still far below their level in 2008 with more than a million people on zero-hour contracts and 2.8 million out of work due to illness.

Nowak ended by saying: ‘It’s time for a change. We need a proper plan for jobs, growth and public services to get living standards rising sustainably again.’

What planet is Nowak and the TUC living on? There is no plan for jobs or investment from either the Tories or the Labour Party which has fully embraced only paying what a bankrupt capitalist economy can afford – which is precisely nothing.

The only policy is to enforce a regime of wage cuts accompanied by slashing benefits to the sick and disabled forcing them back to work.

The working class and young people are certainly demanding it’s time for a change, a change in the cowardly refusal of the TUC to fight, by forcing them to call a general strike to bring down the Tories and go forward to a workers’ government that will nationalise the banks and major industries, building a planned socialist economy.

This is the way forward.