NS&I and UK Gov Bankruptcy

Neil001

Hey guys, I'd like a serious answer to a what if scenario. I've invested in NS & I, bonds and ISA. They claim 100% security. However with the UK's debt bubble on the wrong side of crazy, if the UK Government goes bankrupt and they decide to give a haircut to investors, do I become a creditor, and as a creditor would I then be entitled to withhold tax to the HMRC equivalent to the sum taken ?

ColdIron

How could they go bankrupt when they could just print their way out of it?

System

As above. The UK owns its own currency so isn't in the situation Greece is in. The UK could pay off all its debts right now by instructing the Bank of England to print a £1.7 trillion bank note.

dividendhero

NS&I used to issue index linked bonds, sadly not available to new investors - they'd be handy if Govt ever printed their way out of debt

FatherAbraham

dividendhero wrote: »

NS&I used to issue index linked bonds, sadly not available to new investors - they'd be handy if Govt ever printed their way out of debt

Indeed, issuing index-linked bonds, and issuing bonds denominated in foreign currency, are about the only ways a state can get into an insolvent, dafaulting situation.

A state can't print its way out of problems in paying those, so they're some of the most dangerous financial instruments available.

Warmest regards,
FA

Linton

Issuing index linked bonds shouldnt be a major problem as the government's income is also index linked, taxes generally being charged on a % basis.

themanfromamarillo

Our government debt to GDP ratio is about 90%. Since 1800 that debt as a share of our economy has been higher in more than half the years. In the years after the Napoleonic wars that ratio was almost 3 times higher. Why would we go bust now when we hadn't gone bust in all those other years?

Neil_Jones

Neil001 wrote: »

Hey guys, I'd like a serious answer to a what if scenario. I've invested in NS & I, bonds and ISA. They claim 100% security. However with the UK's debt bubble on the wrong side of crazy, if the UK Government goes bankrupt and they decide to give a haircut to investors, do I become a creditor, and as a creditor would I then be entitled to withhold tax to the HMRC equivalent to the sum taken ?

NS&I doesn't have any more protection than any other bank:

http://www.moneysavingexpert.com/savings/safe-savings wrote:

All money in the state-owned bank NS&I is fully backed by the Government, meaning money put in there is as near to 100% safe as you can get.

Technically it doesn't have any more protection than any other institution, as ultimately the protection most banks have is that if they go bust, the Government will bail them out. Here it's Government-owned, so as it'd take the Government going bust for it to be in trouble it's as safe as it gets (if the UK went bust we'd all have bigger problems!)

But that being said, as themanfromamarillo has said while I was writing this, we've had more serious debt problems than where we are at the moment over the years and survived them all. This isn't a Greece situation.

Linton

Neil_Jones wrote: »

NS&I doesn't have any more protection than any other bank:
.....

Yes it does - bank accounts are limited to the FSCS level of £85K. NS&I doesnt come under the FSCS scheme and deposits are explicitly 100% guaranteed by the Treasury.

Gambler101

If JC ever gets in run a mile, until then we should be OK the Tories arnt reckless spenders!

Gadfium

Gambler101 wrote: »

If JC ever gets in run a mile, until then we should be OK the Tories arnt reckless spenders!

:eek:

£1 Billion to a bunch of far-right, Young Earth Crationist believers in Norn Iron just so they could limp on in power for another few months would suggest otherwise.