The OECD predicted that Britain’s economy will expand by at best a puny 0.5% in 2011, and will contract in the final quarter of this year and at the start of 2012.
This is even without an implosion of the eurozone, which would lead to a far larger economic contraction.
Mervyn King, governor of the Bank of England, has added his voice to the gloomy chorus, also predicting a ‘double-dip’.
Even the government’s quango, the OBR, has predicted growth will be only 0.9% this year.
In reality, this is not some unexpected ‘double-dip’ recession which has resulted, as the Chancellor George Osborne tried to claim in his autumn statement today, in unforeseeable difficulties for the government.
This is the continuation of the ‘great recession’ of 2008-09, interrupted only by a very feeble ‘recovery’ in 2010.
The Socialist Party, along with a few capitalist commentators, has repeatedly predicted what is now unfolding.
As the OECD also points out, the second stage of this great recession will mean even greater misery for working class families, with unemployment increasing more than it did in 2008-09: “Unemployment is already higher than during the 2008-09 recession.
“Government employment will continue to fall, while the business sector will further decrease hiring in response to flagging demand.
“The weakening of the economy is likely to have a proportionally bigger impact on employment than in the recent recession, as real wages and shorter working hours may adjust less this time.”
The Con-Dems have led the world in arguing that cuts are the solution to the economic crisis. The New York Times has rightly accused the Con-Dems of implementing “a quack cure” which could lead to “a lost decade of no growth”.
Back in 2008 the world’s capitalist powers appeared to have learnt from the 1930s, as they responded to the catastrophic crisis in the global financial system by injecting huge sums of money into the economy, thereby preventing, at least in the short term, the recession turning into a ‘great depression’.
In Britain alone, £850 billion was spent on bailing out the banking system. All wings of the capitalists were united in demanding that it should be the working class and poor who paid the price for the economic crisis, but one wing argued that cuts in public spending should only begin once the economy was growing again.
Another section – epitomized by the Con-Dem government – quickly became dominant, arguing that massive and immediate cuts in public spending were needed, and that the ‘private sector would then fill the gap’.
Eighteen months on and the government’s economic strategy lies in tatters. Savage cuts – resulting in misery for millions – have considerably exacerbated the economic crisis.
Gross Domestic Product stands 14% below where it would have been by now without the recession. Far from filling the gap, the private sector is set to contract as demand shrinks.
The myth that Britain could ‘export its way out of the crisis’ – along with every other country in the world – has been shattered.
George Osborne has been forced to admit that borrowing is expected to be £112 billion higher over the next four years than he had previously predicted.
In reality the figure is likely to be far greater as the deepening economic crisis means unemployment rising further and less taxes being collected.
Already the government has been forced to support further quantitative easing (printing money to create more credit for the banks) by the Bank of England, despite the Tories’ opposition to it in 2008-09.
It is due to quantitative easing rather than cuts that the British economic crisis is not as acute as it is in countries like Italy.
And now George Osborne has had no choice but to take some further desperate measures to try to partially alleviate the nightmare facing Britain. However, the autumn statement is not a ‘Plan B’.
On the contrary, as Nick Robinson, BBC political editor put it, the statement amounted to “more pain now, more pain tomorrow and more pain for longer than we’d previously been told”.
Osborne announced cuts in much-needed working tax credit; a two-year 1% cap on public sector pay increases, ie continuing the pay freeze; measures to make it easier to sack workers; and bringing forward to 2026 the increase in the retirement age from 66 to 67.
Meanwhile the OBR predicted that 710,000 public sector jobs are to go, an increase of 300,000 from their last prediction.
Such is the depth of the economic crisis, however, alongside the pain the autumn statement also had to be seen to include some attempts to stimulate the economy.
These included cuts to fuel duty and the promise of a little extra money for schools (although the latter is for more ‘free schools’ further accelerating the break up of state education).
Up until now this government had done absolutely nothing to alleviate youth unemployment, worse even than the record of the Thatcher government, which at least implemented slave labour Youth Training Schemes (YTS).
Now, as youth unemployment spirals upwards, the government has promised its own version of YTS. These work placements, however, do not promise real training or jobs at the end of the six month schemes.
What is more it will be funded by lowering families’ incomes via the cuts to Working Tax Credits.
The other, much-trailed, proposal designed to increase growth, is the £30 billion promised for building projects designed to ‘rebuild Britain’s crumbling infrastructure’ and to create jobs.
With over 200,000 building workers unemployed many will welcome this proposal. However, it is largely smoke and mirrors.
Only £5 billion is to be put up by the government now (with a further £5 billion promised after 2015).
The rest of the money is meant to come from private investors, particularly UK pension funds. It is uncertain if they will be prepared to invest in these projects, but they will certainly only do so if they can make a fat profit from them.
This is another version of the Private Finance Initiative – where the government mortgages our future by paying the private sector to build far more expensively than if the state had funded the projects directly.
A determined mass movement, with a clear strategy, can force this weak Con-Dem government to retreat.
In opinion polls a large majority of the population now oppose the government’s cuts. Nonetheless, the Tories at this stage remain more trusted on the economy than New Labour.
This is because of Labour’s lack of credibility rather than support for Con-Dem policies. In addition to Ed Miliband’s ineffectualness, Labour is undermined because it does not put forward a clear alternative, instead only arguing that they would ‘cut slower’.
The trade union movement is demonstrating its industrial strength on 30 November. However, alongside this, the working class also needs its own mass political party – which opposes all cuts in public services and workers’ pay, conditions and pensions – and fights for a break with capitalism and the building of a socialist society that is driven by meeting the needs of all instead of making profits for a few.