Government borrowing for last year = £107,700,000,000

[keith_d]

Yep, that's right. Last year's public sector borrowing requirement was 107.7 billion pounds, or about 20% more than the government received in tax receipts. That sounds like a whole lot of money until you realise that their total overdraft is £1,185,200,000,000.

To put that into perspective, let's share that across the working population of the UK. That's around 29.7 milliion people.

Last years borrowing: £3626 per person

Total government borrowing: £39906 per person.

So, in addition to the taxes I paid last year the government also borrowed over three grand of my future earnings. B***ards!

I wonder how long it will be before the f***ers start congratulating themselves on only borrowing £107.7 billion pounds??

[Matt-EUC]

I think they need to sell the debt we currently have to another country so we can use that cash to repay some of our other debts.


By that I mean the debt that is owed to us by Ireland, Greece etc.

[NTECUK]

So you think this guy http://t0.gstatic.com/images?q=tbn:ANd9GcQAxAwxoE6ln-Ap4qUGfKOV87QNcvYmAARO3CTzKpZvi3npI_JKSDeJvp-1would do better.
I think not (IMHO)

[Matt-EUC]

I think somebody with actual applicable ability and knowledge would do better.

But it's not the guy in number 10 that does all the work, it's the rest of the government that do stuff. The prime minister is little more than a figurehead.

[Spank86]

So, in addition to the taxes I paid last year the government also borrowed over three grand of my future earnings. B***ards!

Yes and no.

Much of that can be inflated away over time.

It much better to spend future money than present money because it'll be worth less when we get there.

Plus governments are (almost) always in deficit, it's not a "household" even if people would like to pretend it is.

I think they need to sell the debt we currently have to another country so we can use that cash to repay some of our other debts.


By that I mean the debt that is owed to us by Ireland, Greece etc.
but we get higher rates on that than the debt we owe to others, plus it's worth crap all presently. Selling toxic assets gains a lot less than their end worth.

Your suggestion would result in us being worse off.

[Matt-EUC]

China has money.

[Spank86]

China has money.

so you would sell profit making debt at a loss to pay off less of our debt than it's worth?

Leaving us with a slightly lower debt but a bigger deficit?

You should run for government then you could sell off parliament and rent it back.

[Matt-EUC]

Umm. No.

[Spank86]

Umm. No.
That's the outcome of your suggestion.

[PyroUK]

Damn Spank you are on fire! DJ and Matt burned incredibly in just a few days.

Well done sir.

[Spank86]

That's not a burn, just an explanation.

[Matt-EUC]

What would happen if we just stopped spending money we didn't have?

[PyroUK]

Unintentional (as in the case of DJ) burning is still burning.

[PyroUK]

What would happen if we just stopped spending money we didn't have?


The economy and most business would grind to a shattering halt

[Spank86]

What would happen if we just stopped spending money we didn't have?

We'd be bankrupt before the end of the year and lots of public services would shut down.

Plus if we paid off all debt and ceased issuing it there would be a large hole where the gilt market used to be.


The UK's never been in the position of having no debt and neither had England since (probably well) before the hundred years war.

[Matt-EUC]

It really astonishes me that they said their strategy to reduce borrowing was to increase borrowing.

[Sid Squid]

Huge borrowing...

Hmmm...

What to do...?

I know! Let's make some cuts - that'll be a popular way of easing the problem, no?

State spending = public money = taxes/borrowing.

A stunningly simple equation that too few people want to understand. Nothing is free, everything has a cost. The mindless, endless expectation of, and reliance on, state spending has the greatest price.

The UK's never been in the position of having no debt and neither had England since (probably well) before the hundred years war.
True - maybe it's become a bit of a problem now though?

[Matt-EUC]

Legalise cannabis and tax similarly to cigarettes.

Instant billions.

[ClunkintheUK]

Best way to reduce borrow is to make money. you need to spend money to make money. (is the play school explanation).

The problem isn't necessarily the headline borrowing figure, but what you do with it. If they use the increase in borrowing to help businesses hire apprentices or tax breaks for entrepreneurs who will spend the money hiring people or even certain types of investors, then more business is done. more business means more work need to be done, which means more people need to be hired, so fewer people on the dole.

