UK repays a little debt in July

The UK borrowing figures are coming out better than the Office of Budget Responsibility and some other forecasters have been suggesting. In July we had the first July surplus since 2002, at £0.2bn. This leaves borrowing at £22.8bn for the year to date. It seems likely the government will borrow less than the OBR forecast of £58.3 bn for the year as a whole.

The main reason given for a better performance was the increase in self assessment income tax receipts. Total revenues were up 3.4% whilst spending was up by 1.6%. The total stock of official debt stays at £1758 bn or 87.5% of GDP. The effective stock of debt is £1323 bn or 65.8% of GDP, as the state has bought in £435bn of the debt and now owes itself this money.

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34 Comments

  1. Newmania
    Posted August 22, 2017 at 10:42 am | Permalink

    Ha ha ,..this is the Redwood method of debt calculation is it? Oddly similar to printing load of money , in fact identical . Hey John, I have an old monopoly set in the kids bedroom, alright if I go out and spend the pink ones ?

    Reply Don’t be so silly. Have you read recent Fed policy statements?

    • zorro
      Posted August 22, 2017 at 11:19 am | Permalink

      Newmania, from that statement, you clearly have no idea about the workings of QE in UK/USA, unwinding positions in the longer term, or what ‘money printing’ is. If you are thinking of Zimbabwe/Venezuela, you go to the back of the class…..

      zorro

    • Richard1
      Posted August 22, 2017 at 1:39 pm | Permalink

      What is your point? Surely net debt is the proper measure. It is regularly pointed out that c 1/2 of gross Japanese debt is owned by Japanese state owned entities, and therefore that the net position (although high) is much more sustainable than the gross figure suggests.

    • Denis Cooper
      Posted August 22, 2017 at 3:24 pm | Permalink

      Printing money, as endorsed by three successive pro-EU British Chancellors as well as by the EU itself.

    • Captcha King
      Posted August 23, 2017 at 5:20 am | Permalink

      Our economy popped … whilst in the EU.

    • Ed Mahony
      Posted August 23, 2017 at 3:22 pm | Permalink

      Kudos to Mr Redwood for publishing posts critical of him.

      This demonstrates character / modesty (and 10 times more important than whether one is right or wrong over Europe). Lesson to me, at least.

      I really like the guy (even though i disagree with him sometimes / a lot over Europe and other stuff).

      • Ed Mahony
        Posted August 23, 2017 at 7:05 pm | Permalink

        although still very concerned by Brexit i’m afraid

  2. zorro
    Posted August 22, 2017 at 11:02 am | Permalink

    Doubtless there will be much gnashing of teeth at the BBC because of these figures. Weren’t they assured by Gideon that we would have had emergency budgets and recession/economic crisis. Soon they will be so cross that they will be knocking statues off plinths!

    zorro

    • Lifelogic
      Posted August 22, 2017 at 12:50 pm | Permalink

      Osborne on radio 4 again this AM, talking his usual economic drivel, about the northern power house, expensive white elephant train lines and the likes. Why would anyone sensible apply to Manchester for an economics degree knowing they made him an honorary Professor? He hasn’t got a clue how to run an economy well.

      £58 billion is still rather a lot per family, and that is only the increase in the debt. If only we had some sensible pro-growth, cheap energy, far smaller government policies from the gender pay & 15% stamp duty obsessed (and let kill the gig economy too) T May and P Hammond.

  3. Bert Young
    Posted August 22, 2017 at 11:16 am | Permalink

    Revenue receipts would have been higher if a ) there had been a substantial reduction in stamp duties on property and b) a lower overall tax rate . Bring on these changes !.

    • Nig l
      Posted August 22, 2017 at 5:16 pm | Permalink

      But Hammond has promised his mates in Europe that we will not cut taxes to become a low tax economy.

      • Lifelogic
        Posted August 22, 2017 at 8:06 pm | Permalink

        Why? Singapore/Hong Kong is the way to go.

