British capitalism attacks living standards on all fronts

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The bubble of the British economy is about to burst. It appeared to be in reasonable health from the mid-1990s. However, we have shown that this has been achieved by cutting labour costs and increasing working hours, and by the increase in private consumption based on a massive extension of individual debt, primarily through mortgage equity withdrawal and credit card debt. Britain’s total debt including mortgages is estimated at £1 trillion and worsening (see WR 283 and 284, ‘Britain can’t escape the world economic crisis’). However, as we showed in these articles, this can’t last and Britain can’t continue to ‘magic’ away the effects of the global economic crisis of capitalism. There is every sign that the downturn is now upon us and the perspective of increased attacks on workers’ living standards is coming more out into the open.

Britain’s trade deficit last year was £47.6 billion, 4% of GDP, making it “the highest ever in absolute terms”. This was compounded by the first annual deficit in oil of £670 million in 2005 (compared with a surplus of £1.7 billion in 2004) since the early days of North Sea Oil in 1979 and the trade deficit “will tend to get worse due to our increasing dependency on imported fuel” (Independent, 15.2.06).

Economic growth slowed during 2005 to between 1.6 and 1.7% which is the lowest since early 1993 and this is explained in part by the zero growth in hourly productivity per worker in the year to the third quarter of 2005 and output per worker increasing by only 0.4% over the same period, the slowest rate for 15 years. Business investment has been weak in the last 5 years compared with previously.

 The overall state of the British economy can only mean one thing for the working class, a massive attack on its living standards with more redundancies, cuts in pay and conditions including pensions, as well as bigger bills for gas, electricity, council tax, etc. One example of the job cuts was the announcement at the end of February by the telecoms company, Cable and Wireless, of 1,000 job cuts in the next three years.

Increasing unemployment

According to the ONS (Office of National Statistics) the rate of unemployment increased to 5.1% in the final quarter of 2005. The 108,000 people added to the list bring the official total of unemployed to 1.54 million. The real total is much larger. Since the early 1980s the unemployment statistics have been subject to serious ‘massaging’ with a lot of the long-term unemployed not registered as such but classified as unavailable for work and living on incapacity /disability benefit (there are 2.7 million people on incapacity benefit today compared with one million in the 1980s). As for the host of young people trying to enter the jobs market for the first time (who have to be 18 years to claim unemployment benefit anyway) as well as many long-term unemployed, they are not considered to be available for work as a consequence of being placed on various short-term training courses that offer little chance of employment.


In recent issues of WR we have shown how the ruling class is attacking pensions under the rhetoric of ‘we can’t go on living beyond our means’, ending final salary schemes and proposing extending retirement age to 70 years (‘Pensions crisis shows capitalism has no future’ in WR 290, ‘Attacks on pensions: unions are part of the problem’ in WR 291). And the government is increasing the fear for public sector workers that they can’t expect their full pension entitlements: “The black hole in public sector pensions is almost four times larger than originally estimated, Whitehall accounts show. This follows a change in the way the Government works out the cost of its retirement schemes. Government documents show that since last year the amount of provision needed for public sector pensions has risen from £24.2 billion to £81 billion. Experts said that the increase showed that the public sector pensions bill is growing at an alarming rate.” (Daily Telegraph, 27.2.06)

Increased bills

As regards the energy bills workers are facing, five out of the six major energy suppliers have already increased their domestic prices in 2006. By the middle of February annual gas bills had increased by 13.55% according to uSwitch, the organisation that monitors energy prices, equivalent to £61.70 on an average bill. And this could get worse if the other companies follow British gas which has made the highest ever increase of 22%. This is said to be connected with the increased cost of oil and when the G8 ministers met recently they warned of “the threat to global economic growth posed by energy prices.” (Observer, 26.2.06). Alongside this, the new Council Tax bills (i.e. bills for services provided by the local state) are predicted to increase by double the rate of inflation this year.

Cuts in health

In the last issue of WR we also showed that despite the acclaimed government investment in the NHS, the Hospital Trusts were at breaking point as regards their finances. A recent Royal College of Nursing report further confirms this referring to Trusts having had to close wards and delay patient treatments to save money. 64 trusts are predicting deficits totalling £548 million at the half year stage. “To eliminate the overspending and pay back this debt, they would need to cut double that amount from next year’s budget.” (Guardian, 27.2.06). This can only mean dire consequences for staff and patients. Meanwhile in both hospitals and schools, the mechanisms of introducing ‘value for money’ (which means introducing the business ethic of ‘profitability’ and ‘competition’ and so worsening working conditions) are going ahead under the banner of Health and Education reforms.

Incapacity benefit

Another recent announcement concerned the fact that the government can’t anymore afford the large numbers of people collecting invalidity and disability benefits. It is going to re-brand incapacity benefit as ‘employment and support allowance’ with the intention of conducting rigorous medical assessments on claimants. “The government has unveiled its plans to reform incapacity benefit, which include the creation of a new unit to check on claimants to ensure they are still ill. Under the proposals, those who refuse to participate in back-to-work schemes would have their benefits cut. Incapacity benefit claimant Alan Dick, 49, from Cardonald in Glasgow, told the BBC Scotland news website of his concerns about some of the proposals.” (BBC website). These concerns relate to the fact that means-testing is now applied to claimants and the fact that there is a 12 weeks holding period during which adjustments to benefits are decided leaving claimants with problems in paying their bills while they await a decision. A recent government Green paper called the current system “an inhumane and outdated approach” for the brutal way benefits are withdrawn without a waiting period when someone fails an assessment. A Citizen’s Advice Bureau report was scathing about this too, and the fact that claimants were subject to the intimidation of having to go to appeal against assessment decisions when ultimately over 80% of these appeals were won.

The economic crisis is not a localised affair of British capitalism. It is global and all indications tell us that these convulsions will get much worse in the near future. Through tough measures put in place in the 1980s and 1990s, and continued till now, the British economy has given the appearance of being able to ride out the crisis. But this was only an illusion. British capitalism has to compete in the world market and the only way it can hope to defend its position is by brutally attacking workers’ living standards once again. This leaves the working class with no choice. It has to develop its combativity against the attacks and deepen its consciousness of the real nature of the capitalism. Only in this way will it be ultimately capable of developing and uniting its forces against a capitalist system that has for too long hindered humanity’s development.
Duffy 3.3.06


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