To give an idea, most big companies will work with between 1 and 3 turns of debt, i.e. up to about 3 times as much debt as their Earnings Before Interest Tax Depreciation and Amortisation. Average government debt of about 1.3 times average earning per earner would not seem to unreasonable (but I could be wrong, I was a corporate banker not a sovereign banker).

Also there is nothing wrong with spending other peoples money. You use their money while they don't need it (i.e. I am 30 and won't need my retirement savings for about 40 years (probably)) in return you give them back a little more then they gave you. difference is what you spend it on.

[Matt-EUC]

Also, stop building unnecessary railways!!! You don't need to get from London to Birmingham in 2 hours. We have skype, we have conference calling, we have the internet! What can a business person do in Birmingham that he can't do on the phone in London?

(I forgot where the train is actually from/to I just guessed)

[Matt-EUC]

Play Diplomacy 3,
run for prime minister
....
.....
Profit.

[ClunkintheUK]

The UK's never been in the position of having no debt and neither had England since (probably well) before the hundred years war.

Actually the first sovereign borrowing was Edward V (or Henry V I get names mixed up occasionally) specifically to fight the 100 years war. But that was his personal debt as a sovereign. The first Govvie came a few hundred years later.

[ClunkintheUK]

What can a business person do in Birmingham that he can't do on the phone in London?


Shake someone's hand, touch a new product, see the reactions on the juniors faces to what a senior colleague is saying. Don't get me wrong, communications technology is amazing now, but in some situations you simply cannot replace face to face contact.

Having said that HS2 has not been properly thought out/costed.

[Matt-EUC]

So, for those special cases, would a slightly longer commute be that much of an inconvenience? Can we get a confirmation of the actual amount of time saved by travelling on HS2?

[Wideboy]

But you need to remember the amount of jobs that will be created from the start to finish of hs2.

[Matt-EUC]

And what will those people do when it's over? Go back on the dole?

[Matt-EUC]

It'll probably be obsolete by the time it's done anyway.

[NTECUK]

And what will those people do when it's over? Go back TO POLAND?
Fixed it for you

[Matt-EUC]

Well thanks...

[ClunkintheUK]

And what will those people do when it's over? Go back on the dole?

Other construction jobs, probably with additional skills learnt and experience gained from working on the HS2 project.

Also those "special cases" happen A LOT. I used to work in a team split between London and Bristol and would make the trip one way or the other about once a month. Each time there were about 6 trains each morning that would be rammed. Every seat taken.

[Spank86]

Huge borrowing...

Hmmm...

What to do...?

I know! Let's make some cuts - that'll be a popular way of easing the problem, no?

State spending = public money = taxes/borrowing.

A stunningly simple equation that too few people want to understand. Nothing is free, everything has a cost. The mindless, endless expectation of, and reliance on, state spending has the greatest price.

You missed the last (arbitrary) step to clarify your equation and that is "= State spending"

Round and round we go, where it stops nobody knows.


True - maybe it's become a bit of a problem now though?

Post war (ww2) debt was 200% of GDP.

At that point we dissolved our empire and built the welfare state and reduced debt.

Ok so the debt had risen as a result of the war but ignore that and look at what happened next. Building the health service and welfare state didn't cause debt to rise so why should cutting it down cause it to fall?

[Matt-EUC]

Then drive.

2 hours on the M4.

[Spank86]

Also, stop building unnecessary railways!!! You don't need to get from London to Birmingham in 2 hours. We have skype, we have conference calling, we have the internet! What can a business person do in Birmingham that he can't do on the phone in London?

(I forgot where the train is actually from/to I just guessed)

Traditionally large infrastructure projects have played a key part of extracting countries from recession in good order as well as providing for the future.

The US highway system and to a lesser extent the german autobahns are both examples.

This only works of course if the money is spent in house not with completely foreign companies. If you employ 10,000 UK workers you get 10,000 UK taxpayers revenues so that's about, what? 25% off the labour bill immediately.

Actually the first sovereign borrowing was Edward V (or Henry V I get names mixed up occasionally) specifically to fight the 100 years war. But that was his personal debt as a sovereign. The first Govvie came a few hundred years later.

Splitting hairs there and you have to consider that at the time there wasn't much difference between sovereign debt and government debt especially as personal debt could be inherited.

[Matt-EUC]

Not 25% unless they intend to tax 100% of their earnings.

[ClunkintheUK]

I had no issue with the train journey. It was pretty good. Just saying that people travel between cities a lot for business.

