Sunday, 20 December 2009

UK Public Borrowing out of control


At £20 billion a month, the latest public sector borrowing requirement number to be published this week, the UK's finances are officially out of control.

We currently have printing money, low interest rates and Government spending out of control. Never in my life has the year ended on such an abysmal macro note for the UK. 2010 may well end up as difficult as 2009, which is not what many are seemingly thinking with all the talk of a recovery now.

John Smith, the ex-Labour Leader, once berated John Major for borrowing £20 billion in a year (even inflation adjusted this is less than £40 billion in today's money)!

What a shocking set of numbers this is - the overspend per month is equivalent to the entire annual spend of the Department for Transport and Department of Overseas aid combined.

No wonder the Treasury is getting nervous, I would guess the UK can only really sustain a few more months like this before there is a severe run on the gilts market that will force up base rates significantly - and so ensure a double dip recession. The story you hear from Labour, that it is the spending that is keeping us out of a deeper recession, is rapidly becoming the opposite of the truth.

12 comments:

Richard Elliot said...

What a contrast to Australia (where I currently am), they are fretting about having any national debt at all.

Demetrius said...

Good to have you on board. My take is that the UK government is technically insolvent, Enron style. In this situation anything could happen at any time.

Mark Wadsworth said...

They have gone completely mental. This deficit has sort of been creeping up on us, but viewed from any sensible perspective it is nuts, and we let them get away with it.

£20 billion is about £600 per taxpayer or something, for that money, they could hike the personal allowance to £30,000.

Budgie said...

I have long contended that UK government debt is hugely important and until recently, rather ignored. We still have our Prime Mentalist giving away somebody else's money that he doesn't have, like a demented credit card waving shopaholic.

Twenty billion pounds in just one month is lunacy. Is there nothing that will stop the man?

Anonymous said...

So it looks like we will get a small government and high taxes over the next decade.
Hurrah.

More seriously, the point of all the QE and continued govt spending was to prevent a nasty depression - and it looks like that worked, but it is now coming to the point where this is not necessary anymore and we will start to look at paying the bill.

One area that I have not seen discussed overmuch is that along with the interest bill that will double (if we have doubled the national debt), which squeezes spending in other areas, we cannot stop paying for the PFI deals.

Spending on Schools and Hospitals may well be protected, but we may well end up with some very nice, but empty buildings, and no money free to actually pay for your mums knee op.

The Ror said...

Thoughts on whether this is good or bad for the pound?

Clearly a drop in gilts is bad for it, but is the resulting interest rate hike going to bring it back?

CityUnslicker said...

Glad we all agree. Stop QE now!

The Ror - umm, bad for the pound as we have printed many more of them than real people (i.e. not other branches of the Government) actually want.

El-Kevo said...

The Labour supporters I speak to are saying things like:

"It's ok. It's part of the plan. To stave off depression until such a time that inflation means we can pay our debt back easier." and then they add ominously, "The only thing that can mess it up is if a new Tory government comes in and starts to cut back and pay it all off too early."

So the ground is being set for a blame-shift here. History will be kind to Labour as it was in the past.

Our woes run deeper than the economy. I say let Labour win. Let them take their own poison. Thrash the lefty Tories to boot.

We need our democracy back more than anything and I can't see the bi-party state, as it stands, doing this for us. The Tories need to be taught how to be Tories again - Cameron ain't it. Cameron ain't it.

Financial hardship is part of the cure for our malaise - it will galvanise the good people of this land to get involved in politics or at least demand proper representation.

another-anon said...

@el-Kevo

hmmm, you really think Labour would take their own poison? They'd find another thing to blame... most probably America or somesuch ;)

Plus, if you let them back in again, the great Gordoom will see it as a vindication of his great popularity and fiscal prowess over the last 2 years - the crappy threat you mention to be doing the rounds is symptomatic of their attitude towards governing the people.

Whoever wins at the GE, it's going to be a shit slinging match afterwards, but I'd rather see how DC slings it than GB, who just seems to eat it and spout it.

Remember, History is written by the winner, not the loser.

Dick the Prick said...

Geez - EK - good strategy but can we have some sugar for that pill (or probably torpedo sized suppository up d'arse)?

manfromthefuture said...

This is terrible. i cant see anything but real pain ahead on all fronts.

what amazes me is that it is not obvious to people that there is a real problem here that has to be stopped asap.

i read somewhere that it's costing us something like 60b pa in interest payments already. is this true? i've always said the Olympics will cost 20b, but if true, it's like we're buying three of them each year just servicing the debt!

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