UK state debt levels are fine

Some people tell me UK state debt is too high and we need to take tougher and more urgent action to bring it down. I disagree.

According to the ONS at the end of the last financial year UK state borrowing was £1821bn or 84% of GDP. This is well below Japan, Italy, Belgium and some other advanced countries and not very different from the USA and France.

It is not, however, a very meaningful figure. The Bank of England has bought up £435bn of the debt. As the UK state owns the Bank of England and receives dividends from its interest receipts we should deduct this part of the state debt from the total. That brings it down to £1387bn or 64% of GDP actually owed to people and institutions outside the state. This is a perfectly manageable figure.

Today the UK government can borrow at 0.5% for 10 year money and at below 1% for 30 year money. These are very low rates, showing markets think there is little risk in lending to the UK state. In the 1970s when the Labour government was spending and borrowing too much they had to pay more than 15% to borrow. They ignored these warnings and ended up at the IMF begging for a loan. The IMF demanded spending cuts and a lower deficit.

Today’s problem worldwide in advanced countries is fighting deflation and economic slowdown. Markets are telling governments, companies and individuals they can borrow more for decent projects. There is too much saving and not enough investment going on.

It would be quite wrong as the rest of the world fights recession and the economic impact of the virus for the UK to tighten fiscal policy hastening a bigger downturn. Yesterday we learned that Hong Kong is offering helicopter money. Every adult citizen will be given HK$10,000 to spend, to try to fight recession. That is how bad it is in Asia.

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142 Comments

  1. Lifelogic
    Posted February 27, 2020 at 5:26 am | Permalink

    I agree. Helecopter money to individuals makes rather more sense that money just given to banks who still then over charge customers hugely with 40% overdraft rates and the likes. We need real competition and fewer restrictions in banking that reduces margins and fees and gets them lending sensibly, but far more freely.

    What is certainly far, far too high however is government spending (which is very largely just waste) and taxation. The conservatives have delivered the highest (and most absurd and absurdly complex) taxes for 50 years.

    Javid in his resignation speech claimed to be a “low tax Conservative” and wanted to speak truth to power. Yet he was in favour of the absurd HS2 project. To cut taxes and grow the wealth creating sector the government need to stop pissing money down the drain and show some smaller state vision. Clearly Javid does not really get this. I am dry pleased he has gone. He is also very tedious and boring, almost up to Theresa May levels of tedium.

    • Martin in Cardiff
      Posted February 27, 2020 at 10:12 am | Permalink

      Oh. Why wasn’t UK debt fine at substantially lower levels of GDP under Labour then?

      Come on, we’d love to hear.

      • Richard1
        Posted February 27, 2020 at 12:52 pm | Permalink

        Labour ran up a deficit of 5% of GDP (inc off balance sheet tricks) even at the height of a debt fueled boom. They left office with a deficit of 10% of GDP. This was clearly unsustainable at the time.

        They presided over a more than doubling of bank leverage. They engaged in a bank bailout which was ill-conceived and from which losses will never be recovered. Business confidence collapsed as a result. The Blair-brown Labour govt was a disaster from which it has taken years to recover.

        • Martin in Cardiff
          Posted February 27, 2020 at 5:32 pm | Permalink

          Deficits are indeed unsustainable long term because they lead to increasing debt.

          But Labour had a long way to go before that debt itself became a problem, at least according to our host.

          So that does not answer the question at all.

          • Edward2
            Posted February 28, 2020 at 8:04 am | Permalink

            I note you carefully say “before that debt itself” becomes a problem”
            Missing (probably deliberately ) the fact that the annual deficit adds onto the overall total debt.
            With interest added it soon grows quickly and becomes the real problem.

            You end with ” that does not answer the question at all” yet you yourself only addressed one point Richard out of the several points he made.

      • Hope
        Posted February 27, 2020 at 2:57 pm | Permalink

        After 2009 deputy governor of BoE,said all savers should spend to help the Economy! Why because big business, gov had,acted recklessly to,caus themfinancial mess and wanted all prudent people to spend spend spend! Then it went on a reckless QE spending spree while others argued the gov ,should spend on infrastructure instead. Fund to lending scheme wrecked ordinary savers money while the banks did not pass onto business, refus d overdrafts and made businesses go bust to earn money from it and squandered on fund to lending by their investment teams!mtory govt promised bank reforms,like parliamentary reforms, nothing of substance came to pass. Osborn promised balanced structural deficit by 2015- dates were put back then the specious we meant ratio as a percentageto GDP, now cancelled!

        The Tories cannot be trusted to keep their word in anything and will saying anything to be to power. No central manifest pledge has beeen honoured since 2010, the main one being themdeficitmwere told in three elections!
        JR seems to be suffering from amnesia.

      • Matt
        Posted February 27, 2020 at 6:59 pm | Permalink

        Good question.

        If we wanted Corbyn we would have voted for him.

        • Martin in Cardiff
          Posted February 28, 2020 at 7:29 am | Permalink

          You answer a different question from the one that I asked.

          As you did in the referendum too, I suspect.

    • Sir Joe Soap
      Posted February 27, 2020 at 12:34 pm | Permalink

      These credit card and overdraft rates are indeed the scourge of our present society. Don’t let anyone tell you that cutting benefits alone would solve the problem of getting people back into training for decent jobs – all the time credit card companies and catalogue finance will lend on to the feckless at these rates, letting a % go bust, that is where the cash will come from to keep people temporarily afloat and avoiding balancing their income and expenditure.

      • Hope
        Posted February 27, 2020 at 3:49 pm | Permalink

        JR, off topic but linked to your previous blogs there appears to be growing concern among some commentators remainers are starting a discreet campaign to target people and govt depts. to derail Brexit once more i.e.attack on BoE governor elect, Defra, HO, MOD, wedge between US and U.K. Over Haewei. Do you think it a coincidence or plan?

        • Martin in Cardiff
          Posted February 27, 2020 at 5:46 pm | Permalink

          “Events, dear boy” as someone once said.

          Here are a few which have upset the apple cart for the US supremacists, or “Brexiteers” as they often like to style themselves:

          The refusal of the US to extradite the reportedly lady spy who killed a young motorcyclist by driving on the right at Croughton. This shows the claimed “special relationship” for what it is.

          The cancelling of a US-UK summit following, reportedly, Trump’s hanging up the ‘phone on Johnson following an angry exchange over Chinese 5G suppliers. Ditto.

          The flooding in the new northern “blue wall”. It seems that spending on defences has been reduced by £64 million since 2015 – almost the same amount offered by the European Union but refused by Cameron, coincidentally.

          A public health crisis, which will likely have very heavy economic impacts.

          I doubt that the UK will be in a position to play off the US and the European Union under these conditions, and the voters are watching.

          • Edward2
            Posted February 28, 2020 at 8:14 am | Permalink

            The first points about USA will have little or no effect on there being a trade deal.
            Trade between USA and UK carries on now without one quite successfully.

            The floods are not caused by austerity .
            The Environment Agency has plenty of funds but it follows the EU Water Directive and thinks nature should not be disturbed.
            So little dredging, widening , creation of run off areas or clearing of ditches has gone on for over twenty years.

            The fact there is virus affecting all the planet is not going to change the future negotiations between the UK and EU as any economic impact will probably affect us all equally.
            I know you are still trying hard to create Project Fear 3.0 but your post is very weak on logic.

  2. Peter Wood
    Posted February 27, 2020 at 5:33 am | Permalink

    Sir John,

    Jets look at this a different way. Why not get the BoE to print another £1,387bn of new money to purchase all remaining Gilts, so that the Government is debt free and has no interest payment cost to pay from tax?

    If this is not a good idea, why not?

    Reply That is creating too much money. These things are matters of judgement

    • Alan Jutson
      Posted February 27, 2020 at 10:06 am | Permalink

      Reply tp reply

      Given the current historic low rates

      Why not refinance the whole of the debt at 0.5% interest if that is possible.

