SPIRALLING public spending and interest payments on government debt have forced Chancellor Rachel Reeves to borrow £18 billion last month, the highest August figure for five years, with public sector net borrowing rocketing to hit £83.8bn since April, according to the Office for National Statistics (ONS).
The government has spent £36.8bn more so far this financial year than in the same five-month period a year ago, with rising public spending and debt costs outstripping the receipts from Reeves employment tax raid.
Interest payable on central government debt has increased by £10.6bn to £49.9bn since April, the highest for decades. ONS chief economist Grant Fitzner said: ‘Although overall tax and National Insurance receipts were notably up on last year, these increases were outstripped by higher spending on public services, benefits and debt interest.’
Targeting the public sector and the NHS for funding and staff cuts, an article in The Daily Telegraph by Eir Nilose yesterday said that Britain is in the depths of a hiring recession, before launching an attack on the ‘bloated’ public sector.
Almost 6.2 million people are now on the public payroll – more than at any point in 14 years and up by 75,000 in a year.
The total includes more than two million NHS staff, and the demand is for the Labour government to make savage cuts to nurses, doctors and all public sector workers in an attempt to bail-out bankrupt British capitalism.
According to the Office for National Statistics (ONS), higher public sector pay and the rocketing amount of interest charged on the massive national debt of around £3.2 trillion, along with the drop in money from VAT as workers spending hits rock bottom, is responsible for this crisis.
The interest paid on government debt has surged to almost £50bn in the first half of the year alone, against a backdrop of inflation running at nearly double the figure of 2% that the Bank of England (B0E) has been desperate to achieve.
According to bourgeois economists, productivity gains – being able to do more with less – are the ultimate driver of economic growth. Yet, since the financial crisis, both the private and public sectors have struggled on this front, says Andrew Goodwin of Oxford Economics.
To turn things around, ‘we need the public sector to play its role as well’, Goodwin says.
‘It is imperative that the government does take measures to improve productivity across the public sector. We can’t just continue increasing taxes without doing anything on public sector productivity.
‘Making the state more productive is the only pain-free lever the Chancellor can pull to right her fiscal plans when there is little in the way of private sector growth,’ he said.
Making the state ‘more productive’ is a code for cutting wages for public sector workers, as Birmingham’s Labour Council is attempting by imposing annual pay cuts of £8,000 on its bin workers.
Labour prime minister Keir Starmer has pinned his hopes on artificial intelligence (AI), to boost the economy, promising earlier this year that the technology would allow the ‘public sector to spend less time doing admin and more time delivering the services’.
However, this also threatens cutting thousands of public sector jobs.
The Bank of England (BoE) baulked at cutting the central bank interest rate on Thursday and unanimously voted to keep the bank rate at 4.0 per cent, citing the probability of further inflation, and offering no respite for Reeves’s government debt servicing costs.
With the disintegrating Starmer government reeling from one crisis to the next, now is the time to stop Reeves’s planned tax and cut budget attacks on the public sector and NHS.
The TUC leaders must be forced to call a general strike to bring down Starmer’s Labour government, going forward to a workers government and socialism.
Trade union leaders who refuse to call a general strike must be removed and replaced with a leadership prepared to mobilise the strength of the working class to bring down the Labour government and bring in a workers government that will expropriate the bosses and bankers, building a socialist planned economy.
This is the way forward!
