Government Debt: That’ll Be £2.2 Trillion, Please

[interestrateripoff]

http://www.telegraph.co.uk/finance/economi...ion-please.html

Today is Cost of Government Day. Average taxpayers in Britain now have to work almost half the year – 176 days – to pay their share of the cost of running Gordon Brown’s administration. Every penny we have earned since January 1 has gone to feed the state leviathan. It is only from today that, at last, you have started working for yourselves and your families.

More than five months of our servitude – from New Year until May 14 – were spent working to pay taxes, such as income tax, national insurance, council tax, VAT and many others including the notorious “stealth†taxes. But all that effort was still not enough to feed the monster, and when he had run out of our money, the Chancellor, Alistair Darling, had to borrow – at £20  million an hour – to pay his bills.So for the past six weeks, day in, day out, we have been working to fund that borrowing. No wonder Mervyn King, the governor of the Bank of England, warned yesterday of the “truly extraordinary†scale of deficits.

We have had to put in 10 days’ more work than last year in order to keep the Government afloat. It is not just the money that Brown and Darling borrowed to bail out the banks. It is the fact that every bit of public spending – national and local – is rising faster than taxpayers’ incomes. In 1999 – when Brown had finished with New Labour’s 1997 election pledge to match Conservative budgets – government spending was just 36 per cent of the nation’s income. Now it is a third more – 47.5 per cent this year – and rising.

Not that you can believe official figures. The International Monetary Fund thinks things will be far worse. Our national income will take a knock, and more people will be out of work and receiving benefits from the Government rather than paying it taxes. That makes it probable that public spending will be more than 50 per cent of our income – sending Cost of Government Day into July.

It amounts to a huge surge in the burden of government for those of us trying to earn a crust – twice that in France, and even more than when Britain was reeling from the oil-price shocks in the early 1970s. In fact, it’s not far off the 1940s, when at least we were paying off the cost of saving the world from Hitler.

But then Alistair Darling’s budget predictions have proved just as over-optimistic as his predecessor’s. In November 2008, despite all the drama in the banking industry, his forecasts seemed almost rosy. Now, he expects the Government’s budget shortfall this year and in 2010 to be four times that prediction, with 2011 and 2012 about five times bigger. The gap between what the Government expects to spend and what it actually brings in has risen five-fold, from £120 billion to £608 billion in the space of six months.

At that rate, according to the Institute for Fiscal Studies, it will take 23 years to return government borrowing to anything like normal levels – Gordon Brown’s famous “golden ruleâ€.

And of course, every year you borrow keeps adding to what you owe. Right now, the Government calculates that it owes a total of £2.2 trillion – about £144,000 per household. The figure has trebled since the bank bail-outs. Some traders are beginning to wonder if Britain can actually pay its debts. If they start pulling out, then we really are bust.

And the real picture is worse, because the Government does not record all its debts on the official books. Take all those new schools and hospitals being built on tick at a future cost equal to £5,600 per household; Network Rail’s borrowing, another £1,000 per household; nuclear decommissioning, another £2,750; those generous civil service pensions – a future cost of almost £50,000 per household; not to mention the state pension. Add those in, and the real national debt is twice the official figure.

Do not imagine that all this extra spending and borrowing are the fault of the financial crisis and the need to counter recession – interest payments, social benefits and suchlike. A good half of it is simply feeding the Government’s pre-election spending splurge.

Excellent money management from Ponzi Brown.

I hope he borrows some more so we can spend the entire year paying interest and getting fook all for it.

Can anyone calculate what rate of growth we need to pay for this? Please remember to think la la land economics on working this out if it proves to be 10% yoy growth then so be it even if that's impossible at least it would prove how insane Brown really is.

[cashinmattress]

[Guest UK Debt Slave]

http://www.telegraph.co.uk/finance/economi...ion-please.html

Excellent money management from Ponzi Brown.

I hope he borrows some more so we can spend the entire year paying interest and getting fook all for it.