      That is what it seems some people do with their credit card debt, on the limited free credit transfer period merry go round.

    • Mike Wilson
      Posted February 27, 2020 at 11:13 am | Permalink

      Reply to Reply. What an answer! You boldly state that the BOE has bought up £435 billion of the debt so, it not only doesn’t count, the interest on money borrowed by the government is then paid to the government instead of by the government! Abracadabra! When asked the most LOGICAL and obvious question ‘why not buy up the rest of the debt?’ your answer is that it is a ‘matter of judgement’! Whose?? A bloke made chancellor last week? The journalist currently in number 10? A special special adviser?

      • Sir Joe Soap
        Posted February 27, 2020 at 12:38 pm | Permalink

        The delicate balance is between a long-term Sterling run (which is acceptable) and a Sterling crash (which isn’t). Managed decline paved by money printing. Look at the Swiss for an example on sound money. How much do they borrow as a % of GDP? (answer below)

        • Mark B
          Posted February 28, 2020 at 5:09 am | Permalink

          Sound money. This something that I have been talking about. That, and good governance.

    • Fishknife
      Posted February 27, 2020 at 11:55 am | Permalink

      Reply to reply – Creating too much money:
      Helicoptered money just adds to ecomic distortion, as does Help to Buy.
      The NHS is a bottomless pit, but could be our salvation if we turn it into a Training School for the Undeveloped Medical World.
      If we want to base our Society round the NHS and the rule of Law, then pay those trades, Nursing, Police and Services more.
      With the knock on effects of
      Better recruitment,
      better retention,
      and a leveling up of wages generally.
      A competitive aura round jobs that are universally achieveable would incentivise education and transform our country.

      • Fishknife
        Posted February 27, 2020 at 11:57 am | Permalink

        Ed- economic distortion.

    • Peter Wood
      Posted February 27, 2020 at 1:18 pm | Permalink

      This is a TERRIBLE idea, and our host knows it.

      The point is, who decides how much money can the government print before we, and others, lose confidence in the ‘fiat money’ issued by the BoE. Politicians don’t have a good track record on this, review the Weimar Republic and Zimbabwe.

      The £435 Billion, printed in the last 7 years has caused massive asset (house price) inflation; how many millionaire semi-detached London suburb house owners have been created? The government has got away with it so far, but how much more?

      Dangerous times.

      Government, like all other investors, must have a return on investment; I’d suggest a £2 in tax revenue for every £1 ‘invested’ by HMG. How about that, HS2… etc?

      • Ken Moore
        Posted February 28, 2020 at 12:19 am | Permalink

        It is bound to get out of control. How much damage has been done to the economy by cheap money propping up failing companies ?.

        The politicians and their rich friends with assets have seen wealth rocket while the average man in the street has seen his buying power diminish.

        Our host must be able to see their is a danger here and the potential for civil unrest such as we have seen in France ?

    • Lifelogic
      Posted February 27, 2020 at 9:33 pm | Permalink

      Whose judgement will that be? Someone like Osborne Carney ot Hammond?

  3. Lifelogic
    Posted February 27, 2020 at 5:33 am | Permalink

    You say:- Today the UK government can borrow at 0.5% for 10 year money and at below 1% for 30 year money. These are very low rates, showing markets think there is little risk in lending to the UK state.

    Indeed but what is needed is cheaper and easier borrowing for private businesses. The banks are very uncompetitive, slow, incompetent and very over regulated. Government restrictions on lending, idiotic red tape and the moronic double taxation of interest on landlord “profits” they have not even made is hugely damaging. Let us hope the new Chancellor will address this in two weeks time.

    • Lifelogic
      Posted February 27, 2020 at 6:31 am | Permalink

      Better still Sunak should announce that a far smaller state is the intended direction of travel immediately. Also use the covid-19 as an excuse to reverse the idiotic HS2 decision and give £120 billion of tax cuts instead about £5000 per household. The people will spend and invest the money far more efficiently. It would be hard for them not to after all.

    • Mike Wilson
      Posted February 27, 2020 at 10:58 am | Permalink

      What is this ‘moronic double taxation of interest’ you refer to?’ I am reluctantly toying with the idea of a buy to let property as I can’t find any other reasonably safe way of putting my money to work.

      • ian wragg
        Posted February 27, 2020 at 1:07 pm | Permalink

        I would be very wary Mike, this so called Conservative government is going to remove the right to evict nuisance tenants and the High Court has just decreed it’s unlawful to say “No DSS”.
        It’s a big gamble, especially if you rent to the culturally enriched and they sub let the property.

      • Fred H
        Posted February 27, 2020 at 1:34 pm | Permalink

        carefully chosen classic cars, art, Russian icons, mint condition old coins, stamps, Chinese vases (etc)…..
        of course this means no steady income (nor tax until you hit CGT).

      • Alan Jutson
        Posted February 27, 2020 at 7:03 pm | Permalink

        Mike

        Just programme yourself to spend it sensibly Mike, otherwise there is a high percentage chance that it will end up going on care fees or inheritance tax.
        Time to enjoy yourselves a bit, yes by all means leave the kids something, but after a lifetimes work, we all deserve some pleasures and comfort later in life, whilst we are still in reasonable health.

        The Government will just waste when they get it, so you may as well have choice of where it goes rather than them.

    • Ken Moore
      Posted February 28, 2020 at 12:21 am | Permalink

      It’s only easy and cheap for the government to borrow because they rigged the system to drive down interest rates. Instead of fixing the system when it broke in 2008 they kept on loading up on debt to paper over the cracks.

  4. Mark B
    Posted February 27, 2020 at 5:38 am | Permalink

    Good morning

    Clearly out host does not understand what he is being told. We are borrowing money to spend on rubbish. Rubbish that will cost us more to maintain and will only benefit a few including those corporates whose share price will be inflated.

    When one borrows to improve ones house we do so in the belief that it will be of some benefit. The benefit on either having say, a nice new kitchen or, an extention that will add value further down the line.

    Debt is not bad. What is bad is borrowing and not being able to pay back the loan due to excess. This can happen when governments become rather cavalier with other people’s money.

    We require a reduction in both personal and company taxation coupled with less regulation.

    But it seems the One Nation Tory Party has adopted the MMT has its economic and fiscal guru. Free stuff for all it seems.

    Reply I am arguing for tax cuts.I am against wasteful spending like HS2

    • Lifelogic
      Posted February 27, 2020 at 6:36 am | Permalink

      HS2 is just the tip of the iceberg of wasteful spending. The bloated government is wasting billions all over the place this while delivering dire and declining public services. It should be halved in size at least get it off the back of the wealth creators.

    • Bob
      Posted February 27, 2020 at 8:20 am | Permalink

      The govt are over taxing and borrowing money to give away.
      The cost of debt interest is higher than the education budget.
      This is all being dictated at supra national level in pursuit of UN Agenda 21 and global government under the auspices of the Bilderbergers.

    • Lifelogic
      Posted February 27, 2020 at 10:22 am | Permalink

      It is borrowing to piss down the drain is bad but this is what we have had from the Conservatives for almost all of my life with even worse from Labour. We now have the highest taxes for 50 years. One of the highest inheritance taxes in the world (40% over just £325k) and yet it appear suggest the Chancellor is looking to tighten further the noose on this for farm land and similar reported yesterday.

      The only way to get the economy going is substantial tax and regulation cuts, start by undoing all the idiocy we have been given by Brown, Darling, Osborne and Hammond. Is the new chap yet another tax borrow and piss down the drain socialist or a real Conservative with vision? We will find out in two weeks.

    • Mitchel
      Posted February 27, 2020 at 12:15 pm | Permalink

      Yet another article from our host telling us there’s nothing to worry about with the fake money/fake growth system.The debt “we” have accumulated can never be paid back and debt that cannot be paid back is worthless.

      The lady doth protest too much,methinks!

