Our National Debt

Pennywise

steampowered wrote: »

I don't think you've thought this through.

The bank bailout only had a negative impact on the deficit while the bank bailout was going on.

When the bank bailouts finished, it had no more impact on the deficit, since no more money was being spent on the bailouts.

The debt is still there and costing interest. The country pays more in interest on loans than it does on education. We still owe that money used for bailouts.

Part of the bailout was quantitative easing which is basically printing money. That has a very long term effect, including devaluation, the effects of which can last decades.

steampowered

Thrugelmir wrote: »

Debt incurs interest. The money to pay the interest is borrowed.

Pennywise wrote: »

The debt is still there and costing interest.

To fund the bank bailout in 2008, until that money gets repaid (and most of it has been), the government would have had to issue gilts.

The interest rate the government paid on gilts issued at that time is about 4%. This is a fixed interest rate for the life of the gilt and it does not compound.

Let's put some numbers on this. The cash cost to the government on the bank bailout was £124bn (source).

At 4% interest, that is about £5bn a year in interest, assuming nothing gets repaid.

Of course most of the bailout has now been recouped by the government selling its shares back to the private sector anyway, so that £5bn figure would now be much smaller.

The deficit as a whole is currently running at about £70bn.

As I hope you will see from the above, while it is true that the government needs to pay that interest, the impact of interest on the debt incurred to pay for the bank bailout when compared to the size of the deficit as a whole is frankly tiny.

How much is RBS going to cost the taxpayer? There's a huge fine on the way from the USA.

The taxpayer doesn't pay this, RBS pays it. I accept this affects the value of the government's shares in RBS but it doesn't affect the deficit.

The deficit only gets impacted at the point on which it sells or buys RBS shares.

steampowered

Pennywise wrote: »

The country pays more in interest on loans than it does on education.

Does it?

BACKFRMTHEEDGE

Reminds you how bad the 2008 crisis was and why public services are still suffering - I remember Genarali, !!!!!!, etc all saying this would be the case - sadly all banned now (sad times).

wymondham

BACKFRMTHEEDGE wrote: »

Reminds you how bad the 2008 crisis was and why public services are still suffering - I remember Genarali, !!!!!!, etc all saying this would be the case - sadly all banned now (sad times).

are they still banned? miss them, especially Generali - wise man!

Filo25

It's already looking like reducing the deficit much further has been kicked down the road a fair bit, not surprising, even without Brexit impacts, it already looked like the Tories had already addressed most of the politically easy cuts.

The triple lock on pensions should go, but that's impossible for electoral reasons, and going after the benefits of the working poor is a lot less popular than going after the benefits of those who aren't working. It's hard to see how much longer the NHS can continue to function at acceptable levels if that pot is squeezed given the issues its already facing.

There are tough choices ahead for what type of economy people want the UK to be.

wotsthat

This isn't party political. Successive governments have been increasing the national debt. Until the electorate vote for a party that reduces the national debt it won't change unless our creditors reuse to lend any more money.

Gordon Brown's 'prudence' and George Osborne's 'austerity' are anything but. I wonder what Hammond's catchphrase will be for borrowing a shed load of money whilst pretending to get on top of the country's finances.

Seabee42

These figures do not even include pension debt or PFIs both of which are massive. As for which colour is worse sadly everyone seems to want more today without paying for it.

michaels

When the coalition took over in 2010 the deficit (not debt) was well over 10% of GDP. Labour were proposing cutting the deficit more slowly than the Tories. How many people think the coalition cut spending by too little? (The reason the deficit was so large is because Labour had set up the finances based on a boom year being a normal year and handed out money all around on that basis).

Funnily enough although the deficit is still North of 3% of GDP, tax take as a share of the economy is also at record highs so far from being a tax-cutting Tory/coalition govt actually it has presided over unprecedented tax increases.

Of course the big question is why given record employment, a recovering economy and record levels of taxation there is still a deficit?

The simple answer is demographics, the aging population means that even though govt expenditure on providing services has been frozen/cut and working age benefits trimmed, payments to pensioners appear to be unsustainable and becoming more so.

Is there a solution? Yes, combine tax and NI setting the lower NI threshold to the basic rate tax free threshold, removing the NI upper limit and setting the new tax (plus NI) rates to a level to close the current deficit.

Filo25

michaels wrote: »

When the coalition took over in 2010 the deficit (not debt) was well over 10% of GDP. Labour were proposing cutting the deficit more slowly than the Tories. How many people think the coalition cut spending by too little? (The reason the deficit was so large is because Labour thad set up the fiances based on a boom year being a nromal year and handed out money all around on that basis).

Funnily enough although the deficit is still North of 3% of GDP, tax take as a share of the economy is also at record highs so far from being a tax-cutting Tory/coaliton govt actually it has presided over unprecidented tax increases.

Of course the big question is why given record employment, a recovering economy and record levels of taxation there is still a deficit?

The simple answer is demographics, the agign population means that even though govt expenditure on providing services ahs been frozen/cut and working age benefits trimmed, payments to pensioners appear to be unsustainale and becoming more so.

Is there a solution? Yes, combine tax and NI setting the lower NI threshold to the basic rate tax free threshold, removing the NI upper limit and setting the new tax (plus NI) rates to a level to close the current deficit.

In the end though the coalition didn't cut anything like as quickly as they said they would, I would imagine by 2015 the deficit probably got to roughly where Labour had targeted it to be in the 2010 election campaign.

The coalition went heavy on austerity for the first half of the parliament, the economy slowed significantly, as you would expect with such a sharp fiscal tightening, and then they eased up on it.

Realistically we don't look likely to get back to the levels of deficit we had pre global financial crisis for a long time to come.