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From The Socialist newspaper, 5 April 2011

Belt-Tightening Brown Threatens Cutbacks

GORDON BROWN has warned his fellow ministers to abandon any hopes of big rises in next year's public spending round. Latest figures say that the government is in the red by almost 14 billion in the first three months of the financial year.

That compares to 10 billion in the same period of 2002.

Capitalist commentators say that Brown's forecasts of a 27 billion deficit for the year were wildly optimistic. They think weaker economic growth will reduce tax receipts and push the deficit over 30 billion - 20 billion more than Brown predicted a year back.

Mervyn King, the new governor of the Bank of England, says the economy is in for a bumpy ride as the consumer boom winds down. That boom has been fuelled by debt.

Household spending has risen faster than output for the first time in history. The Bank of England encouraged this - it brought growth of sorts.

But now household debts, after their most rapid growth since 1990, have hit an all-time high of just under 120%.

People are now tightening their belts noticeably - if banks, credit cards etc. stop lending so much money to consumers like us, some economists fear a new recession.

Whether that happens or not, the government will definitely need to borrow more. Brown hints that health and education spending would be unaffected but economists calculate that every percentage point reduction in economic growth below the government's over-optimistic target would add 6 billion to 8 billion to the 'hole' in the budget forecasts.

To fill this hole Brown is likely to cut public-sector spending and increase job loses as well as increasing borrowing and raising taxes. The crisis in the capitalist system is preparing a big shock for its most trusting defenders - New Labour.

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In The Socialist 5 April 2011:

Blair Must Go

Should The Unions Campaign To "Reclaim The Labour Party"?

Devon Bus Workers Fight Low Pay

Belt-Tightening Brown Threatens Cutbacks

Heathrow: Why Furious Workers Walked Out

Iraq: Opposition To US/UK Occupation Mounts

Hutton Enquiry: No trust in Blair

Kelly Death Deepens Blair's Crisis

Pride 2003: Fight The Bigots And Bullies

Fighting homophobia: Take The Argument Into The Communities

Pride Or Profit?

Austria: Success In Defending Women's Right To Abortion

French Unions' Protests How The Movement Was Built From Below


 

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