      • Ken Moore
        Posted February 28, 2020 at 12:26 am | Permalink

        All bubbles have a period in which participants experience hysteria just before the big crash!. Imagining John Redwood as the captain of a ship, leaning gracefully over taking water on deck assuring passengers everything is fine.

        Reply I have been warning for sometime all is not well! It’s not the state debt level that is the problem.

    • Sir Joe Soap
      Posted February 27, 2020 at 12:28 pm | Permalink

      A few points:

      1 Poor performing economies generally have higher Debt to GDP ratios – Switzerland has around 45% across all layers of government. JR figures for the UK undoubtedly exclude state and state sector pensions, which should be accounted for, sending our ratio into orbit.

      2 Indeed, why borrow to spend on rubbish? Borrowing more would undoubtedly leak away into grandiose projects like HS2 and others which you say are wasteful.
      We don’t need construction for the sake of it. We have enough of that in building houses for incomers who then build more houses for more incomers.

      It’s time to unwind all this and focus on improving what we already have – health, education, housing and roads by cutting the waste and incentives for folk to do mickey mouse courses and jobs, and using that money to restructure, rather than borrow more, send the £ down further and waste, waste, waste.

  5. Ian Wragg
    Posted February 27, 2020 at 5:40 am | Permalink

    The BoE is stage managing a recession together with the government.
    Wonton destruction of the motor industry and 40% interest on overdrafts does nothing to boost the economy.
    We now have the Treasury kite flying a mansion tax and fuel escalator, is there any wonder why people won’t spend. This from a so called Tory government.

    • Lifelogic
      Posted February 27, 2020 at 6:11 am | Permalink

      Indeed 78% at one major bank (that tax payers bailed out) all cheered on by the fools at FCA. This only for the lucky British customers too. The highest taxes for 50 years delivered by Osborne and Hammond. Then we have the idiotic, government market rigging in health care, housing, energy, broadcasting, education. About 50% of our school leavers being out into circa £50k of debt for degrees of which perhaps 75% are virtually worthless or even worse than worthless. Plus we have the moronic, anti-scientific climate alarmists agenda.

      • Lifelogic
        Posted February 27, 2020 at 6:38 am | Permalink

        Put not out!

      • Lifelogic
        Posted February 27, 2020 at 6:46 am | Permalink

        So British banks (some recently bailed out by the tax payer) are actively ripping of (British) customers on overdraft rates (they call them daily OD fees) of up to 78% APR (but not their overseas customers) and this is the direct result of actions by the mad FCA under the charge of the chap who is soon to be the new head of the BoE. Just how moronic can these people get?

    • Wil Pretty
      Posted February 27, 2020 at 8:45 am | Permalink

      People only spend if the future looks secure, its human nature. Otherwise they save, to tide themselves over percieved problems.
      The Government has created significant uncertainty with its premature dash for renewables and electric vehicles which can be seen to be impractable and are building up problems for the future.
      People will not invest with those threats hanging over them.

    • a-tracy
      Posted February 27, 2020 at 9:04 am | Permalink

      There comes a point, Ian, with taxation where it just isn’t worth borrowing, investing and growing any further if you have sufficient for your needs. Business owners have been pilloried so much that it is now time for some of these younger momentum sorts and Unions to put their pensions and investments where their mouths are and build the jobs and companies they want from scratch not connected to the public sector – you know actually make the money they want to spend.

      • ian wragg
        Posted February 27, 2020 at 1:12 pm | Permalink

        We now have the green blob trying to get the pension funds to stop investing in the oil and chemical industry and put the money in “green” investments.
        This of course will further destroy private sector pensions but not the taxpayer funded public workers pensions.
        I’m glad I have enough to tide me over because todays young won’t be doing too much cruising.

        • Lifelogic
          Posted February 27, 2020 at 9:36 pm | Permalink

          Perhaps as well given the corona virus.

    • Mike Wilson
      Posted February 27, 2020 at 10:54 am | Permalink

      No sane person thinks we need to produce millions of new cars every year.

      Why, using Firefox on an iPhone, do I have to do that annoying Captur thing for every comment in the same session’.

      • Martin R
        Posted February 27, 2020 at 4:31 pm | Permalink

        Do you think cars last forever?

        • Fred H
          Posted February 27, 2020 at 8:49 pm | Permalink

          Well the crap metal and poor tolerance engines of decades ago have long been improved on. Many models made in the last decade will be good for 20 if not 30 years, especially for the users who drive below 5k per year.

    • Ken Moore
      Posted February 28, 2020 at 12:30 am | Permalink

      I thought Cameron was a bit left wing..I suspect this ‘One nation Tory’ government will be even worse. The trouble is the Tories didn’t reject the Labour movement of Blair in 1997 , they instead tried to copy it.

  6. Lifelogic
    Posted February 27, 2020 at 6:01 am | Permalink

    Lord Kirslake launches a report today saying that:- Major infrastructure projects such as High Speed 2 and Northern Powerhouse Rail are unlikely to level up the North West and curb growing regional divides, according to a report to be launched in Salford this week.

    Well indeed, such daft projects, the endless government waste and the vast over taxation that these policies produce are the main problems certainly not the solution. A mathematician, even a Warwick graduate should have grasped this basic fact. The north, just like the south, needs competitive and flexible banking, far less government red tape, some cheap reliable energy and far lower and simpler taxes. Kirslake, just like most civil servants and ex-civil servants thinks we need even more bloated and wasteful government. Nearly 50% of GDP is still not enough for them it seems- what totally deluded dopes these types are.

    • Lifelogic
      Posted February 27, 2020 at 8:24 am | Permalink

      Plus we have Sadie Khan legal challenge against Heathrow’s third runway. Do we want to reestablish some real democracy or do we think unelected judges should now replace the unelected EU bureaucrats? Judges as we see almost every day make some appalling decisions.

      • Matt
        Posted February 27, 2020 at 6:57 pm | Permalink

        The Government are now controlled by XR on every major project.

  7. DOMINIC
    Posted February 27, 2020 at 6:36 am | Permalink

    You truly are John Maynard Keynes reborn. It’s very depressing to see a fiscal Conservative embrace the politics of spending though not too surprising when one considers the tectonic move towards the authoritarian left engineered by the party to which John belongs.

    To be fair, I don’t believe our host is comfortable with the direction his party has taken. The pressure to conform (remain silent) and tow the party line is oppressive

    Of course future generations will have to pick up both the financial and social cost of all three parties move towards a politics that now embraces an all powerful political state that encourages State dependency, politicisation through identity politics, the deliberate destruction of personal responsibility and the subjugation of the individual to the narrative of social collectivism now so endemic in all that we see

    This isn’t about State spending or sovereign debt levels. This is about the rise of a form of politics that is taking us down a path never tread before. It is catastrophic for this nation’s people to be exposed to such moral barbarity. All has been sacrificed on the altar of cultural Marxism and your party’s silent embrace of this is one of the most shameful travesties in British political history

    Reply Do not keep misconstruing my position. I am arguing for tax cuts. I am in favour of spending controls, including my wish to see HS2 cancelled.

    • Fred H
      Posted February 27, 2020 at 1:41 pm | Permalink

      reply to reply….
      Sir John what is your position on Foreign Aid – the percent, the subjects, any change?

      Also 2% on Defence? Increase or allow to miss 2%? Do we buy more naval craft of all descriptions (aggressive & defensive)? Do we continue with large numbers of fighter aircraft sourced from USA? Do we massively expand our cyber warfare staffing and capabilities to disrupt aggression?

      Reply I have set out how I would allocate a substantial part of the current Overseas Aid to UK housing, schools and NHS capital, to provide good facilities for the migrants we welcome here. There would then be an overall budget saving on total spending.
      I want to spend sufficient to have proper armed forces, which will require at least 2% of GDP

      • Fred H
        Posted February 27, 2020 at 8:46 pm | Permalink

        reply to reply…….GOOD ANSWER.

