RACHEL Reeves is due to deliver her first Autumn Budget as Labour Chancellor next Wednesday, and is already promising ‘tough decisions’ on cuts and tax increases to plug a £40 billion ‘black hole’ in the economy.
Yesterday, it was announced that UK government borrowing shot up sharply last month. Official figures showed that government borrowing in September reached £16.6 billion, making it the third highest figure for that month since records began in January 1993.
Governments are forced to borrow money from the international financial markets when the income from taxation is not enough to cover day-to-day spending.
Reeves has made a determined pitch to secure the faith of the international financiers – who buy up UK government debt – that she will not borrow more to fund day-to-day spending.
Which leaves open the question as to how Reeves will cover the shortfall that has dramatically increased by even more than she anticipated.
The answer can be found in the blame being ascribed to this dramatic increase in borrowing by economists, namely, the wage increases the Labour government was forced to make to NHS and public sector workers after the election. This in turn drove up the interest payments on the increased borrowing to cover these increases.
The fact that wage increases for nurses and doctors didn’t even match the loss in pay they have experienced since the Tory government instituted its vicious austerity war on wages (when wage increase was at the slowest level since the Napoleonic era in the 19th century) is swept aside.
Increased wages and increased spending on public services just pile up more debt as far as Reeves and Starmer are concerned.
Despite all Labour’s insistence of no return to austerity, the massive debt crisis gripping British capitalism demands that this is the only solution for the bosses and bankers who dominate this Labour government.
They demand not just a return to the austerity of previous Tory governments but a full-blooded war on every gain made by the working class – such is the scale of the debt crisis crushing not just British capitalism but the entire capitalist world.
This week, Reeves is in Washington for the annual meeting of the International Monetary Fund and World Bank where she will be told by the world bankers in no uncertain terms to get moving with super-austerity to try to bring down the national debt – currently standing at 100% of the UK’s economic output
The head of the IMF, Kristalina Georgieva, warned the world bankers and political leaders that global public debt will exceed $100 trillion by the end of this year and that ‘tougher action’ is required by governments and central banks to ‘stabilise’ borrowing in major economies around the world. But the IMF is insisting that the plans by major economies to stabilise borrowing ‘fall far short of what is required’.
The IMF report named the UK, Brazil, France, Italy and South Africa as among the countries where debt is expected to carry on spiralling out of control and most in need of their governments’ taking extreme measures to deal with it.
In fact, the centre of the world economic crisis is the US which has a totally unsustainable debt of over $35 trillion and whose economic and military supremacy is being challenged around the world.
What is causing nightmares amongst the IMF and World Bank is that the entire capitalist global economy is drowning in unrepayable debt with no hope of surviving except through inflicting the fast developing economic crash firmly on the backs of the masses throughout the world with imperialist wars.
The powerful working class in the US, UK, Europe and around the world will never accept being made to pay for the capitalist crisis by having all its gains of the past destroyed to keep the bankers and governments from crashing into bankruptcy.
Capitalism is in its death agony and the working class will never allow itself to be dragged down with it.
The way forward for workers in Britain is clear – the TUC must be forced to call a general strike to kick out the Starmer government and bring in a workers’ government that will expropriate the bankers and bosses and bring in a planned socialist economy.
Socialist revolution is the only way for workers to resolve the capitalist debt crisis.