Can anyone calculate what rate of growth we need to pay for this? Please remember to think la la land economics on working this out if it proves to be 10% yoy growth then so be it even if that's impossible at least it would prove how insane Brown really is.

Just read this piece in the Telegraph

The thing I find astounding is that the British people accept, without so much as a wimper, that they work for 5 1/2 months every year just to service the cost of the state......BEFORE they service any personal debt or mortgages.

The conclusion must surely be that the British people, 99.99% of them anyway, are just as barking bonkers as the political eite they elect to rule them.

But hey! This madness is all going to end in the next 2-3 years (or months maybe) and the dumb bovine proles are going to be FORCED to realize that their lifestyles and their accepted status quo IKEA lifestyle is a fantasy. Too fekkn bad I say. Bring it on

Edited June 24, 2009 by UK Debt Slave

[bogbrush]

Just read this piece in the Telegraph

The thing I find astounding is that the British people accept, without so much as a wimper, that they work for 5 1/2 months every year just to service the cost of the state......BEFORE they service any personal debt or mortgages.

The conclusion must surely be that the British people, 99.99% of them anyway, are just as barking bonkers as the political eite they elect to rule them.

But hey! This madness is all going to end in the next 2-3 years (or months maybe) and the dumb bovine proles are going to be FORCED to realize that their lifestyles and their accepted status quo IKEA lifestyle is a fantasy. Too fekkn bad I say. Bring it on

I sadly agree, Britain is not going to change its ways until the financial nukes land.

[cells]

Just read this piece in the Telegraph

The thing I find astounding is that the British people accept, without so much as a wimper, that they work for 5 1/2 months every year just to service the cost of the state......BEFORE they service any personal debt or mortgages.

The conclusion must surely be that the British people, 99.99% of them anyway, are just as barking bonkers as the political eite they elect to rule them.

But hey! This madness is all going to end in the next 2-3 years (or months maybe) and the dumb bovine proles are going to be FORCED to realize that their lifestyles and their accepted status quo IKEA lifestyle is a fantasy. Too fekkn bad I say. Bring it on

It is because we live in a democracy that it continues.

Do you think the single mother on state handouts is going to vote cuts in her benefits?

Do you think the 2-3-4 million on “long term sick†would vote for less government spending on them?

Do you think the OAP getting £100pw plus a “free†house is going to vote that away?

Do you think the thermally ill woman getting £50k worth of treatment to prolong life by 6 months is going to vote that away?

[cells]

I sadly agree, Britain is not going to change its ways until the financial nukes land.

90% of the uk public thinks governments has a magic wand and an infinite bag of wealth/money.

They will vote for whoever says they will open that bag a little further.

[sikejsudjek]

Pay it back ? If anyone seriously thinks anyone in the UK is going to work to pay back that total of debt they are delusional. It will be money printing - and your bonds/gilts will be as useful as monopoly money within a few years. The UK is going bust.

Edited June 24, 2009 by sikejsudjek

[interestrateripoff]

Anyone know how much growth we need to keep this debt level sustainable.

Any sort of prolonged contraction will create a minor problem in servicing this level of debt.

[CrashConnoisseur]

It is because we live in a democracy that it continues.

Do you think the single mother on state handouts is going to vote cuts in her benefits?

Do you think the 2-3-4 million on “long term sick†would vote for less government spending on them?

It's not spending on benefits which is the cause of the problem. As a percentage of GDP, welfare spending is as low as it's been since the late 1960s:

http://www.ukpublicspending.co.uk/downchar...pending%20Chart

If other categories of public spending had grown at a similar rate then we wouldn't be in this mess. From the article...

'Government debt: That’ll be £2.2 trillion, please':

http://www.telegraph.co.uk/finance/economi...ion-please.html

The task is to reduce public expenditure without it showing. A freeze on spending and recruitment for a couple of years, then pegging it to inflation, would be surprisingly effective at re-balancing the books. (If spending since 1997 had risen no faster than inflation, we would be spending a third less than we do now, and could abolish income tax, VAT, and council tax entirely.)