      • Narrow Shoulders
        Posted February 27, 2020 at 9:42 pm | Permalink

        Sir John

        I have been following this blog for many years and agree with much that you write in so far as you can take concrete positions as a professional politician.

        However recently when it comes to spending and tax cuts you appear to divert from my understanding of what is possible.

        Could you publish as per the red book a breakdown of your suggestions? The changes by x billion, this costs x billion and this brings in x billion.

        How much of your spending including tax cuts is financed by growth and how much is shifting priorities?

        What is the net change and your new deficit?

        Reply I have done so.I want a mixture of tax cuts and the spending increases the government has announced. Some of my tax cuts will raise more revenue. The net fiscal stimulus was 1% of GDP. Now I think there should be bigger tax cuts given the world background with a stimulus of 1.5% of GDP. I would like to redirect the HS2 spend to a range of other cheaper and faster acting infrastructure investments.

  8. Toronto
    Posted February 27, 2020 at 6:38 am | Permalink

    I hear no news of how the UK will take advantage of the panic about the virus, advantage economically if I am wrong and the virus continues to be debilitating.
    ‘If you can keep your head…” is a cliche which is not as good as most things our Bard uttered but possibly good enough to get you the sack from ITN
    If, you are absolutely brilliant like me, which is not possible for you but just in theory, how to take advantage?
    Buy up stuff!

  9. Dave Andrews
    Posted February 27, 2020 at 7:15 am | Permalink

    For the price of debt interest we could have 5 EU memberships. We argue about the value of EU membership, but what benefit do we get for all that debt interest? Perhaps the UK pensioners with annuities get something, but the rest just goes to waste.
    And what does government do with all that borrowed money? Spend on every hard up case that comes through the door, with no prospect of any return.
    Perhaps you can have a word with the tax office and suggest I can owe them my tax, for which I will pay 1% interest? I’m sure it won’t do for them, partly because I can’t find a guarantor for my debt, whereas the government can load it onto the next generation whether they like it or not.

  10. villaking
    Posted February 27, 2020 at 7:16 am | Permalink

    Sir John,
    Do you still stand by your party’s manifesto promise to have lower debt at the end of this parliament?#

    Reply The proposal was as a percentage of GDP and I am trying to get GDP to help!

    • villaking
      Posted February 27, 2020 at 1:25 pm | Permalink

      That is not what was written in the manifesto. It said, in bold type, that debt would be lower, not that debt would be lower as a % of GDP. The distinction matters. No politician can prevent a recession at some point, GDP can not always keep rising forever. If absolute debt increases it still means that the state is continuing to spend more than it raises in taxes. With taxes already at historically high levels, the music will stop at some point in the future when you will have retired and be unanswerable for the problems you pile on to the next generation.

      Reply They have always expressed it as a percentage of GDP when offering detail

      • Ken Moore
        Posted February 28, 2020 at 12:38 am | Permalink

        Debt as a percentage of GDP is meaningless. Government spending borrowed money adds to GDP ?. It’s he logic of pulling yourself up by your own shoe laces.

        The government could double spending to 80% of GDP by borrowing more and halve debt as a percentage.

  11. APL
    Posted February 27, 2020 at 7:28 am | Permalink

    JR: “UK state debt levels are fine”

    The train is fine.

  12. Narrow Shoulders
    Posted February 27, 2020 at 7:31 am | Permalink

    Sir John,

    As borrowing is so low and government can borrow so cheaply could you arrange for the top rate and higher rates of income tax to be reduced to 20% please? Scrap VAT and VED and Council tax while we are at it and just create money.

    Then the workers and the shirkers can be happy together.

    I want my government to take the tough decisions about spending and only spend what is can raise in revenue, I don’t want it wasting £50 billion a year in interest payments (start charging for services if you have to).

  13. James1
    Posted February 27, 2020 at 7:35 am | Permalink

    The reason borrowing rates are so expensive to the private sector is because of the way the government has been raiding the capital markets. The government should spend less, downsize radically and allow the productive private sector and taxpayers to spend in infinitely better ways. They should also strive to ensure the creation of greater competition within a number of industries, including banking.

  14. APL
    Posted February 27, 2020 at 7:38 am | Permalink

    JR: “Today’s problem worldwide in advanced countries is fighting deflation and economic slowdown.”

    I guess your misuse of terminology is deliberate.

    The administration you support, all its predecessors since 1914 have been encouraging inflation. Deflation, which you claim to be ‘fighting’ is really the ultimate and unavoidable result of a hundred years of inflationary ( or expansionary ) policy.

    An aeroplane cannot stay in the air indefinitely, it will have to come to land eventually.

    Now that the Chinese government has shut down it entire economy, we have a great opportunity to onshore some of the jobs the Chinese government no longer wants.

    We could ‘onshore’ the supply chains. Reversing the government encouraged trend of the last fifty or sixty years, would be a big task. But something a government with imagination could do.

  15. Christine
    Posted February 27, 2020 at 7:53 am | Permalink

    Whilst rates are low we should be investing in automation to wean the country off cheap labour. Particularly in the farming industry. Government should be looking at best practice from around the world and giving business and farmers tax breaks to introduce labour saving innovation.

  16. Andy
    Posted February 27, 2020 at 7:54 am | Permalink

    I have a rule in my household.

    Borrowing is fine for large long-term purchases – houses, cars etc.

    Always at the best possible rate of course.

    But day to day spending is never on credit. Never, never, never.

    And if I can’t afford something for day to day use, I don’t buy it.

    Government should work on the same principle.

    Borrowing is fine for long term investments, like HS2.

    But we currently borrow to pay the day to day bills.

    And the fact is that about half of our day to day spending goes on the elderly.

    Pensions, social care, extra NHS spending. This is what we need to cut.

    Borrowing for long term investments in our future. Good.

    Borrowing to fund day to day handouts to rich old people. Bad.

    • ian wragg
      Posted February 27, 2020 at 1:15 pm | Permalink

      Can’t wait for you to get old Andy when your pension won’t be worth tuppence and your kids have all left you to work in Gabon or some such backwater as they can’t compete in the EU.

    • Fred H
      Posted February 27, 2020 at 1:46 pm | Permalink

      I hope you enjoy your faster trip to Birmingham in 10 years time. And know it was worth the debt your son (children?) are lumbered with.

    • zorro
      Posted February 27, 2020 at 4:43 pm | Permalink

      Borrowing is fine for long term investment which will pay a good return in the future (unfortunately not HS2!)

      Zorro

    • steve
      Posted February 27, 2020 at 6:39 pm | Permalink

      Andy

      “And if I can’t afford something for day to day use, I don’t buy it.”

      No you just demand it be taken from some OAP who has worked hard all his / her life and for it to be given to you instead.

    • The Antidolt
      Posted February 27, 2020 at 6:53 pm | Permalink

      Well.

      If you have a lot of borrowing on your house/car and you then choose to buy other things with cash – instead of paying down as much as you can on your debt – then…

      … you’re using borrowed money to buy day-to-day things, are you not ?

    • Narrow Shoulders
      Posted February 27, 2020 at 9:48 pm | Permalink

      Could you publish those figures on the elderly please Andy.

      It is not my understanding of the numbers which is much lower.

      There is also a huge difference between public sector and state pension. Do break these out from the figures you give us.

  17. Kevin
    Posted February 27, 2020 at 8:03 am | Permalink

    1) “The Bank of England has bought up £435bn of the debt.”

    Are you referring to the Quantitative Easing figure? You seem quite phlegmatic about that figure, yet when Hong Kong offers helicopter money of HK$10,000 for every adult citizen to spend, you appear to call that “bad”. This action, however, sounds similar to suggestions I have read of “Quantitative Easing for the people” (emphasis added).

    2) “Markets are telling governments, companies and individuals they can borrow more for decent projects. There is too much saving and not enough investment going on.”

