THE Institute for Fiscal Studies (IFS) says that if there is a capitalist government in office in 2016 it will have to find an extra £39bn a year to finance government debt, since the government has underestimated its indebtedness.
This extra £39bn is on top of the £38bn of fiscal tightening the chancellor announced in the pre-Budget report (PBR).
The institute states that if the money were raised entirely through tax-raising measures then families would face an average increase of £1,250 in taxes a year, otherwise it will mean a five year freeze on public expenditure, a measure that will mean the destruction of the Welfare State through closures and privatisations, and the sacking of hundreds of thousands of public sector workers, along with savage wage cuts.
The IFS is forecasting that the budget gap could reach £150bn a year, that is over 10% of GDP over the next three years.
The IFS predicts that the total stock of government debt, which is already over the government’s previous target of 40% of GDP, could double to more than 80% of GDP by 2016.
The IFS adds that total debt could stabilise at between 80% and 90% of GDP – worse than Italy or Greece.
Such indebtedness will see the pound sterling being devalued on an hourly basis creating a monstrous inflation in basic food prices.
Using estimates prepared by the International Monetary Fund, the IFS states that the government would ultimately have to cover bank losses of £130bn.
These have not been included in the government’s calculations.
The policies of the Labour government and the Tory opposition on how to deal with this developing crisis are similar.
A Tory government would end the ‘age of excess’ in public sector pay, shadow chancellor George Osborne said yesterday.
He added that pay had to reflect economic conditions.
In other words, workers’ pay must be cut not just by price inflation and below inflation pay rises but by state-decreed wage cuts.
Asked on BBC Radio 4’s Today programme how he would restore the public finances if he were chancellor, Osborne said: ‘I haven’t ruled out further tax rises although I will work hard to avoid them because I think where the bulk of the strain needs to be borne is on spending restraint.’
Once again, that would include ensuring pay settlements reflected the ‘prevailing conditions in the economy’, he said.
He also said that the Tories would look at three-year public sector pay deals because ‘they may be very inflexible at a time when the economic conditions are changing very quickly’.
In fact, faced with mountainous debt and massive price inflation, capitalism can only survive by pauperising the working class.
The tool for this will be a national government of all the bourgeois parties, backed by a military police apparatus that squashes every protest.
The period ahead is going to be the most revolutionary since the 1649 execution of Charles 1 by the rising English capitalist class.
The working class, the only really revolutionary class in society, must have its own revolutionary programme and revolutionary party for the developing crisis. It must accept no wage cuts, and demand wage rises that keep pace with a real cost of living index. It must resist all sackings and closures with occupations and the building of councils of action to mobilise workers for a revolutionary general strike.
This must bring down the capitalist government of the day and bring in a workers government and socialism. This is the only way forward! Join the WRP today.
