A WEEK ago the Chairman of the Bank of England, King, suggested that those who said they were seeing the ‘green shoots of recovery’ were hallucinating.
In fact, the minutes of the Bank of England Monetary Policy Committee show that King was part of a three-man minority that wanted to pump £75bn, and not just £50bn, of new paper money into purchasing the British banks’ dodgy assets.
He explained at his press conference that unless the Bank was prepared to print and hand out more ‘new’ money to the banks, a savage deflation would grip the capitalist economy.
The alarming (for the bourgeoisie) £14bn fall in revenue in July, compared to the previous year, shows that King’s concerns about the capitalist economy are well founded. In July 2008, a £5.8bn surplus was recorded for the public sector borrowing requirement. Because of the slump, bourgeois economists had predicted that last July’s surplus would turn into a £500m deficit, a worsening of the PSBR by £6.3 bn.
In fact, the onrush of unemployment and the collapse of incoming corporation and income taxation confounded these predictions in a shattering fashion. The July deficit turned out to be £8 bn – 16 times greater than the amount that the bourgeoisie had been steeling itself to accept!
This collapse of the government finances means that the Chancellor’s £175bn PSBR target for the current financial year is now history, and that the UK is heading for a PSBR this financial year of £250bn, a figure that would resound throughout the planet and contribute to a major run on the pound sterling.
Already Britain’s national debt is set to double due to the financial and industrial crisis. UK net debt is now over the £800bn level, the Office for National Statistics states, and has reached 56.8 per cent of the UK’ gross domestic product.
The total net borrowing since the beginning of the financial year now stands at £49.8bn. This is more than three times the £15.9bn borrowed at the same point last year.
Yesterday the City of London was warning that the situation demanded ‘severe fiscal consolidation and that the reversal of the VAT cut in January, when the VAT rate will return to 17.5pc from 15pc, will not be enough.
The city was quoting the verdict of the International Monetary Fund, that the UK is likely to face the biggest deficit of all the major Western economies this year, and potentially next, as this shortfall widens. This will make it absolutely impossible for the UK government to finance its deficit and the disintegrating effect on the pound sterling will be immense.
Neil Mellor, at Bank of New York, commented that: ‘People are worried that the global recovery is based on unsustainable government spending and numbers like this from the UK only encourage those fears.’
In fact the rapid deepening of the crisis means that the policies that the Tories are discussing, behind the scenes with like-minded Labour MPs – that there must be a 20% rate of VAT, a national wage freeze, and steep 20 per cent cuts in spending in all government departments, including cuts across the board in benefits and pensions – will become the programme for a national government, to ‘save the nation,’ by caning the working class and the middle class.
In this situation, the task facing the working class is to bring forward a leadership that will mobilise the trade unions to fight all cuts and closures by organising an indefinite general strike to remove the Brown government and bring in a workers’ government that will carry out socialist policies.
Capitalism is in its death agony. It must be speedily buried by the working class all over the world. Only a socialist society can satisfy the requirements of the working people of the world.