    Why do you not interpret this as the savings market’s way of saying that it does not agree that the projects on offer are “decent” (i.e. worth the investment risk)?

  18. Richard1
    Posted February 27, 2020 at 8:08 am | Permalink

    It is odd how little understanding there is of the concept of gross and net debt. It is something at least which anyone who has bought or owned a business, or advised on such transactions, should understand well enough. Mr Sunak certainly has the training to understand this concept. Let us hope he has the robustness and clarity to insist that others around him get it as well.

  19. BOF
    Posted February 27, 2020 at 8:18 am | Permalink

    That still does not justify the huge waste in the public sector and the sheer disproportionate size of the state.

    Unfortunately the state invariably spends money unwisely and on the wrong priorities.

    Make it easier for the private sector to undertake capital projects, as per Heathrow.

    • BOF
      Posted February 27, 2020 at 12:15 pm | Permalink

      I was wrong this morning. Parliament is not supreme, the courts have overruled them. Again. No 3rd runway for Heathrow so that will be more business going to hub airports in the EU.

      • ian wragg
        Posted February 27, 2020 at 1:17 pm | Permalink

        Advised by Carrie Simmonds no doubt.

      • Martin in Cardiff
        Posted February 27, 2020 at 3:32 pm | Permalink

        Rubbish.

        Parliament could pass an Act stating that the project will go ahead and there would be nothing that the Courts could do.

        However, in its opinion – and probably the international community’s too – this country would be in breach of an international treaty.

        Do you understand for one moment what that means in the eyes of the world?

        I have a feeling that you couldn’t care less.

        • Edward2
          Posted February 27, 2020 at 6:01 pm | Permalink

          It isn’t in breach of any international treaty if it were to allow Heathrow to build another runway.
          The Paris Agreement contains a generalised ambition to reduce CO2 emissions.
          The UK is doing that.
          In fact we are doing better than most nations.
          You are making the mistake of looking at this single project.
          That is an argument for not building anything ever again as every project has an environmental impact.
          So no new homes, no new schools, no new hospitals.

          • Martin in Cardiff
            Posted February 28, 2020 at 7:33 am | Permalink

            It is whatever the Court says it is, by definition.

            You could always appeal its decision.

          • Edward2
            Posted February 28, 2020 at 8:17 am | Permalink

            Heathrow are going to appeal.

            The Court just said Heathrow should take the government’s climate change policies into account in their planning.

          • Martin in Cardiff
            Posted February 28, 2020 at 7:55 pm | Permalink

            I must avoid your dragging me down to your level, Edward.

            None of this is relevant to the comment to which I replied, which asserted wrongly that the Courts trumped Parliament.

          • Edward2
            Posted February 29, 2020 at 8:10 am | Permalink

            The Court has trumped Parliament.
            They have stopped the expansion of Heathrow which Parliament agreed to two years ago.
            And on flimsy grounds.

            Interesting opening comment Martin.
            It is a novel way of you having to say that I was right.

  20. zorro
    Posted February 27, 2020 at 8:27 am | Permalink

    We need to borrow at advantageous rates now to invest in 21st century connectivity – IT connectivity and fast fibre broadband reception everywhere in the UK to enable better productivity, less travel to meetings, better online talk facilities.

    No pork barrel spending to line the pockets of certain companies who might donate money to certain parties. We have a great opportunity to get a commercial advantage over our competitors, sorry I mean EU partners, in new technology by thinking forward instead of engaging in rear view mirror driving and obsessing over minor time improvements in rail journeys.

    Zorro

  21. Bob
    Posted February 27, 2020 at 8:29 am | Permalink

    If you had a friend who was borrowing money to fund a standing order to pay £14 billion pounds a year in charitable payments to support space programs, nuclear weapons programs and girl bands overseas, what would your advice to them be?

  22. John E
    Posted February 27, 2020 at 8:37 am | Permalink

    HK$10,000 is roughly £1,000. If a helicopter dropped that in my lap this morning I would save it. I wouldn’t go out and spend it.

    • Bob
      Posted February 27, 2020 at 6:52 pm | Permalink

      @John E

      “I wouldn’t go out and spend it.”

      I expect that many HongKongers will have the same idea as you.

  23. a-tracy
    Posted February 27, 2020 at 9:00 am | Permalink

    a) “The Bank of England has bought up £435bn of the debt.” Where did the BoE get the money from? Does it have more billions to borrow us? Why not let the BoE buy off more of the £1387bn?

    b) Who do the UK owe £1387bn to?

    c) “Today the UK government can borrow at 0.5% for 10 year money and at below 1% for 30 year money.” Who do the government borrow this from?

    d) “governments, companies and individuals…can borrow more for decent projects. There is too much saving and not enough investment going on.” Your previous couple of government leaders have dithered, delayed and caused this, a decisive government would have helped. This created less confidence in the future, we were constantly told the UK was doomed and disaster lay ahead. We need a definitive decision on the way forward, what is the government going to do next? Is global warming going to make the planet flood or freeze so we know whether to build a boat or an igloo? All scientists do is talk of disaster and doom rather than dig more ditches, find a way of storing extra water and using it?

    Reply The Bank bought up the debt with created money. I am not proposing they do more of this today.

  24. Iain Gill
    Posted February 27, 2020 at 9:08 am | Permalink

    You have deducted things from the national debt, you have not added the many things that the state is obliged to pay which are not included in the national debt.

    Stuff like the cost of hospitals hidden behind PFI deals will in many cases end up large liabilities the state will have to pay. Then the pensions of current and ex public sector workers. For instance the whole BT pension scheme is underwritten by the state but does not show in the national debt.

    So wishful thinking.

    • Martin in Cardiff
      Posted February 27, 2020 at 6:04 pm | Permalink

      Future liabilities are not present debt, owed to a lender.

      Do you understand this?

      • Iain Gill
        Posted February 28, 2020 at 8:15 am | Permalink

        PFI on a hospital is little different to a mortgage on that hospital, except one shows as debt and the other does not. That’s the only reason those hospitals were financed like that.

        Guarantees and liabilities on pension funds which only become due if the underlying performance of the pension fund is poor are magnifiers. If shares collapse, economy is in dire trouble, guess why the liquidity of the state goes off a cliff face.

      • Edward2
        Posted February 28, 2020 at 8:18 am | Permalink

        Ask an accountant on that Martin.
        Debt is recorded.
        And it is a liability on a balance sheet.
        Current or future.

        • Martin in Cardiff
          Posted February 28, 2020 at 7:59 pm | Permalink

          Why do you use my name, when replying to a point not made by me?

          • Edward2
            Posted February 29, 2020 at 8:16 am | Permalink

            Well Martin, if other people also reply to your posts and a lengthy thread is created it stops any confusion as to who my reply is aimed at.

          • Edward2
            Posted February 29, 2020 at 8:18 am | Permalink

            For example Martin my comment at 8.18 on Feb 28th could have mistaken for a rely to Iain Gill.

  25. Fedupsoutherner
    Posted February 27, 2020 at 10:07 am | Permalink

    We built up our car industry to something to be proud of and now government policy has completely destroyed it. We are penalised for wanting to buy a new car on the value of it when many of us don’t spend our money on foreign holidays or eating out etc. We should all have a choice and not be penalised for that choice. Some on here think buying a new car is a waste of money. I would say eating out and going on lots of holidays is a waste. Let us decide and not the government.

    • ian wragg
      Posted February 27, 2020 at 1:19 pm | Permalink

      I like to do all 3 and after all it’s my money. almost 30 years working in Africa and the Middle East, I intend to enjoy the fruits of my labours.

  26. Know-Dice
    Posted February 27, 2020 at 10:19 am | Permalink

    The “elephant in the room” with reference to government borrowing is what could be done with all the money saved by not paying interest on loans…

    Could pay off HS2 in two years or Hinkley in one year – or even better scrape both of those all together…

    Maybe add proper flood defences on the Severn… A few more hospitals wouldn’t come amiss as well…

  27. Mike Wilson
    Posted February 27, 2020 at 10:40 am | Permalink

    If it is that simple, why doesn’t the Bank of England ‘buy up’ all the debt?

