The slump deepens as Labour steps up attacks on the poorest

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UK Gross Domestic Product fell in the three months from April to June by 0.7% confirming that the slump is deepening and that the ‘recession’ is far from over.

The year-on-year collapse in production was 5.5%, the biggest fall since records began.

The previous quarter saw a huge 2.4% contraction of the UK capitalist economy.

In fact, business investment also fell catastrophically in the second quarter of the year by 10% to £29.89bn. This was a massive 18.4% crash from the same quarter of the previous year, and also the biggest collapse in investment since records began in 1967.

Alan Clarke, economist at BNP Paribas, described the figures as ‘diabolical’.

The CBI joined in the chorus of gloom by revealing that retail sales had dropped for the fourth month running.

It also published the answers to its quarterly questions which indicate that retailers are continuing to feel the effects of the slump.

A balance of 41% of retailers told the CBI that they had reduced their number of employees, a notable deterioration from the 29% who admitted to this in May, while 30% said that they had cut back on their investment intentions.

In this situation of crisis, where the banks are already guaranteed to the tune of £1.2 trillion by the Brown government, massive cuts in government spending are being prepared for all departments, with the exception of the military.

While Tory MPs are baying for the complete privatisation of the NHS, and are demanding a 20% rate of VAT, and 20% cuts in government spending, the Brown government is getting on with the job for the bosses and the bankers.

Brown got his fingers badly burnt when he abolished the 10p rate of income tax, a vicious attack on the poor. However, the deepening of the economic crisis is driving the Brown government forward once again to lash out at the poorest.

It was reported yesterday that Brown already faces threats of a backbench rebellion over plans that will reduce the housing benefit, and the income of the poorest families in the UK, by up to £15 a week.

Ministers are being told that they must end the policy which allows people who rent homes for less than their maximum benefit to keep the difference.

About 300,000 people gained from this measure which was introduced last year. Ministers say scrapping it will save £150 million. Opponents of the plan say it will cause untold misery.

Even right-wing Labour MP Frank Field has called it ‘crazy’ and said he will table a House of Commons motion to block it.

Poor families who are to lose 20 per cent of their benefit income will be shattered and put on a starvation budget by Labour, if this measure goes through.

Of the 600,000 people who claim the housing allowance, about half are thought to have retained the surplus money – amounting to up to £780 a year each in some cases.

If approved, the measure will come into force next April, just ahead of an expected general election.

In fact, Brown hopes that a policy of beating the poorest people by cutting their benefit will gain him right wing middle class votes in any such election.

It is believed to be just the first of a number of ‘beat the poor’ measures that the government intends to bring in to win the support of the right wing vote.

Brown intends to focus on workfare policies for youth and single parents, which will include benefit cuts, as well as policies to hold down and cut public sector workers’ pay and pensions, and to significantly reduce the number of workers employed in the public sector, especially the civil service and the Royal Mail.

Trade unions must stop these attacks, and prevent the return of the Tories by taking action to bring down the Brown government, and bring in a workers government and socialism.

This is the only way to defend the interests of the working class and the poor today.