LAST week, the Bank of England issued a ‘gloomy’ outlook for the UK economy with its growth forecast cut in half from that made just three months ago and the revelation that the economy contracted by 0.1% in the final quarter of 2024.
If this was considered to be ‘gloomy’, then the reality is much more acute for a British capitalist system whose pile of unrepayable debt is vastly greater than officially admitted by the Bank.
The national debt, officially estimated to be approaching £3 trillion, scarcely gets a mention from the Treasury or the Bank, despite the fact that it represents 100% of the UK’s GDP (the total wealth produced by the country).
In fact, this figure of nearly £3 trillion is a massive underestimation of the debt drowning British capitalism, according to an article in yesterday’s Telegraph newspaper.
This article by Liam Halligan, headed: ‘The national accounts are full of cons and tricks – no wonder investors see us as a joke,’ starts with the undeniable assertion that Britain’s public finances are ‘teetering on the brink of systematic meltdown’.
Halligan identifies three areas that are left out of the UK debt pile.
These are: ‘The Bank of England’s asset purchase facility (APF); contractual debts accrued under the private finance initiative (PFI); and, the really big one – mammoth state obligations represented by the still very generous, inflation-proofed pensions enjoyed by millions of public sector workers.’
When these are factored in, the UK’s national debt shoots up to a staggering £4.385 trillion, ‘an astonishing 161% of GDP’.
Halligan explains that the Bank of England ‘is sitting on big losses as a result of its quantitative easing (QE) programme’.
QE was the programme to rescue the banks and corporations from collapse following the world banking crash in 2008. Under QE the Bank ‘bought hundreds of billions of pounds of mainly sovereign debt in a bid to boost the economy’.
The value of these ‘assets’ have fallen dramatically since the Bank bought them but instead of adding these losses to the national debt the Office for National Statistics (ONS) actually subtracts them from the UK’s headline debt figure.
The second massive debt hanging over the UK economy that he identifies is the Private Finance Initiative (PFI), championed by the Labour government of Gordon Brown and Tony Blair.
PFI, which brought in the privateers to finance the building of hospitals and schools, saddled the NHS and the nation with massive debts owed to the hedge funds, thus contributing to bankrupting the NHS, and adding billions to the public purse, as these debts now become liable for repayment.
But while the Labour government will never contemplate making the banks and corporations liable for the billions of public money spent bailing them out of bankruptcy, and certainly not refusing to pay off the hedge fund speculators, the third cause of the debt crisis identified by Halligan, public sector pensions, has been under continual attack by the government and local authorities.
The index-linked pensions of millions of low paid civil servants, nurses, doctors, teachers, firefighters and other state workers is, according to Halligan, ‘the really big one’. For the working class, pensions are not a gift from the government or employer, but have always been regarded as ‘deferred pay’.
Workers accepted lower pay increases than average in return for guaranteed pensions, paid for out of their wages and employer contributions, to guarantee a life after work.
With the UK economy heading into recession and being strangled by debt, even greater than officially acknowledged, capitalism is demanding that pensions, along with all the gains of the welfare state, are smashed.
British capitalism is not just a joke but a system that is dying on its feet and determined to make the working class pay, as it crashes into recession and bankruptcy. Workers will never accept being driven into the gutter of poverty to keep the bloated capitalist bankers and bosses in profit.
The working class must put an end to bankrupt capitalism by forcing the TUC to call a general strike to bring down the Labour government and bring in a workers government that will nationalise the banks and major industry under a planned socialist economy.
