THE British capitalist economy and government finances are in a worse state than Chancellor Alistair Darling led everyone to believe when he delivered his Budget on April 30.
This is the view of both the House of Commons Treasury Committee, which issued its report on the Budget yesterday, and the National Institute for Economic and Social Research (NIESR).
The parliamentary report said: ‘Whilst it is possible that the Government will meet its growth forecasts, on the available evidence this is an optimistic assumption.’ (emphasis added)
Labour MP, John McFall, Chairman of the Committee, said: ‘As the Chancellor said, we are living in extraordinary and uncertain times. However, we are not convinced that the Budget forecasts fully acknowledge this uncertainty. We all want to see a way out of the recession, but we need to be realistic.’
The report noted that ‘the Chancellor’s forecasts for public borrowing and national debt represent the worst fiscal outlook since the Second World War.’
The latest quarterly report from the NIESR also indicates how far off target Prime Minister Gordon Brown and his Chancellor are in their published forecasts and spending plans.
The NIESR said it expects the British economy to contract by 4.3 per cent this year, far greater than Darling’s 3.5 per cent Budget projection.
An NIESR economist warned: ‘World trade has collapsed by more than forecast. If net trade fails to pick up, we could see a second year of economic contraction.’
The think tank forecasts that ‘unemployment will carry on rising to a peak of 3.1m people – 9.6 per cent of the labour force in 2011’. It hopes the economy will grow again in 2011.
Comparing the present economic contraction with the past, the NIESR said it is worse than that in 1979-80.
It added: ‘The pace of decline to date shows a remarkable resemblance to that of the depression of the early 1930s, though that similarity should be broken as a feeble recovery gets under way in the final quarter of this year.’
The NIESR said the outlook for public finances were worse than the Chancellor set out in the Budget because GDP would rise less than Darling expected. Government debt could rise to 100 per cent of GDP as a result of the collapse in trade.
These reports should serve as a warning to the working class and the trade union movement.
Even though they ignore the impact of the slump on the indebtedness of the banks and the resulting financial collapses, which will feed the slump, they make clear that the huge contraction in production will be deeper and more prolonged than the Brown government is admitting.
In turn, this will result in bigger government debts and even greater cuts in public spending on essential services.
Brown’s supporters in the leadership of the trade unions, who are agreeing to redundancies and pay cuts on the basis that this will enable those who have jobs to benefit in an ‘upturn’, are betraying those who have lost their jobs and suffered pay cuts, and those who still have jobs.
An ‘upturn’ is not on the agenda for years. Millions will lose their jobs, essential services will be slashed and there will be more wars for years to come.
These treacherous trade union leaders must be removed and replaced by a new leadership that will fight for the interests of the working class.
Workers must insist that their unions fight to defend every job, oppose wage cuts and insist on index-linked pay, and fight all cuts in the National Health Service, education and local authority services.
This struggle will be carried forward by occupying plants and services under threat, building local Councils of Action and strike action.
Only by removing Brown’s bankers’ government through mass political and industrial action, and its replacement with a workers’ government, that will get rid of capitalism and implement socialist policies, can the working class avoid the threatening catastrophe of the deepening slump and more financial collapses.