  28. Mike Wilson
    Posted February 27, 2020 at 10:49 am | Permalink

    Why do you always relate state borrowing to GDP? It’s not like saying ‘I earn 20k and I owe 18k – so that is okay’. It is utterly meaningless. You surely need to say ‘the state owes a total of X, the cost of servicing that debt is Y, the state has an income of Z, it will be W years until the state is debt free’. It’s still pretty meaningless. It is not as vacuous as ‘State debt is X, GDP is Y – so everything is okay.’

    Reply I relate state debt to gdp because international comparisons are made on that basis and because until we have left the EU our economy was run on a state debt as a percentage of GDP mandate.

    • Hope
      Posted February 27, 2020 at 2:48 pm | Permalink

      Hang on JR, you have stated along with the false Johnson mantra Brexit is done! Do you now accept thismwas false and the UKmis in vassalage becaus of your govt?Secondly, All debt economies require growth which normally means mass immigration. Your govt has now admitted it has not properly costed its multi trillion pound zero carbon promise! Where is that money coming from?

      Vote Tory get Corbyn comes true. Before the elelection you were arguing against the huge borrowing from Labour! Outrageous hypocrisy. I seem to recall You also argued after 2010 that the fund to lending scheme was not working- money not being passed on to business and yet you are now for it. This caused saving rates to plummet for ordinary every day people.

      It is right people should be rightly confused what you and your party stands for. Come back Gordon they make you look like a genious!

  29. Bob
    Posted February 27, 2020 at 10:58 am | Permalink

    I read in the DT that the Court of Appeal found that the Government failed to take into account its commitment to the Paris Agreement on climate change when setting out its support for the airport expansion in its Airports National Policy Statement (ANPS), which it deemed “unlawful”.

    It’s funny how the govt will break the law on this but not on the 0.7% overseas aid payments.

  30. Mike Wilson
    Posted February 27, 2020 at 11:01 am | Permalink

    Mr. Redwood – your observation that we are saving to much caused me to splutter my coffee all over my phone. Saving too much? Saving too much! Everyone I know who has a few bob buys property with it.

    • Mike Wilson
      Posted February 27, 2020 at 11:02 am | Permalink

      Too much, not ‘to much’. iPhones!

  31. Mike Wilson
    Posted February 27, 2020 at 11:03 am | Permalink

    What about future liabilities? No mention of them.

  32. Everhopeful
    Posted February 27, 2020 at 11:14 am | Permalink

    Maybe it isn’t debt that is too high but tax receipts that are too low? ( Zero hours plus self employment).
    After all many working class jobs and unions were wiped out in the 80s ( destroying the very pillars of capitalism). Replaced by service industry. Deregulation then led to our present woes (?).
    Trad working class job loss = huge burden on state. Without the factories and mines it continues down the generations.
    High public debt followed by private. Then the crash followed by low interest rates and an attempt to rebalance with “austerity”. Almost led to the socialism Thatcher tried to crush once and for all. ( Or was she obeying Brussels?). Not forgetting the lack of the much revered “growth” and rising levels of inequality. And the threat to democracy.

    Oh well…as ever, I expect we will stiffen our upper lips and keep searching the sky for a rainbow. We will do as we are told. Spend! Spend! Spend!

  33. Fred H
    Posted February 27, 2020 at 11:27 am | Permalink

    OFF TOPIC.

    With the Heathrow expansion now in doubt, should the Birmingham Int’l airport be examined for expansion? After all, with HS2 now going ahead fast rail links to London will be available!

    • Mark
      Posted February 27, 2020 at 1:04 pm | Permalink

      As I understand it, the court decision effectively bans any airport expansion. It might even ban the building of HS2 if the principle of not being compatible with climate change commitments were extended. In fact, it probably bans all building. See the Absolute Zero report from Cambridge University which explains that all airports must close by 2050, and we must stop virtually all imports and use of cement, steel etc.

      It is of course utter madness that we should be aiming to close the economy in this way. I presume the intention is to provoke mass emigration.

  34. Tad Davison
    Posted February 27, 2020 at 12:06 pm | Permalink

    Labour is synonimous with blowing all the good work of previous governments and creating unmanageable debt with reckless spending. And that can happen all over again If we let up. People need to be constantly reminded of their ineptitude. The government must set a good example, and increased public spending needs to be tempered with control of waste. I suspect a purge of lefty liberals in the civil service will greatly assist that process.

    • Lifelogic
      Posted February 27, 2020 at 8:51 pm | Permalink

      “a purge of lefty liberals in the civil service will greatly assist that process” – So that would be about 95% of them!

  35. John S
    Posted February 27, 2020 at 12:12 pm | Permalink

    The government needs to make a concerted effort to reduce waste. This will run into the teeth of opposition from public sector employees, many of whom believe that government spending is a job creation exercise, and may result in strikes. But it must be done.

    • Lifelogic
      Posted February 27, 2020 at 3:51 pm | Permalink

      It must indeed but no sign of this whatsoever. Tax, borrow, over regulate, vanity projects, green crap, expensive unreliable energy, piss money down the drain all over the place seems to be the order of the day. Now it looks like they (with the assistance of more political Judges) are even cancelling Heathrow. Boris seems to be about as left wing as Ed Miliband. Plus is looks like another tax grabbing budget in two weeks.

      • Lifelogic
        Posted February 27, 2020 at 5:35 pm | Permalink

        Though I did thing we should have done Gatwick first as quicker to do then Heathrow and an HS shuttle between them to give a 5 runway London hub airport – which is what the country clearly needs. Doubtless we will have to wait another 20 years. Yet the HS2 tax payer funded lunacy get the non.

        • Lifelogic
          Posted February 28, 2020 at 4:32 pm | Permalink

          gets the nod

  36. formula57
    Posted February 27, 2020 at 12:39 pm | Permalink

    Strong fiscal stimulus will be needed as you show, especially with monetary policy rendered ineffective.

  37. Mark
    Posted February 27, 2020 at 1:01 pm | Permalink

    We have of course privatised international borrowing via the rapid expansion in mortgages outstanding, much of which has been financed by the sale of mortgage backed securities to foreign buyers. The total for mortgages outstanding is now almost £1.5 trillion. The days when we funded mortgages out of domestic savings (giving an interest income to savers) are long gone.

  38. Martin R
    Posted February 27, 2020 at 1:44 pm | Permalink

    If memory serves Dave and his chums more than doubled the debt in half the time (roughly). They did so by squandering money on such as foreign aid to third world despots, smart meters nonsense, subsidies for useless windmills and useless solar panels, billions for national grid upgrades foe wind farms we don’t need, and so on. The idea was to match the spending of the far left, a recipe for economic ruin. Instead of paying down the debt as Mrs T would have done, they expanded it wholesale. We are now in a situation where debt interest costs us something in the region of £95,000 every minute of the day and night. And now BJ has opened the floodgates and £100 Bn, or more likely £200 Bn we don’t have is to be tipped down the lavatory on a shiny train set no one needs. That isn’t enough for BJ apparently because that is to be overshadowed by £5 trillion to be spent on getting rid of CO2 which does nothing more than feed plant life (and down the line, us). And that economic suicide attempt won’t even get rid of the hated plant food because our production of it is utterly insignificant. If you think that all makes sense then I have to humbly disagree 100%.

    • Martin R
      Posted February 27, 2020 at 2:08 pm | Permalink

      This government and the one before it seems to operate on the socialistic principle that throwing money at something generates “jobs” and so is generally desirable. Unfortunately such misdirection of capital on command economy principles impoverishes because, almost invariably it is not wealth generating. The very opposite in fact. We see the consequences of such mindless foolishness in the way that every year for more than two decades when we go on holiday our currency is increasingly worthless in relation to the currency of other countries. Not surprising, merely the inevitable result of the leftist policies pursued year after year by both wings of the liblabcon party. Is this ever going to change I wonder? No, not on the current showing.