Edited June 25, 2009 by Crash Connoisseur

[Timm]

If spending since 1997 had risen no faster than inflation, we would be spending a third less than we do now, and could abolish income tax, VAT, and council tax entirely.

Edited June 25, 2009 by Timm

[kzb]

I find myself extremely skeptical about that "welfare spending chart", in particular the downward sweep. I think we will find that all they have succeeded in doing is re-classifying certain benefits and not recording them in the same way. Do "tax credits" count for example?

We are living in a country with over 6 million "economically inactive", the highest since records began.

[Guest Parry]

It is because we live in a democracy that it continues.

Do you think the single mother on state handouts is going to vote cuts in her benefits?

Do you think the 2-3-4 million on “long term sick†would vote for less government spending on them?

Do you think the OAP getting £100pw plus a “free†house is going to vote that away?

Do you think the thermally ill woman getting £50k worth of treatment to prolong life by 6 months is going to vote that away?

No, of course not.

But the few productive folks left might just decide to down tools and not bother supporting this carnage any more.

[RufflesTheGuineaPig]

Pay it back ? If anyone seriously thinks anyone in the UK is going to work to pay back that total of debt they are delusional. It will be money printing - and your bonds/gilts will be as useful as monopoly money within a few years. The UK is going bust.

Note: The above is 50-60% B*llocks.

Printing money - inflation - won't work as the largest of the debts relate to pensions and are index linked to inflation.

Government "borrowing" only makes up the smaller part of outstanding government liabilities than come due in the next 2 decades... pension liabilities (and healthcare for pensioners) masively outweigh any borrowings, and rise in line with inflation.

If half your population are retired, the other half of the population have to collectively work hard enought to support them *and* themselves. It's basic mathamatics.

Someone is going to have to live a life of abject poverty for 20-30 years. It will either be old people (boomers) or their children. The boomers have setup a system so they are legally entitled to be supported by their children... so one way or another there is going to be a fight.

Have NO DOUBTS ABOUT IT - maths does NOT negotiate and cannot be reasoned with.

One generation is going to have to suffer 3 decades of hell.

Prepare to defend yourselves against the demographic time bomb.

Duck and cover.

[fluffy666]

Note: The above is 50-60% B*llocks.

Printing money - inflation - won't work as the largest of the debts relate to pensions and are index linked to inflation.

Government "borrowing" only makes up the smaller part of outstanding government liabilities than come due in the next 2 decades... pension liabilities (and healthcare for pensioners) masively outweigh any borrowings, and rise in line with inflation.

If half your population are retired, the other half of the population have to collectively work hard enought to support them *and* themselves. It's basic mathamatics.

Someone is going to have to live a life of abject poverty for 20-30 years. It will either be old people (boomers) or their children. The boomers have setup a system so they are legally entitled to be supported by their children... so one way or another there is going to be a fight.

Have NO DOUBTS ABOUT IT - maths does NOT negotiate and cannot be reasoned with.

One generation is going to have to suffer 3 decades of hell.

Prepare to defend yourselves against the demographic time bomb.

Duck and cover.

Or we could just raise the retirement age, making reasoned arguments to the electorate so that they understand it..

[RufflesTheGuineaPig]

Or we could just raise the retirement age, making reasoned arguments to the electorate so that they understand it..

Turkeys don't vote for christmas, and old people don't vote to delay their "hard-earned" comfortable retirement.

They worked 35-45 years and have earned their 20-30 years of retirement and will vote to get what they are entitled to.

[50sQuiff]

Note: The above is 50-60% B*llocks.

Printing money - inflation - won't work as the largest of the debts relate to pensions and are index linked to inflation.

Government "borrowing" only makes up the smaller part of outstanding government liabilities than come due in the next 2 decades... pension liabilities (and healthcare for pensioners) masively outweigh any borrowings, and rise in line with inflation.