  4. Iain Gill
    Posted August 22, 2017 at 12:31 pm | Permalink

    Oh so the national debt is only 2 trillion quid rounded, and we are supposed to be happy

    Meanwhile we keep giving money away to places with aircraft carriers that actually have planes on them (unlike our own) and nuclear weapons

    I appreciate in the bubble this is news John, out here in the real world it just makes our country look like a joke

    • Posted August 22, 2017 at 8:31 pm | Permalink

      The national debt = private sector sterling savings to the penny.

      So if you want to pay off the national debt can we start with your savings first please.

      Reply You are not the only person to understand balancing surpluses and deficits, but it does not mean you have to clear deficit A by stealing surplus B. The system is dynamic. The budget deficit reduces if we grow faster.

    • JoolsB
      Posted August 23, 2017 at 7:37 am | Permalink

      Spot on. Many outside the bubble totally agree with you!

  5. Prigger
    Posted August 22, 2017 at 12:34 pm | Permalink

    I shall not pretend to understand the figures ( answers ) put out by government or the OBR. I cannot see their “workings-out” which, after attending mathematics classes they must know they need to show or face detention and write a hundred lines ( do they still do that to kids? ) of ” I must put all my workings-out in the approved manner or my answers will be marked incorrect “. So, they know at the OBR they’ve been bad.

  6. The Prangwizard
    Posted August 22, 2017 at 1:19 pm | Permalink

    I hope this is not used by Mr Hammond as an excuse to start some new big spending.

  7. acorn
    Posted August 22, 2017 at 1:42 pm | Permalink

    The public sector banks still owe £300 billion, so it is £2,058 billion, 102% of GDP. In December 2009 the UK debt to GDP near trebled to 150%, two thirds of that was the Treasury “magic money tree” keeping the banks afloat. And you never felt a thing. The government didn’t go into the Bond market and borrow like crazy; it didn’t treble taxation either. It didn’t have to run a printer twenty four seven either. Magic!

  8. ian
    Posted August 22, 2017 at 2:09 pm | Permalink

    At least you have figure right now of 65% of what owed to banks, institution, markets, and people, so why not deal with PFI, and get that rat out of the hole. Lots work to do in the tax system before leaving the EU.

  9. Terry
    Posted August 22, 2017 at 3:37 pm | Permalink

    There certainly is something unsavoury about the fact that the Government bought in £435B and now owes itself that money.
    First of all, the Government has no money of its own it is Tax Payers money “managed” by Government and secondly, it devalues our currency and sometime it will have to be accounted for.

    Luckily for us, it seems the whole world is doing the same thing and has caused Global debt to rise to a mere £170 Trillions according to IMF figures.
    That is 325% Global GDP. So, how is that little lot going to be repaid?
    We certainly are “All in it together”. Now really meaning ‘all in the mucky stuff’, I do believe.

    • Posted August 22, 2017 at 8:29 pm | Permalink

      Complete nonsense Terry.

      Where do tax payers get the £’s from that then allows them to pay their taxes ?

      Once you can answer that then you can begin to understand the accounting between HM Treasury and the BOE.

      • anon
        Posted August 23, 2017 at 9:38 pm | Permalink

        Mostly via cash the private banks create, after being bailed out with QE. When they should have been loaned money and or wound down and new competitors allowed to replace them.

        Stealing purchasing power via the “inflation” read increasing prices is real though.

  10. Mockbeggar
    Posted August 22, 2017 at 4:16 pm | Permalink

    There was bound to be a delay in getting higher direct income tax because of the number of people who became self-employed. No tax payable until 31st Jan follwing the previous 5th April, so an average of some 15 months delay instead of the month end on PAYE. I wonder that the OBR didn’t take this into account when making their calculations.

    • a-tracy
      Posted August 23, 2017 at 11:42 am | Permalink

      This only works in the first year after registration. After that HMRC calculate your anticipated income for the following year and bill you for the tax in advance so that it helps to smooth this problem out, half upfront and half in arears. You can request a reduction in the anticipated tax but you have to justify it.

  11. Denis Cooper
    Posted August 22, 2017 at 5:38 pm | Permalink

    Off-topic, in recommendation of his article in the Telegraph, an author tweets:

    “Brexiters need to embrace certainty – the ECJ is no worse than any alternative”

    Really?