      • Lifelogic
        Posted February 27, 2020 at 8:49 pm | Permalink

        Indeed.

        They even talk endlessly of green jobs from “renewable” energy. Expensive and unreliably energy is a massive net job destroyer/exporter.

        Jeremy Corbyn even pledges to insulate 27 million homes to create jobs at least he did not get it!

  39. Fred H
    Posted February 27, 2020 at 1:57 pm | Permalink

    UK firing a broadside or merely blanks?
    from BBC website.

    The UK has warned the EU it will walk away from trade talks in June unless there is a “broad outline” of a deal. Michael Gove told MPs the UK wanted to strike a “comprehensive free trade agreement” in 10 months. But the government would not accept any alignment with EU laws as the EU is demanding, with Mr Gove adding: “We will not trade away our sovereignty.”
    The EU has already set out its priorities ahead of the formal start of the talks on Monday.
    The government has published a 30-page document outlining its priorities for the talks.
    The UK document says:
    * The UK “will not negotiate any arrangements in which the UK does not have control of its own laws and political life”
    * The UK’s aim is for a trading relationship with the EU similar to the ones the 27-nation bloc has with Canada, Japan and South Korea
    * There will be no jurisdiction for EU law or the European Court of Justice in the UK
    * The UK will rely on World Trade Organisation rules under an arrangement with the EU similar to Australia’s if progress on a comprehensive deal cannot be made
    * A separate agreement on fisheries is needed, to reflect the fact that “the UK will be an independent coastal state at the end of 2020”.

    • steve
      Posted February 27, 2020 at 6:31 pm | Permalink

      Fred H

      ” The UK’s aim is for a trading relationship with the EU similar to the ones the 27-nation bloc has with Canada, Japan and South Korea”

      But the French i.e Macron & Barnier have absolutely refused this. The best Barnier could come up with to justify his ungrateful attitude toward our country was to say that Britain is not Canada. Lame, pathetic, ungrateful.

      Fisheries – I don’t see any agreement is needed other than to tell Macron in no uncertain terms there will be no French fishing in UK waters, period.

      We need to see what Boris is made of. He’ll get his party lynched if he caves in to the EU / France.

      That said, he’s done for anyway because of the petrol and diesel engine ban, and embracing climatist snowflakes at every turn.

      The best thing Boris could do is walk away from the EU now and reverse his climate policy shenanigans.

      We need to default to WTO, and not even bother with the EU. Without this country the EU will break apart anyway within a decade.

      All ‘regimes’ that resort to threats lies and fear mongering, have one tell tale sign…..they’re not as solid as they make out.

      We shall have to see, in the coming months.

  40. Ian Kaye
    Posted February 27, 2020 at 3:58 pm | Permalink

    I don’t understand where some of these figures for borrowing costs come from. Treasury 2049 yields 2.29 per cent, 2060 1 94 per cent,Tr 2071 1.20 per cent At the long end running and redemption yields are pretty much the same so it can’t be that.I have seen a table for the yield curve where the figure s shown seem to be much too low

  41. Neil Turrell
    Posted February 27, 2020 at 4:41 pm | Permalink

    How about speaking for England on this idea of ‘Global Britain’ often espoused by your blonde friend. The Government will not appeal the decision of the activist judges (we seem more and more to be heading towards a Kritarchy), but 40% of our exports head out from Heathrow, which the rest of England depends upon. You, and the rest of the political class, have signally failed to develop significantly outside London, so that now we are going to be held hostage by the green movement in alliance with woke judges – we have no options. So much for global Britain. You don’t even have the courage to stand by a decision that Parliament made, now struck down by the courts. You can be sure the PM will do nothing about this, even with a healthy majority. Are you all mad? Who will you blame when business realises it’s been traduced by the PM and the Conservative Party and decides to relocate to climes with decent transport hubs?

  42. glen cullen
    Posted February 27, 2020 at 4:46 pm | Permalink

    If you don’t have any debt there isn’t any chance of debt default

  43. glen cullen
    Posted February 27, 2020 at 5:46 pm | Permalink

    Can someone please tell me why carbon pricing and climate change is included within the ‘The Future Relationship with the EU The UK’s Approach to Negotiations’ published today

    What’s carbon pricing and climate change got to do with an FTA

  44. Chris S
    Posted February 27, 2020 at 5:48 pm | Permalink

    I quite agree, however I would take a measured view because it looks like we are heading for no deal with Brussels, and rightly so, if they maintain their current position.

    If we do leave on WTO terms ( which I’ve always thought would be the most likely outcome), we may well face a run on the pound and a temporay deterioration in the balance of payments.

    On the home front, the Government needs to take firm action over the current account deficit. English taxpayers are taking a big hit every year subsidising NI and Scotland, in total, double the net amount paid to the EU. England alone or even with Wales, has a very healthy economy and minimal deficit.

    I cannot see any benefit to us in continuing the drain on our resources caused by Scotland and NI.

    Scotland should be given a clear choice, stay in the UK and do away with all the SNP give-aways not available in England or leave and attempt to keep their own economy afloat.

    As for N. Ireland, demographics are going to see a majority for a united Ireland within a decade or so. Why not allow a vote now and get shot of the drain on ourselves and the problems created by the EU over cross border trade?

  45. Chris S
    Posted February 27, 2020 at 5:56 pm | Permalink

    At least it looks like the end of the line for the third runway. To me, it always made more sense it add one or two additional runways at Gatwick. That would require some expensive road and rail improvements but the overal cost would still be cheaper than building another Heathrow runway. I would go for planning permission for two straight away, even if only one is built for now.

    Of course, there is a third alternative : the government could easily borrow the money to build Boris Island instead……

    There’s a Prime Ministerial legacy for you !

  46. steve
    Posted February 27, 2020 at 6:06 pm | Permalink

    JR

    “Yesterday we learned that Hong Kong is offering helicopter money. Every adult citizen will be given HK$10,000 to spend, to try to fight recession.”

    That’s about £900 each. I could do with 900 nicker – I’d spend it on PETROL !

  47. acorn
    Posted February 27, 2020 at 6:34 pm | Permalink

    Ian. Look-up “Duration and Convexity to Measure Bond Risk”

    Meanwhile, ignore anything you read from the IFS about tax rises being needed. The IFS, like the OBR and the ONS; perpetuate the myth that the government’s Treasury, has to tax and borrow back from the non-government sector, its own “money” it previously created and spent into the non-government sector, before the government had any money to spend.

    One day, voters will understand the difference between a sovereign fiat currency ISSUING government and its currency USING non-government private sector. The government does not “borrow” its own unique monopoly currency from anybody!

    • Edward2
      Posted February 28, 2020 at 7:09 pm | Permalink

      Ah the Zimbabwean School of Economics.
      Just print and spend until inflation roars away uncontrollably down the steep slope.

      • Ken Moore
        Posted February 29, 2020 at 1:25 pm | Permalink

        The elites have got their inflation on asset prices. The super rich, the Warren Buffets and Michael Bloombergs/Bill Gates etc. have seen their fortunes quadruple as asset prices have rocketed. Meanwhile ordinary people have seen their prosperity (money available after paying for essentials) decline.

        What will be troublesome for our kind host is when hyper inflation starts to affect food and energy. So far falling prosperity and the absence of real economic growth has been masked by borrowings and money printing – I wish John Redwood would be honest about this and stop pretending everything is fine and it’s business as usual!.

        The trouble is he and other politicians can only deal with a world that is in a trajectory of economic growth with a few bumps along the way – it’s all they have ever known. What if the rising cost of energy and population growth has pushed us into a situation where prosperity starts to go into reverse ?. It’s one thing to give a dog a bone, quite another to take it away. Who is going to explain in honest language that our standard of living isn’t sustainable ?