I wouldn't want to drive 2 hours, sit in a meeting/negotiations all day, then drive another two hours home. On the train I can write up my notes from the day, organise my to do list for the next day then have a beer and read a book.

[Spank86]

Not 25% unless they intend to tax 100% of their earnings.

How did you work that out?

25% of the money paid to the workers comes straight back in taxes.

Plus national insurance etc, plus taxes on materials and the companies that supply them and the taxes on the workers.

The headline cost is not the same as what it actually cost 10 years down the line UNLESS you have full employment and those people would have been working anyway.

[PyroUK]

Not 25% unless they intend to tax 100% of their earnings.


Tax and NI contributions are (for those not on higher rate tax anyway) roughly 33% so 25% on tax alone sounds about right.

And that is on earnings over your tax allowance

[Spank86]

Tax and NI contributions are (for those not on higher rate tax anyway) roughly 33% so 25% on tax alone sounds about right.

And that is on earnings over your tax allowance

I was making a stab at a rough number since you have all sorts of tax rates being paid. I wouldn't quibble over a hypothetical 5% or whatever either way since we're not dealing with the actual numbers anyway.

If you also deduct the cost of welfare payments for those who would otherwise be out of work you again see that the "cost" reduces.

[PyroUK]

Crap, it didn't add the quote from Matt.

I was agreeing with you Spank.

There we go

[Matt-EUC]

I didn't take into consideration the tax on materials etc. But you don't get taxed 25% of your earnings. You are allowed a certain amount before tax, everything after that is taxed.

If you tax code is 745L for example, you can earn up to £7.45k a year before tax. Everything you earn over that is taxed at, I believe, 25%.

[ClunkintheUK]

Not 25% unless they intend to tax 100% of their earnings.

Average tax (including national insurance contributions etc) across the whole workforce including managers and highly specialist workers with part of their income taxed at 50%, I'd say 25% is a conservative estimate.

[Matt-EUC]

Well sh!t. Once again I am wrong, no surprise there. Sorry guys.

[Wideboy]

It'll probably be obsolete by the time it's done anyway.

Fixed it for you

You could be right seing as every other ****er in this country seems to be lazy and prefer to collect dole instead of starting a career.

[ClunkintheUK]

I didn't take into consideration the tax on materials etc. But you don't get taxed 25% of your earnings. You are allowed a certain amount before tax, everything after that is taxed.

If you tax code is 745L for example, you can earn up to £7.45k a year before tax. Everything you earn over that is taxed at, I believe, 25%.

20% up to about £35k, then its 40%. and 50% over £150k, but not many people are going to be earning that working on HS2.

[Bibio]

where is all the money being spent and on what?

i would hazard a guess that a large chunk is robbing Peter to pay Paul and not actually being spent on the public and the other large chunk is paying for bullets.

[Spank86]

When I run numbers I try to pick ones that are least helpful to what I'm suggesting.

[Sid Squid]

@ Spank.

What are you trying to say? Other than that it seems to be a rebuttal of that which I wrote, it's far from clear, and I'm a little cloudy as to the relevance of some of it.

Do please advise.

[ClunkintheUK]

where is all the money being spent and on what?

i would hazard a guess that a large chunk is robbing Peter to pay Paul and not actually being spent on the public and the other large chunk is paying for bullets.

This may be right, but the number itself is not necessarily a problem. In fact I would be inclined to believe it is, given my current level of faith in our beloved politicians.

[ClunkintheUK]

Splitting hairs there and you have to consider that at the time there wasn't much difference between sovereign debt and government debt especially as personal debt could be inherited.

Was more just saying that the concept sovereign debt really started in the hundred years war. And then the current practice of sovereign debt being a good and natural part of national economics was a bit later. I was using Sovereign and government interchangeably.

[Spank86]

@ Spank.

What are you trying to say? Other than that it seems to be a rebuttal of that which I wrote, it's far from clear, and I'm a little cloudy as to the relevance of some of it.

Do please advise.

Today's wages are tomorrows profits.

It's a cycle not a straight line path.

The fundamental paradox at the heart of the capitalist system is that companies individually have an incentive to maximize profits by minimizing wages BUT as a whole wages have to be maximized to maximize profits because the workforce are the customers. (they have so far avoided this issue by this by expanding the system but that's possibly a finite solution)


This is just as true in government. Cost Cutting is generally done by sacking people which reduces revenue (except in times of booming employment, it can be argued that an efficient government would manage expansion of debt in recessions by taking up the slack from the private sector and then feeds workers back as the recession ends however our government tends to do the opposite).

