ON WEDNESDAY, the Governor of the Bank of England, Andrew Bailey, speaking at the European Central Bank’s annual policy forum, warned that soaring inflation would hit the UK harder than any other major economy during the current energy crisis.
He said Britain faces a faster and steeper downturn as households are ‘battered by a very large national real income shock’.
Bailey said that the British economy is ‘at a turning point’ and that the energy price surge and the war in Ukraine had combined to trigger spiralling inflation and the biggest drop in disposable incomes in decades’.
He said that he would act more forcefully if painfully high inflation, forecast to reach 11% in October, persists. Bailey added for good measure that: ‘The UK economy is probably weakening rather earlier and somewhat more than others. I think that’s been evident now for a few months.’
He warned: ‘There will be circumstances in which we will have to do more on rates.’ He said: ‘We’re not there yet in terms of the next meeting. We’re still a month away, but that’s on the table.’
Christine Lagarde, the head of the European Central Bank, said: ‘I don’t think that we are going to go back to the environment of low inflation.’
Stefano Pessina, the head of Walgreens Boots Alliance, said that the UK is heading for a worse crisis than other European countries.
He said: ‘The war in Ukraine does not help with its impact on the cost of oil, gas and commodities further exacerbating the speculation around it. We will go into a recession. I suspect that the UK will have a big recession, probably bigger than other European countries.’
In a panel discussion at the European Central Bank conference, Governor Bailey said: ‘We are being hit by a very large national real income shock … It will reduce domestic demand and it will pass through into the labour market, and it will pass through into inflation.’
Meanwhile, Shevaun Haviland, director-general of the British Chamber of Commerce (BCC), told its conference yesterday that time is running out to help the economy grow.
Haviland added that higher costs for raw materials over last summer, supply chain and shipping issues, problems in recruiting people, and future energy price rises, are ‘firmly putting the brakes on the country’s economic recovery from the pandemic’.
Haviland told audience members at the BCC’s global annual conference that the government has ‘until the autumn budget to reset, rethink and get their house in order’.
‘They (the government) need to put in place support for businesses now to weather this storm. And, secondly, they need to work in partnership with us to develop a long-term economic strategy for growth.’
Rising material costs, supply chain issues and worker shortages is creating a ‘perfect storm’, she said.
The plan of the UK ruling class is to make the working class pay the full price for this ‘perfect storm’ with smashed living standards, rampant inflation, homelessness and a one meal a day existence if they are lucky.
The trade unions and the TUC must now be forced to take action to defend the interests and the lives of the working class.
They must demand a sliding scale of hours so that when the full slump hits, hours will be reduced with no loss of pay and no sackings. They must also demand a sliding scale of wages so that wages are indexed to keep pace with a trade union cost of living index..
This is the way to mobilise the working class against the ruling class, and to bring out onto the streets million of workers in a general strike to bring down the Tories, to go forward to a workers government, based on workers’ councils of action, carrying out socialist policies.
This is the period for millions of workers and youth to join the WRP and its youth organisation the Young Socialists to provide the revolutionary leadership to lead the British working class to the taking of power and socialism.
However, the crisis of capitalism is a world crisis. This is why a socialist revolution in the UK will not just continue the Russian and Chinese revolutions, it must lead to the victory of the World Socialist Revolution!