Are the forecast budget deficits sustainable?

Conrad

The defecit is a minor niggle, but as ever we'll cope and life goes on. The US amassed a huge military following 10 years of depression and then people never had it so good in the 1950s.

Perma-pessimists, life goes on, the clock still ticks, the Oak still grows.

My Taxes will rise, hey ho

Rochdale_Pioneers

JayScottGreenspan wrote: »

I thought Darling was making provisions for a £60bn loss.

He is. If it all goes tits up we have money accrued in the P&L to cover it. Most amateur observers have taken this normal accounting practice and have banked the £60bn as lost.

JayScottGreenspan

Conrad wrote: »

The defecit is a minor niggle, but as ever we'll cope and life goes on.

The interest bill alone on government debt will soon be about the size of twice the total annual council tax receipts.

This will severely impact your wealth and quality of life.

And all because our politicians had the choice of whether to do what's right for the UK, or do what makes them look good and just store up some debt for future governments.

JayScottGreenspan

Rochdale_Pioneers wrote: »

He is. If it all goes tits up we have money accrued in the P&L to cover it. Most amateur observers have taken this normal accounting practice and have banked the £60bn as lost.

If Darling thought there was a high chance of there being no loss, he wouldn't be making anything like these provisions. He'd just be happy to take the risk that the next Tory government might get a nasty surprise.

I'd say the majority are focussing on what the loss is likely to be when it is crystallised. Are the IMF amateurs?

StevieJ

JayScottGreenspan wrote: »

The interest bill alone on government debt will soon be about the size of twice the total annual council tax receipts.

This will severely impact your wealth and quality of life.

And all because our politicians had the choice of whether to do what's right for the UK, or do what makes them look good and just store up some debt for future governments.

What is right for the UK - No banking system :eek:

JayScottGreenspan

StevieJ wrote: »

What is right for the UK - No banking system :eek:

Every government has the choice to spend now pay later, and funnily enough they all conclude that it's the best thing to do... for them.

The banking bailout loss provisions are a mere £60bn. Sod all in comparison to the structural deficit.

Conrad

StevieJ wrote: »

What is right for the UK - No banking system :eek:

Exactly. I'm no Labour man, but I can see they had no other choice.
Of course the state (in otherwords all of us collectivly) should dip into our pockets to spread the wealth in hard times and pay it back spreadf over many years - tis just the way it is and pointless grumbling.

JayScottGreenspan

I think we need to be a little wary of what we mean when we say "they had no choice".

Applied to bank bailouts, I agree they had to do something. What they did was not optimal, but I wouldn't expect that of any government. So indeed they "had no choice", if you like.

But they certainly had a choice about a lot of the other stuff that is contributing to the deficits.

Rochdale_Pioneers

JayScottGreenspan wrote: »

If Darling thought there was a high chance of there being no loss, he wouldn't be making anything like these provisions. He'd just be happy to take the risk that the next Tory government might get a nasty surprise.

Do you run a P&L account?* You don't make assumptions like that. There is clearly a reasonable risk that the money will be lost, hence the accrual. The money has been taken out of normal availability as it has been accrued against the risk. Does that risk mean that the £60bn has actually been spent as so many of you are assuming? No! Once we get to the point that we know its not needed then the accrual is released and the £60bn goes back into the pot showing as a gain on the P&L. If its within the same financial year then it has no effect. If its in different years then the £60bn "spend" becomes a £60bn "gain" the following year.

*Before anyone asks I manage a budget of £1.7m

JayScottGreenspan

Rochdale_Pioneers wrote: »

Do you run a P&L account?* You don't make assumptions like that. There is clearly a reasonable risk that the money will be lost, hence the accrual. The money has been taken out of normal availability as it has been accrued against the risk. Does that risk mean that the £60bn has actually been spent as so many of you are assuming? No! Once we get to the point that we know its not needed then the accrual is released and the £60bn goes back into the pot showing as a gain on the P&L. If its within the same financial year then it has no effect. If its in different years then the £60bn "spend" becomes a £60bn "gain" the following year.

*Before anyone asks I manage a budget of £1.7m

I'm not assuming the money has been spent. I'm concerned about how big the loss might be when it crystallises. The accouting principles are quite clear.

The bit in bold is what concerns me which, incidentally, doesn't sem to chime with your assumption that we will one day release the provision - we might, but than again we might not. What worries me further is this: why £60bn, why not £30bn, why not £200bn? He's plucked the number straight out of thin air. In keeping with the rest of the budget I have no doubt that he's plucked the most politically convenient number he thought he could get away with.

Why pick a safe number when that would look bad now and might hand the Tories a "gain" in one of their budgets? If he's putting up £60bn, how much more would an independently calculated provision be?