Governor King Breaks Ranks With Osborne


UK PUBLIC sector borrowing has hit a record high of £14.4bn. After more than two years of Tory austerity measures, the deficit for August is the biggest for that month since records began.

Corporation tax receipts fell by 2.1% while benefit payments rose by 4.9%, as hundreds of thousands of workers lost their jobs or became part-time workers.

The figures make it crystal clear that the government is failing in its aim of wiping out the structural budget deficit by 2015, despite the wilder and wilder schemes for slashing the benefits of the poorest.

The April 2012 net borrowing figures at £61.3bn, are 22% higher than in the same period last year.

With public sector net debt standing at £1.04 trillion at the end of August 2012, equivalent to 66.1% of gross domestic product (GDP), the pressure on Chancellor George Osborne remains enormous.

Osborne has been countering his critics by insisting that any easing of the austerity programme, and the consequent growth of debt, would mean a huge crisis with rising yield prices making the sale of British debt impossible, completely undermining the government’s basic spending programme and prompting even bigger cuts.

However, on Thursday night along came the Governor of the Bank of England to say that it would not greatly matter if the government failed to eliminate its structural debt as promised, as long as it looked as if it was trying hard to do so.

In an interview with Channel 4 News, King said it would be ‘acceptable’ if the government missed its deficit reduction target, as long as this was the result of slower global economic growth.

In vain, he was warned by others of the banking fraternity that ‘if persistently weak growth causes borrowing to overshoot, the UK’s credit rating may be endangered’.

King argued that public spending cuts should be supplemented with policies to boost growth, including infrastructure spending, support for business lending and a reduction in National Insurance contributions.

He added optimistically that he had begun to see signs of recovery, only to immediately caution that a proper recovery is many years ahead.

In fact, the Governor of the Bank of England is about to engage in more quantitative easing following the example of the Federal Reserve Bank and has given up the battle to get inflation down below 2%, in the face of rising oil and food prices and also the reality that a series of wars are being prepared in the oil-rich Gulf and Middle East.

King added that the future of the UK depended on resolving the eurozone crisis, which is hanging over the UK like a ‘black cloud’, with Greece having to sell off everything from islands to airports to get further financial support from the EU.

This is at the same time as Spain is beginning to break apart, with Catalonia seeking independence while Spain seeks an EU bailout with the ECB taking charge of its books.

In the face of all this, King now says that: ‘After a banking crisis one can’t expect to get back to normal and I fear it will take a long time.’

He added that there may well have to be another banking bailout and that the taxpayer ‘would have to step in again in any future crisis, but that it would be for a shorter period of time’.

It is plain that capitalism is in its death agony and seeks permanent life support at the expense of the working class and the middle class, and by sacrificing the future of the planet’s young people.

In fact, the capitalist system must be buried to ensure the future of humanity by socialist revolutions, leading to the victory of the world socialist revolution to replace crisis-ridden capitalism with the world socialist republic.