Duck and cover.

I don't believe it's correct to consider future pension and healthcare commitments as part of the national debt. They are obligations that we must meet when due, but they're not debts. That said, if we break those social contracts the collapse of the social order will surely follow. On the other hand, if we default on our debts, our economic order will collapse.

Ultimately I'm inclined to agree with you - we're buggered either way.

Edited June 25, 2009 by 50sQuiff

[50sQuiff]

It's not spending on benefits which is the cause of the problem. As a percentage of GDP, welfare spending is as low as it's been since the late 1960s:

http://www.ukpublicspending.co.uk/downchar...pending%20Chart

If other categories of public spending had grown at a similar rate then we wouldn't be in this mess. From the article...

'Government debt: That’ll be £2.2 trillion, please':

http://www.telegraph.co.uk/finance/economi...ion-please.html

Looks to me like those figures don't include tax credits and use an out of date GDP forecast. Welfare is going to hit 10% of GDP next year.

Edited June 25, 2009 by 50sQuiff

[interestrateripoff]

So no one can give a growth prediction then?

To get growth do you always get inflation? Can you have growth without inflation? Or is growth inflation?

[CrashConnoisseur]

I find myself extremely skeptical about that "welfare spending chart", in particular the downward sweep. I think we will find that all they have succeeded in doing is re-classifying certain benefits and not recording them in the same way. Do "tax credits" count for example?

Prior to the bursting of Brown's Debt Bubble the number of claimants for most working-age benefits had been steadily falling since the mid-1990s. Over the last three decades most such benefits have become incrementally more conditional and difficult to claim. Their value has only been raised in-line with the Rossi Index (RPI excluding housing) rather than average earnings. For under-25s some benefits have been cut further. For example, relative to earnings the real value of Job Seekers Allowance is around half that of the old Supplementary Benefit. How could this scenario not result in spending falling as a percentage of GDP? Tax Credits aren't included in welfare spending, but the downward sweep predates their introduction.

We are living in a country with over 6 million "economically inactive", the highest since records began.

The latest figure for economically inactive people of working age (including students) is actually 7.9 million -- a figure which has changed little since records began in 1971. As a percentage of the working population inactivity is unchanged on the year. Excluding students inactivity has fallen over the last year continuing a long-running trend.

'DWP Press release: 17 June 2009 �" Cooper: Jobs are the top priority':

http://www.dwp.gov.uk/mediacentre/pressrel...0309-170609.asp

• the economic inactivity level is 7.889 million, up 92 thousand on the quarter and up 32 thousand on the year.

• the economic inactivity rate is 20.8%, up 0.2 percentage points on the quarter and unchanged on the year.

• excluding students, inactivity as a proportion of the working age population is up 0.1 percentage points on the quarter and down 1.1 percentage points over the last year, at 15.2%.

This graph shows the percentage of inactivity, including and excluding students, from 1993 to 2008...

For a detailed report complete with a graph showing inactivity level from 1971 to 2008 see 'Economic inactivity' [PDF]:

http://www.statistics.gov.uk/elmr/02_09/do...b09_Leaker2.pdf

Edited June 26, 2009 by Crash Connoisseur

[spivT]

Anyone know how much growth we need to keep this debt level sustainable.

Any sort of prolonged contraction will create a minor problem in servicing this level of debt.

japan didn't have any problems servicing it's debt.

Secondly in the article someone states.....

At that rate, according to the Institute for Fiscal Studies, it will take 23 years to return government borrowing to anything like normal levels – Gordon Brown’s famous “golden ruleâ€.

But Gordon's golden rule is utterly arbitrary. Just as the eurozone criteria for joining the euro were totally arbitrary.

Why do we need to look at a timescale for a return to a rule that isn't normal but utterly pointless.

[interestrateripoff]

So no one can give a growth prediction then?

To get growth do you always get inflation? Can you have growth without inflation? Or is growth inflation?

Can you have growth and no inflation?