        Well it’s already happening – life expectancy is stagnating and the signs are that monetary manipulation is reaching ‘end game’…

        • Edward2
          Posted February 29, 2020 at 8:38 pm | Permalink

          Growth will continue because there are more of us and we are a creative lot.
          Governments sometimes get in the way with their disincentives.
          Such as complex rules, regulations, directives and ever more taxation.
          If they just encouraged us, the wealth that could be created and the poverty that could be eliminated could be huge.
          Then governments could use the proceeds of that economic growth could be used to achieve so much.

          • Ken Moore
            Posted March 1, 2020 at 12:43 am | Permalink

            The economy is an energy based system but the age of cheap and easily obtainable fossil fuels is coming to an end. The developed world almost stopped growing in the early 2000’s. This was masked by lowering interest rates to zero and expanding the money supply but this policy is reaching the end of the road..Buying 1$ of growth with $3 of printed money isn’t a sustainable policy..

            Fossil fuels have allowed us to transition from subsistence living and expand our population to 8bn +. Renewables are vital but they will only slow our decline. Shale oil requires more energy to get out of the ground than is provided by the oil itself, is hugely polluting and none of the drillers has yet turned a profit…

            Human creativity has to work within the envelope of the laws of physics. It can’t make a lithium battery match the energy density of petrol.

          • Edward2
            Posted March 1, 2020 at 11:51 am | Permalink

            You are very pessimistic Ken.
            We were told fossil fuels would have run out by now but there is a glut of cheap oil.
            Gas is abundant.
            Nuclear power is a great form of energy but weak governments are shying away from growing our nuclear capacity.
            Fracked gas has halved gas prices in America.
            It is taxes that make fossil fuels expensive.
            Untaxed diesel and petrol in the UK would be about 40p a litre.

  48. Paul Freedman
    Posted February 27, 2020 at 6:39 pm | Permalink

    President Bill Clinton in 1992 initiated a successful fiscal and monetary policy of bringing the US debt down. The purpose was less debt will cause lower interest rates so that there would be disposable income for all Americans to pay down their personal debt and consume more especially via lower mortgage payments. It worked and the US experienced a long sustainable boom. In his last State of the Union address in 2000 Clinton announced the US would be debt free by 2010. Please watch on YouTube. If it was not for the subsequent calamitous mistakes made by the subsequent US administration the US government would likely have been debt free accordingly. We need to be mindful of this. I agree that with low interest rates we could borrow more now and that’s sensible but we also need to be mindful as paying the debt down now will cause a permance to those low interest rates

  49. Matt
    Posted February 27, 2020 at 6:49 pm | Permalink

    Well. We need Tories to remember they’re Tories. Low tax, small government.

    Well why not small government ?

    The advice to refugees is “Make your way to Lunar house, here’s a travel warrant. See you there.”

    Much the same as your Corona virus advice. “Self quarantine. We’ll see you there.”

  50. Ken Moore
    Posted February 28, 2020 at 12:07 am | Permalink

    Are the lunatics running the asylum ?

    My understanding is that governments have been buying up gilts to drive down interest rates in order to make the debt affordable. The low rates the government enjoy reflect this rather than any great sense of confidence. There is no such thing as a free lunch the current situation is wholly unsustainable. Why doesn’t the BOE buy up all the debt if this is such a good idea ?.

    Having destroyed the capitalist system by abolishing returns on savings the lunatics are busying themselves destroying the credibility of the pound itself with monetary adventurism.

    Much of the growth in GDP is just money pumped into the economy through borrowings and QE. To then pretend that measuring levels of debt against this is the logic of pulling yourself up by your own bootstraps.

    Britain has been living beyond it’s means as the state of the current account shows which – cannibalisation of the economy which makes a recovery from our predicament ever more unlikely.

    No amount of grovelling to China will get us out of this death spiral.

    The point is drawing ever nearer when some very nasty events occur. I will leave you to ponder what these nasty consequences might be, suggesting that you consider the possibility of a sharp fall in Sterling, a sharp rise in Britain’s cost of borrowing, and a simple inability to go on selling assets or borrowing from abroad.
    Conceivably, there may be someone,perhaps even John Redwood himself reading this who believes that this will never happen, and that the UK can continue indefinitely to live far beyond its means. If so, that person has all the qualities of vision and understanding to qualify for a top job in government.
    For everyone else in Britain, the outlook is grim. Living beyond one’s means is not a sustainable policy.

    Reply UK state debt is sterling denominated . I have never recommended state borrowing from abroad. I do recommend policies to cut the external deficit on balance of payments.

  51. Peter Martin
    Posted February 28, 2020 at 2:54 am | Permalink

    “If it is that simple, why doesn’t the Bank of England ‘buy up’ all the debt?”

    Asks Mike Wilson. Others have made the same point. The answer is that because interest rates are very low it wouldn’t make much difference. ££ are government IOUs which don’t pay any interest. Bonds or Gilts are government IOUs which do usually pay some interest. So, as interest rates fall there is less need for Govts to make a swap of one for the other -which is all that QE is.

    “If you don’t have any debt there isn’t any chance of debt default”

    So says Glen Cullen. OK so Govt shouldn’t borrow in a foreign currency. But Govt debt in its own currency, either in the form of cash or gilts, is the basis of our financial system. It is unavoidable.

    • Ken Moore
      Posted February 29, 2020 at 10:59 pm | Permalink

      ‘The answer is that because interest rates are very low it wouldn’t make much difference’.

      In theory yes. In practice no…
      Something you don’t mention is trust which can be lost very quickly. It’s that trust in the system that creates value. That system is very fragile and can be lost. And once lost, it’s almost impossible to regain. I don’t need to pay taxes – I can store my wealth in gold, land etc. if I lose my trust in the pound.

      It’s all very well saying the treasury can cancel 200bn of debt..then if inflation takes off we can dial it back. But you can’t. Once inflation takes off it is impossible to control. It’s not a linear relationship that can be neatly predicted…

      Think we do need to think carefully before calling for more expansion of the money supply or making credit cheaper it has some very nasty side effects

  52. rick hamilton
    Posted February 28, 2020 at 3:18 am | Permalink

    I cannot understand why the UK, with its much-vaunted financial expertise, is unable to raise private capital for projects like HS2. Or indeed, more excellent roads like the M6 Toll. Or a bridge/ tunnel to N. Ireland.

    JR East, the Japanese company building the new 500kph Maglev line (which will cut journey times from Tokyo to Nagoya from 2 hours to 40 mins), is raising the finance by issuing 60 year bonds which I believe are guaranteed by the government. This company was spun off from the old nationalised railways about 25 years ago, inherited its share of the (inevitable) debt, paid that off and then developed the Maglev system at its own expense. By the way the first 30kms out of central Tokyo are in a tunnel, to avoid the incredible cost of buying the land.

    Why is the British taxpayer always expected to cough up for everything that the country needs? With greater private investment allowing lower taxes, or at least reduced national debt interest, what’s wrong with toll roads as an option to our choked motorways?

    Reply If the state guarantees the debt taxpayers are paying

  53. kzb
    Posted February 28, 2020 at 10:15 am | Permalink

    Every adult citizen will be given HK$10,000 to spend. “That is how bad it is in Asia”.

    Bit of unwitting humour there !? I f only things were so bad here.

  54. nhsgp
    Posted February 29, 2020 at 3:06 pm | Permalink

    2005 – the ONS reported that the state then owed over 1.387 trillion, not billion for pensions with zero assets.
    2015 – the ONS reported the state owed 7.6 trillion, with zero assets.
    That’s an annual compounded growth rate of 17.5% each year.
    Current that’s risen to 14 trillion and the other debts are on top.
    That’s £550,000 of inflation linked debt per tax payer. If Mr Min Wage doesn’t pay his share,then no pensions. His share increases by £90,000 next year alone.
    So why do you ignore the pension debts?

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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