You may not get something for nothing but you certainly get nothing for nothing.

[yorkie_chris]

20% up to about £35k, then its 40%. and 50% over £150k, but not many people are going to be earning that working on HS2.

Plenty managers, consultants and estate agents...

[Matt-EUC]

They should probably try and repair some of our roads first. Hire a bunch of extra workers, resurface a shed load of (all) affected road surfaces and then employ them to help out with HS2 somehow. I'm sure they'll need service roads etc.

[dizzyblonde]

There's not much talk about this legislation

I wonder why?
http://m.huffpost.com/uk/entry/5145194/

Perhaps they should raid the bank account of Mr Google, or Mr G4S, or Mr Cafe Nero for tax dodges? Hmmmmm that would mean a lot of government friends might get bitten too....

No wonder it's quiet. And possibly illegal.

[Matt-EUC]

Don't forget amazon and Starbucks.

[dizzyblonde]

Don't forget amazon and Starbucks.

Joking aside, raiding a people's bank account in 'affluent' countries is a suggestion made by the IMF not too long ago.
They forced one country to do it for a bail in, once it's been done, it can be done again in many different guises.

[NTECUK]

Well I'm sure that the money can be moved to countries who won't subscribe to such underhand policies

[keith_d]

Yes and no.

Much of that can be inflated away over time.

It much better to spend future money than present money because it'll be worth less when we get there.



I know it's a bit late to respond to a post on page 1, but I think you've forgotten that the government pays interest on it's debt. I've not found any current figures, but this time last year the government's debt service costs were just over 3%, or broadly similar to inflation. So the real terms the value of government debt remained roughly constant.


I also got curious about what they're spending it all on, so here are the big ticket items from 2013-14:


Pensions: 21%
NHS: 18%
Welfare: 17%
Education: 13%
Debt service costs: 7%
Defence: 6%


Yep - we're spending more on our debt than on our armed forces.

But the interesting bit is the cost of health and pensions. Together they're almost 40% of the budget and they're going to rise over the next few decades. Death Race 2000, may have been a few years premature

[Spank86]

I know it's a bit late to respond to a post on page 1, but I think you've forgotten that the government pays interest on it's debt. I've not found any current figures, but this time last year the government's debt service costs were just over 3%, or broadly similar to inflation. So the real terms the value of government debt remained roughly constant.

You cant extrapolate long term trends from whats currently a pretty unusual situation, the interest on new debt is fairly high right now and inflation is very low. It's also worth noting that we have an awful lot of very old debt because interest rates on it are low so the current rate isn't the whole picture. traditionally inflation far outstrips government interest rates


But the interesting bit is the cost of health and pensions. Together they're almost 40% of the budget and they're going to rise over the next few decades. Death Race 2000, may have been a few years premature

And how much of those are staff salaries which essentially represent tomorrows taxes?

[keith_d]

You cant extrapolate long term trends from whats currently a pretty unusual situation, the interest on new debt is fairly high right now and inflation is very low. It's also worth noting that we have an awful lot of very old debt because interest rates on it are low so the current rate isn't the whole picture. traditionally inflation far outstrips government interest rates

I used the average debt service cost and an average inflation value, both of which are combinations of a whole assortment of variables. It's not a great measure, but it's an accessible one.

In general the coupon on new gilt issues lags inflation, so during periods of high inflation the government benefits from their low perceived risk by deflating away the value of some debts. However, over the last 20 years inflation has remained low, and for much of that time the coupon on gilts has been higher than inflation. Even QE pumping money into the banking system has generated surprisingly little inflationary growth. So there has been few opportunities for deflating away deficits.

From a historic perspective, even 20 years of low inflation might be regarded as an unusual occurrence. But from a personal perspective, twenty years seems like a pretty long glitch. :-)


And how much of those are staff salaries which essentially represent tomorrows taxes?

Now that's an interesting question, because pensions and health care are very different types of expenditure. Health care does pay salaries, and produces some benefit to society by keeping people healthy and therefore more productive. While pensioners are frequently below the tax threshold and generate little economic activity.

