Public debt: GDP

JayScottGreenspan

IronWolf wrote: »

There is a good reason things like this are off balance sheet. It's because they are not debt, they don't have a redemption value or maturity date, and the creditors have no claim to them in the event of bankrupcy.

Just like you don't include future interest payments on debt, or future lease payments, because they are not debt.

So if an investment bank did some artificial jiggery pokery and helped the Treasury to re-cast the entire national debt in this way, we could happily say the national debt was zero?

I actually don't think the UK national debt is the biggest problem. The deficit is the real git.

If we had a big national debt and a balanced budget we could defer sorting out the debt until we felt we could. But we don't have a balanced budget. We're borrowing 10% of GDP per year, and there are no easy fixes.

If we carry on borrowing 10% of GDP per year, it won't be long before the gravity of the debt becomes inescapable and we spiral down into Greek territory.

chewmylegoff

Old_Slaphead wrote: »

News to me - I could have sworn that obligations under finance leases were shown on Company Balance Sheets (usually split between current and +1 year creditors)

the trouble is that you usually determine whether it is a finance lease by looking at which party holds the risk and reward. with PFI, the govt bears the risk, and the private sector "partner" the reward. does not compute, does not compute.

lvader

The graph is wrong, the UK's debt is below 70% of GDP.

chewmylegoff

IronWolf wrote: »

There is a good reason things like this are off balance sheet. It's because they are not debt, they don't have a redemption value or maturity date, and the creditors have no claim to them in the event of bankrupcy.

Just like you don't include future interest payments on debt, or future lease payments, because they are not debt.

Yeah, it's technically not debt, because it was carefully designed not to be, so that it could be held "off-balance sheet", but in substance it is the same, or worse.

Debt: borrow £10bn now, recognise £10bn liability and pay it back with £5bn interest.

PFI: instead of borrowing get a private company to pay the £10bn, the project overruns and costs £20bn capital, doesn't appear on the books, but government pays a total of £30bn to the private company in "finance payments" and another £10bn in stupid ancillary contracts which could be provided for 1/10th of the price by an alternative supplier.

Masomnia

lvader wrote: »

The graph is wrong, the UK's debt is below 70% of GDP.

Closer to 60% in fact. I wonder if they're the projected debts for a few years time?

Loughton_Monkey

Yet again, we have the biggest smoke-screen they can muster. GDP = Turnover. What's that go to do with the price of fish?

Imagine you're a typical British 'over-spender'. Your GDP is your spending!. Your 'profit' is the amount by which your spending falls below your earnings. [Balance of payments]. In fact, like UK, your spending well exceeds your income [negative balance of payments] and your total debts as a proportion of spending is huge! Let's say 110%.

Answer? It's easy. Spend 10% more. Then your debts will only be 109% of spending!

GDP is the biggest time-wasting statistic of all time! Since when has any company's turnover been a good measure of its health?

Rochdale_Pioneers

The PFI argument always comes back to this. If Tories are against the spending on PFI, and against government spending, they clearly would rather we not have built all those new schools and hospitals.

If thats the argument then fine - make it. Why hide behind "ooh, PFI is so expensive because all our mates are profiteering"?

Wookster

Rochdale_Pioneers wrote: »

Why hide behind "ooh, PFI is so expensive because all our mates are profiteering"?

Its only the Tories mates profiting?

LOL

Life is simple in your little world isn't it.

JayScottGreenspan

Rochdale_Pioneers wrote: »

The PFI argument always comes back to this. If Tories are against the spending on PFI, and against government spending, they clearly would rather we not have built all those new schools and hospitals.

What about the argument that those schools and hospitals should have been built using proper debt, on the balance sheet, in order to pay an interest rate of 3% on gilts rather than 10-15% to some opportunistic businessmen?

Old_Slaphead

Rochdale_Pioneers wrote: »

The PFI argument always comes back to this. If Tories are against the spending on PFI, and against government spending, they clearly would rather we not have built all those new schools and hospitals.

If thats the argument then fine - make it. Why hide behind "ooh, PFI is so expensive because all our mates are profiteering"?

I think the argument is a lot simpler than than.

Labour had plenty of money to spend but wasted significant amounts (national ID card for starters, defence 'black holes', consultants etc etc). With half decent financial management they wouldn't have needed to resort to PFI which, as JSG comments, costs far more in the long run.....and guess who'll ultimately have to pay that cost.