    This is a court which presumes to declare that there is a new legal system superior to the national legal systems of the sovereign EU member states, and – guess what – it is the supreme arbiter of that new superior, proto-federal, legal system.

    But it is still be no worse than any alternative, actual or conceivable?

    Tell you what, once we have left the EU why don’t we invite the Australian Federal High Court to assume the mantle presently worn by the federal supreme court of the European Union? OK, so we wouldn’t have the right to appoint one twenty-seventh of the judges on that Australian court, but how much of a loss would that be? Especially as so far it has not claimed to be superior to our own UK Supreme Court, unlike the EU court.

    I’m getting sick of these people who have transferred their primary loyalty to the EU and who are still determined to impose their lack of patriotism on the rest of us.

    They are only a very small minority, both of the total body of UK citizens and the 16.1 million who judged that on balance we would be better off staying in the EU and voted accordingly last summer, and to be honest we’d be better off without them.

    • Denis Cooper
      Posted August 22, 2017 at 5:46 pm | Permalink

      Actually one twenty-eighth, I forgot about Croatia!

  12. Posted August 22, 2017 at 8:22 pm | Permalink

    It’s a disaster. It is not anything like a household budget.

    Government budget surplus = private sector deficit

    Let’s look at the other side of the balance sheet and rephrase the headline.

    Boost for Chancellor as UK public finances see first July surplus since 2002.

    Is exactly the equivalent to…

    Private sector clobbered as net savings fell in July for the first time since 2002.

    To the penny !

  13. Aatif Ahmad
    Posted August 22, 2017 at 9:04 pm | Permalink

    The state bought c £435b of public debt but paid for it by issuing liabilities to commercial banks. If this debt is cancelled what happens to the central bank’s liabilities and the fact that it’s liabilities will exceed its assets? Will the Redwood ETF continue to be long sterling bonds if the central bank is balance sheet insolvent?

    Try reading the Bank’s balance sheet. It can cancel both sides of the bond purchase transaction.

  14. Beecee
    Posted August 23, 2017 at 7:48 am | Permalink

    I read that Economists are ‘confounded’ by the news.

    Like Meteorologists with their long-term forecasts they nearly almost get it wrong for the simple reason that their algorithms are based on history.

    Fortunately Satellite images now enable much more accurate weather forecasts for up to a week ahead. Meanwhile economists remain stuck in the past which keeps us laymen confounded as to why anybody listens to them?

  15. JM
    Posted August 23, 2017 at 8:57 am | Permalink

    If the state has bought in some debt, why can it not simply be written off?

    • Peter Martin
      Posted August 24, 2017 at 12:58 pm | Permalink

      If you your left hand owed your right hand £10 then you’d just forget about it. You’d write it off as you suggest.

      The problem, if I understand it correctly, is that the BoE which is just as much part of Government as any other, despite what politicians like to pretend, has bought some bonds issued by the Treasury which even politicians have to accept is a part of Government.

      If the Treasury and the BoE were merged then, hey presto, the £435 bn just disappears by subtraction. But as we like to pretend that they are different, then we have to have one nominally owing the other.

      Reply Not so. The Treasury underwrites the Banks position in the bonds. It would be easy to cancel both sides of this entry in the national books as tge Bank is a branch of government

  16. Peter Martin
    Posted August 23, 2017 at 7:43 pm | Permalink

    I’ve been banging on for quite a while that we really don’t have a correct understanding of the way our economy works.

    The last sentence of JR’s post shows what I mean:

    “……..as the state has bought in £435bn of the debt and now owes itself this money.”

    No-one can owe themselves money. It’s just not possible.

  17. Lindsay McDougall
    Posted August 24, 2017 at 3:17 pm | Permalink

    So our stock of debt is ONLY 65.8% of GDP! What a COMFORT!

  18. Mike Wilson
    Posted August 24, 2017 at 4:14 pm | Permalink

    The effective stock of debt is £1323 bn or 65.8% of GDP, as the state has bought in £435bn of the debt and now owes itself this money.

    This statement fascinates me. Why doesn’t ‘the state’ buy in the rest of the debt so it owes itself all the money?

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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