17th June 2023
British Chancellor Jeremy Hunt – hands more to corporate profiteers.
The prospects for the Tories at the next General Election took a further dip this week as interest rates head toward 6% and the pressure upon mortgage repayments for homeowners, as well as rents for those in the private sector, look set to soar. The Bank of England, flying in the face of the actual evidence, continues to increase base rates as part of its misguided strategy to combat inflation. Bank of England Governor, Andrew Bailey, has admitted that the fall in inflation was “taking a lot longer than we expected.”
The economic path being driven by the Tories, in cahoots with the Bank of England, is to increase the cost of credit, forcing businesses to cut back on staff, increasing unemployment, with the aim of reducing the ability of workers to win higher wages.
While the fact that inflation remains stubbornly high is blamed by the Bank and capitalist economists on wage increases, the reality is that wage settlements remain below the rate of inflation. Many are still in dispute as workers struggle to make ends meet due to the ongoing price of food and consumer essentials. Pay has been failing to keep up with inflation for more than a decade in Britain.
According to the International Monetary Fund (IMF) Britain is set to become the worst performing economy in the G20 in 2023, which includes sanction hit Russia. Significantly, the only economy in which the IMF anticipates growth of over 5% is that of China, with even the United States languishing far behind at a predicted rate of just under 2% growth.
The Organisation for Economic Co-operation and Development (OECD) predicts a slightly better outlook for Britain but not by much. The OECD said that it expects a 0.2% fall in British gross domestic product this year, followed by a rise of 0.9% next year. This is worse than all countries but Russia, whose GDP is forecast to dip 2.5% this year followed by a 0.5% drop in 2024, the organisation’s economists said. This means that Britain is the only country apart from Russia to see its economy shrink this year.
According to these measures the British economy is struggling to hold its own even with its capitalist peers, who are also struggling with issues of inflation and low growth, although on a smaller scale than Britain.
While the British press make much of the impact upon mortgage repayments there is little analysis of what brought Britain to this situation and what can be done to address it. It is convenient for the banks to push the blame towards workers struggling for pay rises as being the driver of inflation but this is mere deflection on their part.
A key driver of inflation and soaring mortgage costs is the greed of the banks themselves, who have been complicit in driving house price inflation. This means that while 6% mortgage rates are nowhere near the 13% seen in the 1980’s, the impact is broadly similar. Home buyers in the 1980’s could expect to be borrowing just twice their income, for many at the present time borrowing to secure a mortgage can be higher than four times their income.
It is estimated that 2.6 million households will come off fixed rate mortgage deals in the next year resulting in massive monthly repayment increases.
Meanwhile profits at the Lloyds Banking Group alone jumped 46% in the first three months of this year, to a tidy £2.3 billion. Lloyds was not the only bank to bask in good results as a strong earnings season for the big four high street banks saw them all report better-than-expected profits on the back of higher interest rates.
The big five banks – Barclays, HSBC, Lloyds TSB, NatWest and Standard Chartered – posted profits of £37.4bn for 2022. These are the highest since the 2008 crash and come straight from households and small businesses in the form of higher mortgage payments, and increased rates on loans. There is little indication that such naked profiteering will not continue for the banks and their shareholders into 2023.
Meanwhile British Chancellor, Jeremy Hunt, is said to be prepared to back “whatever it takes” to reduce inflation, though he has ruled out a mortgage relief scheme to give subsidies for households struggling to make ends meet. In typically disingenuous fashion Hunt stated,
“We will always try to do everything we can to support families going through difficult periods and support families facing additional mortgage pressures. But we know the best help we can give them in the long run is to bring down inflation. That’s the cause of people’s worries. So, we will support the Bank of England to do what it takes to bring down inflation.”
Alongside backing the Bank of England’s interest rate rises Hunt has also pledged to limit public sector pay rises as part of his strategy to prioritise fighting inflation. So, it is clear that NHS staff, teachers, local government workers and civil servants can expect little help from the Tories in tackling rising bills.
Underinvestment in the economic infrastructure, too much reliance of the financial services sector to give the illusion of economic activity, along with corporate greed and profiteering, are at the root of the capitalist crisis in Britain. The idea that workers fighting to keep up with inflation generated by corporate profiteering, by demanding increased pay, is the usual Tory sleight of hand.
It will be little surprise to note that between 2020 and 2021, the Tories received £11.5m in donations from the finance sector. Almost one in three meetings with Treasury ministers were with big finance and its lobbyists, making it by far the most powerful lobbying force in the UK. This year reforms, known as big bang 2.0, will rip up the post-crash regulation aimed at constraining banks’ worst excesses.
British capitalism may not yet be naked in tooth and claw but unless there is decisive intervention by the working class and its organisations, it may well get there.
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