[Spank86]

From a historic perspective, even 20 years of low inflation might be regarded as an unusual occurrence. But from a personal perspective, twenty years seems like a pretty long glitch. :-)
Governments aren't people, or at least a government isn't a person.




Now that's an interesting question, because pensions and health care are very different types of expenditure. Health care does pay salaries, and produces some benefit to society by keeping people healthy and therefore more productive. While pensioners are frequently below the tax threshold and generate little economic activity.
But none of the money stays with pensioners (not in the end).

Indirect benefits is one thing but the other is that the money that flows out flows back and if it doesn't flow out then it can't flow back. If all there were was pensioners who paid 100% tax then the government could pay them an infinite amount indefinitely. The tax rate isn't anything like 100% obviously but all this means in real terms is that each £ makes more hops before it returns to government coffers.



I find it exceedingly odd that people are so concerned with our budget deficit but so completely unaware of our trade deficit which would seem rather more important.

[Skip]

China has money.

I guess you missed the TV program recently about the insane amount of borrowing/debt that China has...

http://www.telegraph.co.uk/finance/china-business/10692583/China-needs-to-solve-its-debt-crisis-says-former-Treasury-minister.html

[Red ones]

To return to the OP.
If the Gov didn't have the level of debt it does we wouldn't have the standard of living we do. The problem is how to reduce the debt without the heavy bump of living less well.

If you say we don't have much; it could be a whole lot worse. What does 20% unemployment look like?

[Biker Biggles]

Has our government been rolling over that wonga payday loan again?No wonder the bill is so high.

[Specialone]

The labour from '97 spent way more money than what they had, this created a thinly walled bubble of prosperity, with pins coming from Europe and north America, it was only a matter of time before it burst.

The conservatives got in and immediately tried to lower the deficit, something the public fought tooth and nail, it made the torys very unpopular though, but it was and still is very important to get rid of unnecessary spending, this includes some public services unfortunately.

There are tons of examples of obscene spending during the labour period, we're all paying for it now.

In regards to HS2, don't be fooled by all the crap about it creates jobs and will be good for the economy, the jobs will be mostly filled by foreign workers and businesses, regardless of what they say officially, speak to any site manager and ask what the percentage of foreign workers are on their sites.
This money will then leave the country, gone forever, the jobs are short term, the debt will be forever.

The hs2 line runs about a mile or so away from me as the crow flies, every large house close to a section by me is up for sale, none can sell, who is the gain for again?
The HS2 money would be better spent improving our current transport network, our trains are ridiculously over crowded and unreliable, road network massively under invested etc etc, the HS2 will inconvenience many but help very few.

[Matt-EUC]

Word.

[Spank86]

The labour from '97 spent way more money than what they had, this created a thinly walled bubble of prosperity, with pins coming from Europe and north America, it was only a matter of time before it burst.
This was exactlym the problem but the problem wasnt overspending in itself, it was the timing.

Labour overspent during the boom when they should have been underspending, This left us nowhere to go when the boom ended.

We have a tendency to elect the government we should have elected last time, labour and their overspending during booms and conservatives with cost cutting during busts, If we did it the other way around (see post war years) we'd have a system where the government reigns back the boom (hopefully, maybe not) and cushions the bust instead of exacerbating whichever situation is currently happening.


This money will then leave the country, gone forever, the jobs are short term, the debt will be forever.
Which is why i firmly believe that our trade deficit is much much more important than our budget deficit.

It doesn't really matter how much money you owe if you owe it to yourself.

Of course a trade surplus can have equally problematic consequences but at least they're the problems of the rich.

[keith_d]

In regards to HS2, don't be fooled by all the crap about it creates jobs and will be good for the economy, the jobs will be mostly filled by foreign workers and businesses, regardless of what they say officially, speak to any site manager and ask what the percentage of foreign workers are on their sites.

But HS2 enjoys support from both of the big parties. One of them sees it as jobs for their voters in the construction industry, and the other sees nice fat profits for it's donors.

Actually, that's rather simplistic, but I'm not convinced that the HS2 project has been costed accurately. I'm not even sure it can be costed accurately because of externalities like property values along the route. The benefits of HS2 are even less clear, so any kind of cost-benefit analysis is really complete fiction.

With this in mind, I'm not sure why it seems to have plenty of support from the government, and minimal scrutiny from the opposition.

Just my opinions,

Keith