The New Worker
The Weekly paper of the New Communist Party of Britain
Week commencing 13th August 2010
THE BANK OF ENGLAND on Wednesday 4th August 2010 revised its forecast for expected growth in Britain’s economy downwards and predicted a “choppy recovery”, raising real fears of a “double-dip” recession.
The Bank of England now expects gross domestic product growth to peak at around three per cent annually — down from its forecast in May of 3.4 per cent growth — and predicts that inflation will stay above its two per cent target until the end of 2011.
There are many factors involved. One of the biggest ongoing problems is that United States economy is still in trouble, causing the Federal Bank there to resort to “quantitative easing” again.
This is effectively printing more money, which lowers the value of the dollar, making American exports cheaper in the world market and imports to America dearer.
Naturally American companies will be buying fewer imports but the US is one of Britain’s biggest customers. Our exports will be hit.
Unemployment in Britain fell slightly according to the Office of National Statistics. The number of people unemployed in Britain fell by 49,000 to 2.46 million in the three months to June. This is the second consecutive month that the jobless number has fallen but the numbers involved are so low economists are regarding it as more or less holding steady.
But big increases are expected in the autumn after the Government’s October spending review and as the details of public sector cuts are spelled out and implemented.
Unison general secretary Dave Prentis commented: “The latest figures are cold comfort to the millions of people still locked out of the jobs market, and to the hundreds of thousands of public sector workers faced with losing their jobs.”
And last Tuesday the Government announced cuts of £2 billion in the budget of the Ministry of Justice, predicted to cost 15,000 jobs. And a new batch of graduates has just entered the jobs market with very few jobs for them to go to.
The looming prospects of high unemployment and general economic insecurity — the feel-bad factor — are having an impact on retail sales. Holiday firms are cutting prices in half and still failing to find buyers.
The British Retail Consortium reported a 0.5 per cent rise in retail sales in July compared with a year earlier, down from the 1.2 per cent increase seen in June.
Sales will also be hit by the rise in value Added tax from 17 per cent to 20 per cent next January.
Inflation is also rising because of a steep rise in the price of petrol and world food prices. Food prices are rising because of farmers using land for biofuels rather than food and because of climate change-related weather disasters all around the world that are affecting crops in Russia, Asia and Africa.
But these rises are being exacerbated by capitalist speculators betting on commodity prices to make themselves a fortune while millions starve.
Inflation in Britain is likely to stay much higher than the Government’s target for a long time. Meanwhile working class household incomes are shrinking due to unemployment and wage freezes. There will be serious hardship.
At the same time the bosses are doing very nicely. Research published last week by the employment consultancy Hewitt New Bridge Street showed that the average pay package among Britain’s top executives increased by £500,000 in the past financial year, while ordinary employees’ salaries at a third of Britain’s biggest companies remained frozen.
The research shows that despite the feeble economic recovery executive pay at Britain’s FTSE 100 companies continues to soar.
The median total remuneration for the highest paid directors in FTSE 100 companies is now just below £3 million. It has risen from £2.5 million a year ago, even as leading companies have been implementing massive job cuts.
Unemployment has risen in the period covered to nearly 2.5 million people out of work, and the average pay increase across the country, including bonuses, was just 2.7 per cent in the year to May, according to the Office for National Statistics.