LONDON, July 14 (AFP): Britain is very close to sinking into a recession and Prime Minister Gordon Brown has cut off all the solutions, former premier John Major warned yesterday.
Major, who served as the Conservatives' last prime minister between 1990 and 1997, said it was still not clear how bad the situation would become, with more bankruptcies and redundancies likely as fuel and food costs soar.
"We're going to be very close to recession, if not technically in recession-two quarters of negative growth. I think that's entirely possible," Major told BBC television.
Brown, who served as Britain's finance minister under prime minister Tony Blair for a decade from 1997, insists that the British economy is suffering due to global financial turbulence. Major said that was "partly true".
But he added: "What is equally true, I'm afraid, is because of the actions the government themselves have taken over the last 10 years or so, we are not in a very good position to deal with that problem."
Ministers could not cut taxes because of their "big fiscal deficit" and could not increase public spending "because they have already spent the money," said the 65-year-old.
"So they have cut off the solution to this problem just as the problem has arisen.
"It's quite extraordinary that over 10 years, in which the world has had the most benign economic circumstances for a very long time, that we have run up such a huge fiscal deficit.
"We have increased taxes... and we have a trade deficit that's about between 50 and 60 times higher than it was in 1997.
Of the financial climate, he said: "Fear is toxic and it is spreading, and that toxic element, that fear element, is very serious."
But, he added, government changes to the way inflation was calculated had made the official figures "extremely misleading."
"I would say inflation is probably double the retail prices index (RPI) figure, so we're between eight and 10 per cent."
Britain's economy is struggling under the credit crunch and a slowing property market.
Businesses are facing the prospect of sky-high energy bills after crude oil prices hit record highs near 147 dollars per barrel (92 euros) last week.
At the same time, the ongoing worldwide squeeze on credit has left many businesses struggling to raise capital.
Meanwhile, the chairman of Britain's Royal Bank of Scotland (RBS) signalled in an interview published today that the group would hold on to its stake in Bank of China (BoC) for the long-term.
Gordon Pell's comments to the Financial Times came in spite of RBS's financial struggles and the increase in value of its stake in Bank of China, one of the Asian country's big four state-owned lenders.
