WITH business sure that the Bank of England is due to raise interest rates to at least five per cent, warnings are being made about the prospect of a rapid increase in unemployment, in bankruptcies, even now at record figures, and in the number of people who are unable to pay their mortgages, and will lose their homes.
Now the Financial Services Authority (FSA) has joined the warning chorus. It has stated it is ‘inevitable’ that a large private equity backed company will collapse, and that this will pose a threat to the entire debt-ridden British capitalist economy.
Its nightmare is that a number of companies will be unable to deal with the amount of debt that they have been loaded up with by venture capitalist groups. These borrowed big from the banks to buy the companies, then borrowed further on the basis of their newly acquired assets to give themselves instant dividends, before going on to ruthlessly asset strip the company and to super-exploit its workforce to make a further killing, and to begin paying back the banks what they are owed.
Thirteen banks have responded to an FSA survey. This revealed that in June 2006 these banks had lent £45.5 billion to private groups of venture capitalists for buy-outs, compared to £38 billion in June 2005.
It transpires that more than 80 per cent of that vast debt has been sold on to other gangs of financial vultures including hedge funds.
The FSA is afraid that one major company failure, after a rise in interest rates, will bring down the banks and other financial institutions like a pack of cards.
Among the corporate raiders, also known as smash and grab merchants – well known to workers – are Permira Advisers, which acquired the AA, and Texas Pacific, forever linked to the ruthless lock-out of workers at Gate Gourmet, which has now acquired Debenhams.
In fact, the forthcoming rise in interest rates will turn Britain from a nation of debtors into a nation of paupers, with revolution the only way out of the crisis.
Indebtedness is at record levels and growing rapidly. Over 23,000 people in England and Wales became insolvent during the first three months of 2006 – 73 per cent more than in the same period last year, according to government figures.
The charity, Citizens Advice, has advised 1.4 million people in debt difficulty during the past year, an 11 per cent increase on the previous twelve months.
People struggling with mortgages, credit card, council tax and utility bills made up the bulk of enquiries.
When the Bank of England raises UK interest rates tomorrow, more people will sink beneath the ocean of debt.
In August Credit Action published the latest UK debt statistics.
At the end of July 2006 the total UK personal debt was £1,237bn. The growth rate increased to 10.5 per cent for the previous 12 months which equates to an increase of £105bn.
Total secured lending on homes has exceeded £1 trillion (£1,000 billion) and in July 2006 it stood at £1025.4bn. This has increased 11.2 per cent in the last 12 months.
Total consumer credit lending to individuals in July 2006 was £211.9bn. This has increased 7.2 per cent in the last 12 months.
Average household debt in the UK is approximately £8,577 (excluding mortgages) and £50,091 including mortgages.
Britain’s personal debt is increasing by £1 million every four minutes.
This is a mountain of debt that will be enlarged by higher interest rates leading to massive attacks on jobs, wages and all benefits.
Faced with this threatening catastrophe, the only way to safeguard jobs, wages, homes and basic rights is to join the WRP to organise a socialist revolution to sweep away capitalism.
The only solution to the debt crisis is to annul the debt through nationalising the banks!
