UK interest rates were kept on hold at 0.5% yesterday, the 26th month in a row that the Bank of England has left interest rates unchanged, out of fear that the UK economy is heading for a deep slump, and that a rate rise will accelerate the process.
Last week, the Office for National Statistics confirmed that the annual rate of GDP growth in the first quarter of 2011 was 0.5%, after a 0.5% slump in the last quarter in 2010 – meaning that the UK capitalist economy is at a standstill.
Meanwhile, the inflation rate is increasing at the gallop. It is now over twice the Bank’s targeted 2% rate, meaning that the value of wages is being cut savagely as living standards are driven down.
The majority on the BoE’s Monetary Policy Committee state that inflation is being caused by the world crisis driving up food, raw material and oil prices, and that increasing the bank rate will further drive down production while having no impact on the inflation rate.
This majority 6-3 line is an expression of the absolutely hopeless position of British capitalism.
In fact, rising energy costs are expected to push inflation higher again, further slashing wages and working class living standards.
The National Institute of Economic and Social Research yesterday revised its inflation forecast higher.
Its economists say CPI inflation will reach 4.5% this year, up from a forecast of 3.3% in 2010.
The crisis in the UK is deepening rapidly, with Thursday morning’s figures showing that even the UK’s service sector slowed more than expected in April.
The Purchasing Managers’ Index (PMI) for services fell to 54.3 from 57.1 in March, compared with forecasts of a more modest drop to 55.7.
This followed similar falls in the PMIs for manufacturing and construction, released on Tuesday and Wednesday respectively.
It is a grim all round outlook for UK capitalism.
However, for the working class the deepening crisis is putting it in a position where it must fight the bosses and bankers or go under.
The annual rate of increase in the average cost of a trolley of food rose from 4% in March to 4.7% in April, according to industry figures.
Many families have been forced to cut down on the amount of food they buy and eat.
The British Retail Consortium suggested yesterday that the surprise fall in the official Consumer Price index inflation rate to 4% in March will be quickly reversed.
How low UK capitalism has sunk can be gauged from the research published by Deloitte this week, which shows that living standards have been squeezed for four years in a row by rising prices and low or no wage growth. This is the first time this has happened since 1870.
In April, the president of the World Bank, Bob Zoellick, issued a grave warning on ‘high and volatile’ food prices, where maize has climbed 74%, wheat by 69% and soybeans by 36% over the last year.
Gas and electricity costs are expected to surge by 15% in two stages this year, as energy companies pass on soaring wholesale prices.
The working class must force its trade unions to draw up their own cost of living index, based on the cost of the basic necessities that workers and their families require, and insist on monthly wage rises to match rises in their cost of living index.
There must be no sackings. If the bosses are going broke, their industries must be nationalised under workers control.
Above all there must be a general strike to bring down the Tory-led coalition and bring in a workers government that will carry out socialist policies that put an end to capitalism.
