New Labour has finally admitted what millions have known for months – that the country is sailing towards recession and government ministers have no solution to the crisis.
The pound plummeted against the US dollar this week after chancellor Alistair Darling declared that Britain might be facing the worst economic crisis in 60 years. “I think it’s going to be more profound and long-lasting than people thought,” he said.
New Labour had previously tried to pretend that Britain would somehow be immune from the worst effects of a global recession. Ministers clung to the hope that if the economic situation improved, so would Labour’s popularity.
That illusion is now shattered. As the Financial Times put it last week, “The strategy of pretending things were better than they are – favoured up to now by 10 Downing Street – has run out of rope.”
Darling’s interview has left Gordon Brown’s planned “relaunch” of the Labour Party in tatters. Ministers are now fighting among themselves over who will get the blame for the growing crisis the party faces.
But none of them will dare address the fundamental problem. The real reason why New Labour has no solutions to the economic crisis is that it is ideologically wedded to the “free market” and the chaos that it creates.
That is why all New Labour’s “solutions” are for the benefit of the rich and big business.
Yet it is working people who are suffering the effects of this crisis. They are the ones threatened with rising unemployment, insecure jobs, home repossessions and poverty.
Just over the past week, a raft of new statistics have emerged to cast further gloom on the prospects for the economy.
Britain’s economy froze between April and June this year for the first time since the early 1990s, according to the Office for National Statistics figures. Almost 16 years of economic expansion has now ended.
On Monday the value of the pound fell to its lowest level against the euro since it was launched in 1999. The pound fell by 8.6 percent against the dollar in August – the biggest monthly fall since October 1992.
The weak pound will put further upwards pressure on inflation, since it means imported commodities such as oil will become more expensive.
“The current weakness of sterling accurately reflects the present situation of the British economy,” said Lutz Karpowitz, an analyst at Commerzbank.
“All indicators seem to suggest that the economy will unavoidably slide into recession.”
The Organisation for Economic Cooperation and Development (OECD) agrees with this assessment. On Tuesday of this week it predicted that the British economy will officially be in recession by the end of this year.
Last week a Bank of England official predicted that 2,000 people would lose their jobs every day over the next four months.
This would mean two million people unemployed by Christmas – the highest unemployment level since Labour came to power.
Gordon Brown’s only answer to all this is to make Britain more “business friendly” by attacking the pay, rights and conditions of workers. His public sector pay limit means millions of workers are suffering pay cuts in real terms. Private sector bosses are now following suit.
Yet if Labour wanted to help ordinary people it could. It could introduce caps on the price rises that energy companies can introduce – as the French government already has done. It could impose a windfall tax on energy companies.
It could re-establish the link between pensions and earnings to cut fuel poverty among pensioners. It could scrap the public sector pay limit and give workers decent pay rises.
But New Labour is a party wedded to the rich – and it will only do any of these if workers force it to.
660 more jobs lost a day
The campaigning organisation Credit Action released its latest shocking figures on the levels of personal debt in Britain on Monday of this week.
It revealed that one person is declared bankrupt or insolvent every five minutes. An extra 660 people became unemployed every day during the last three months.
An average of 104 homes are repossessed every day – and the Council of Mortgage Lenders estimates this figure will rise to an average of 123 a day by the end of this year.
Some 2,370 consumer county court judgements are issued every day. Across the country citizens advice bureaux are dealing with 6,600 debt problems daily.