Socialist Worker

We’ll pay twice for credit chaos

<ul><li>Brown holds down wages as debt spirals</li><li>Pay rises at lowest rate in five years</li><li>Cost of debt set to rise as City panics</li></ul>

Issue No. 2069

Customers queue to withdraw their savings in Croydon (Pic:» Guy Smallman )

Customers queue to withdraw their savings in Croydon (Pic: » Guy Smallman)

Working people will have to pay twice over for the credit chaos that struck down mortgage lender Northern Rock this week.

Gordon Brown tells us to hold down wage increases to below inflation levels. He has limited public sector pay rises to below 2 percent and encouraged private employers to follow suit.

And now we are all likely to face higher interest payments on mortgages and other debts as banks jack up rates to protect themselves from their own lending decisions.

For nearly two decades we have been encouraged to borrow – either on credit cards, or by taking out loans or extending mortgages.

According to the charity Credit Action, the average amount owed by each adult in Britain now stands at over £28,000.

This access to cheap loans and credit supposedly made up for Britain having some of the lowest wage rates in Western Europe.

People borrowed to make ends meet – not to splash out on “fripperies” as some right wing commentators are now claiming.

Meanwhile, the bank’s collapse threatens the pensions of thousands of workers at John Lewis, Cheshire County Council and elsewhere. Pensions firm Baillie Gifford was the biggest investor in Northern Rock – it had lost £250 million by Tuesday of this week.

For decades Tory and Labour governments have repeated the mantra that the state must not intervene in the economy.

Now the chancellor Alistair Darling has issued a blank cheque to Northern Rock and any other bank at similar risk. He did this to cheers from the same City financiers that normally decry nationalisation and state bail-outs.

Yet Labour and Tory governments have refused to spend money on council homes, telling people to rely instead on the market for a roof over their heads.

That neoliberal economic dogma is the single biggest factor behind the current financial chaos.

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