Wednesday, Dec 16, 2009
Debt figures don't look good
TIMES: Darling accused of 'hiding' debt interest bill of £60bn
"Michael Fallon, the most senior Tory on the panel, asked Alistair Darling why he had not admitted that annual interest on the debt is forecast to hit £60 billion within four years. The cost of servicing the country’s £178 billion budget deficit represents just under double the annual budget for the Ministry of Defence. The figure is roughly double the current interest charges". These charges will go back and forth till the election...
Posted by alan @ 07:40 PM (993 views) Add Comment
9 Comments
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1. Geoffps said...
Don't quite understand the maths. If they're paying 30 bio interest this year on debt of 178 bio it's almost 17%.
Can't be right, can it?
2. paul said...
Interest rates are at only 0.5% - don't our creditors realise that!
3. markj69 str05 said...
It's hardly any wonder we have bread a society of borrowers. Lead by example. It must be OK to borrow, the gov't does it, and does it so well. Well, does it greatly!!!
Someone once told me, if you want something, save for it then buy it. Don't borrow. Gives a good feeling of being well earn't, and a great understanding of the worth of material things.
Seems this has been lost, somewhere. Or engineered out of society by those who lend.
Buy now pay later. Why wait when you can have it now?
What an impatient world we live in. So much greed, so much waste.
4. str 2007 said...
How is interest on £178 billion £60 billion ?
I assume what they are saying and frankly not making that clear is the cumulitive annual debt of !70 billion this year + £178 billion next year etc etc will leave us with an annual interest bill of £60 billion.
Is there an official rate at which they are securing all this future borrowing ?
I personally can't see this country ever getting out of this.
Still Gold mining in Wales might make a come back.
Think I'll have a look on Rightmove for Welsh Goldmines.
Oh, no categories for that - yet !
5. fallingbuzzard said...
When the £178 billion is actually £1200 billion!
The £178bn is the extra amount borrowed, not the total borrowing. The official rate for this borrowing is set by the bond market, the investors that buy it. Currently the UK borrowing rate is around 4% depending on the type of debt, but it will start to creep up in about a year.
paul, Creditors do realise that interest rates are at 0.5%. Thats why they demand 4%.
6. str 2007 said...
Cheers FB
About as I thought it must be.
Seriosly though - what a mess.
Somewhere out there is a clip of Gordon Brown uttering the words 'there's nothing wrong with debt'.
Maybe not, but couldn't 60 billion be put to better use each year ?
If nothing else they could reduce the countries tax burden by £1000 for every man, woman & child in the country. That's £3-4k per household.
Oh wait a minute that would allow banks to increase lending multiples further allowing Joe public to compete with one another to push up house prices further.
7. str 2007 said...
£3-4k per household.............
Now let's think about that.
I reckon alot of households have been overspending by about £5k per annum over the last 5-7 years and getting the money from property equity.
Let's also consider that perhaps 30% of huseholds won't be able to afford this extra burden of interest payments.
Would that then make the figure nearer £5k per household that will be paying.
So £5k towards the nations interest payments (never mind capital repayment of countries debt) + cutting back the £5k per annum overspend.
Hmmmm I think we're very very fooked and the majority don't seem to realise this yet.
Or is it me that's missing something ??
8. fallingbuzzard said...
The thing that you're missing is the incredible potential to increase taxes to cover the deficit if there were not an impending election. Had Brown gone to the polls in 2007 imagine what a different outlook we would be facing!
Assuming a modest recovery there's scope for at least 5p on basic rate tax, possibly more over the medium term, and a 1.5% rise on VAT would bring us into line with say Germany although 2.5% more likely. VAT on energy will have to be harmonised within the EU rules soon so expect more VAT on those bills too. There's also scope for bringing forward some of the changes to retirement age more aggressively than has been announced to date, say increasing retirement age by 1 year for every five years forward from now. I also expect that some public spending will be pushed down to local level and funded through higher council tax.
The country as a whole isn't on the hook but the individuals within it are. I think the majority do realise but are a bit silent. Its our national characteristic. We keep quiet and say nothing. Stiff upper lip etc. etc.
9. stillthinking said...
Everybody thinks that somebody else is going to pay. Thats why Darling trumpeted the tax on bankers. The financial pain felt by the majority will be hidden as well as possible, lifting NI employer contribution being a good example, the end result is that you as an employee become more expensive and so your wage is adjusted down, but you don't directly perceive the reason as tax.
The Tories are the same, offering up the public sector (not enough).
Both parties are in the same boat, they have to create the impression that somebody else is paying. Pointlessly though because people will notice fiscal retrenchment on the required scale. The most sneaky of all, the inflation tax, can occur now under ideal invisibility conditions (but not later when obvious).
In our current deflationary environment, government spending is still inflationary, but serves to moderate the deflation rate i.e. prices do not fall at the rate they should do, or put it another way, the deflation rate for prices and wages is changed. Wages fall faster than prices, the difference being consumption by government.