Why I am not worried about UK state debt levels

The UK government has put in a new control on UK state debt. It is a sensible one. The interest on the debt should not be more than 6% of total public spending. This appears to be quite a tough target, as very year bar one from 1945 to 2000 saw interest higher than 6% of spending.

Today debt interest is around 4% of public spending, or under 2% of GDP. It is down at this level mainly because UK interest rates are so low and look likely to stay low. UK rates remain higher than the Euro area and Japan though below the US.

State debt at the end of last financial year was £1.82bn or a quite high 85% of National Income. This was a gross figure. The Bank of England, 100% owned by the state on behalf of taxpayers, owned £435 bn of that. If you deduct that, state debt was a more realistic £1.39tn or 67% of GDP, a low figure by contemporary standards.

Refinancing UK state net debt today at rates under 1% for up to 30 year borrowing would leave the state with an net interest bill to pay of under £13.9bn or under 2% of state spending. There is every reason to get on with funding the debt longer and refinancing . It is clearly affordable. It is, however, as some will rightly point out, no reason to waste money. Tax cuts are a particularly good idea.

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136 Comments

  1. Lifelogic
    Posted March 6, 2020 at 5:22 am | Permalink

    Correction £1.82tn not bn.

    It is indeed no reason to waste money, something all recent governments have rather specialised in. I too am in favour of tax cuts this as people invest and spend their money so much more wisely than government do in general. After all it is their hard earned money and they who will get the benefit. This unlike government and bureaucrats, plus you have the costs and damage done in the collections and distribution process. Also further damage done by the costly actions taken by people to avoid excessive taxation. From the current highest and absurdly complex taxation huge reductions and simplification is the only sensible way to go.

    As Milton Friedman rightly puts it:-
    I am favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible.

    • Bob
      Posted March 6, 2020 at 8:11 am | Permalink

      “Correction £1.82tn not bn.”

      The interest payments on the debt are more than the UK education budget.

    • Hope
      Posted March 6, 2020 at 8:53 am | Permalink

      JR, you get worse. Your govt has never kept its central plank economic targets to get elected three times over ten years!, Carney has repeatedly failed his. Now you want us to believe another govt control! This is our money. The interest paid is more than some public services get combined. I note you left the sum out. We know because your govt told us this should not be until the excuses started for failure. Your govt told us to repair the roof when the sun shines! All forgotten.

      HS2 should be scrapped and fifty other projects could be delivered in its place, read Guidomfawkes for suggestions. Paying to leave the EU when all in govt know it is wrong and not legal requirement. Giving NHS another £34 billion after it wasted £34 billion on a failed computer system where no senior person or the most senior person was not sacked.

    • jerry
      Posted March 6, 2020 at 9:20 am | Permalink

      @LL; “tax cuts [allow people to] invest and spend their money so much more wisely than government do in general.”

      Some do, others simply waste it or squirrel it away, perhaps even off-shore…

      Our host is suggesting future tax payers fund current tax cuts by way of long term borrowing in effect, not fund current tax cuts from higher current GDP or the sale of assets for example, that debt will need to be repaid even if the incurred interest is small, unless the plan is to allow higher inflation to diminish the debt.

      I’m not against borrowing to invest, but borrowing to give tax cuts is another issues, and very much dependant on what types of tax cuts are made, a slashing of VAT might be acceptable but not Income tax because many people do not pay income tax, certainly not those who in 30 years time will have fund this borrowing!

      • Lifelogic
        Posted March 7, 2020 at 4:16 am | Permalink

        People with money either spend it, invest it or leave it in a bank (squirrel it away as you put it) and it is then lent on to others to invest. Even if you just keep cash under the bed or burn it that is, in effect, just paying more tax as it devalues each day.

        • jerry
          Posted March 7, 2020 at 7:39 pm | Permalink

          @LL; Not a lot of good to the UK economy if those using their PSNCR funded tax cuts spend their windfall by purchasing goods and services with minimal or no UK GDP economic worth. That is why I’ve suggested, on many occasions, that significant VAT changes after 1st Jan 2021 when there will be nothing to stop the UK govt extolling the virtues of “Buying British” and making it fiscally attractive to do so. A UK version of Trumps MEGA in other words.

          If industry needs money to invest, post Brexit/WA, then why not set up something like a sovereign wealth fund (using both borrowed and money diverted from what we used to send to the EU), and make that available to UK based Businesses and industry on preferred loan rates.

          The value of money only devalues if inflation raises (or specific actions are taken via the international currency markets, as Wilson did in 1967) that money still has to be paid back at full value, plus interest (if deferred).

          How many, harking after this suggested ‘helicopter money’ today were arguing back in 2007-8 that it is unfair to place such a debt burden upon the future generations, criticising the then Labour govt for doing just that?…

          There are ways the Govt. can help by using borrowed money, and as I said, ‘tax’ cuts could be in the mix but NOT the blunt tool that is personal income tax.

    • Martin in Cardiff
      Posted March 6, 2020 at 10:49 am | Permalink

      Well, we seem to have a contradiction to those with any memory.

      The debt under Labour was far lower, and yet it was never out of the news as being “out of control”.

      Yes, there was a deficit, but the at that rate of increase it would have been some years before the debt reached present levels.

      You might claim that deficits are the main problem, but whenever there is debt there is insecurity and being a hostage to fortune.

      The greater the debt, the worse the precarity.

      A few weeks ago the world did not know that there was a global crisis around the corner, for instance.

      Countries will require resilience, and the resources to meet the financial impacts. Debt is the last thing that anyone needs.

      The Norwegians are well-prepared at least.

      Reply Interest charges used to be a lot higher. the debt clearly mattered under Labour when we were forced to borrow from the IMF who made us cut spending, and again when Labour ran out of money in 2009

      • Mitchel
        Posted March 6, 2020 at 4:24 pm | Permalink

        The Russians are even better prepared.Mr Putin has created a veritable financial fortress.

      • Richard1
        Posted March 6, 2020 at 11:46 pm | Permalink

        The deficit under labour by the time they got kicked out was running at > 10% pa, the highest in the OECD. It was catastrophic for confidence, as always happens after labour govts.

        • jerry
          Posted March 7, 2020 at 8:10 pm | Permalink

          @Richard1; “[the post 2008 deficit] was catastrophic for confidence, as always happens after labour govts.”

          Well yes, especially when the right-wing MSM bangs on about such a lack of confidence ever day, misquoting the facts in doing so (the true cause of the deficit) and even the misquoting the Labour PM of the day (as in 1979), with such politically salacious Headlines as “Crisis? What crisis?” (words Callaghan never used), when in context his full comment is not so unreasonable.

          There was no more chaos in the UK on the 10th Jan 1978 than there was in UK on the 10th Jan 1974, and before you ask, yes I remember both periods in question very well.

          • Edward2
            Posted March 7, 2020 at 10:34 pm | Permalink

            You think the main stream media is right wing?
            Guardian Independent Observer Mirrorand even the Times and Financial Times are left leaning.
            Then TV news like BBC Sky Channel Four and Channel Five are all left leaning.
            Please list the ones you feel are right wing.

          • jerry
            Posted March 8, 2020 at 7:55 am | Permalink

            @Edward2; “even the Times and Financial Times are left leaning.”

            That comment probably tells us more about your own politics than it does the cited newsprint titles, if you truly believe voice of the City and Capitalism here in the UK is left wing – next you’ll be telling us the Pope isn’t a Catholic!

          • Edward2
            Posted March 8, 2020 at 1:57 pm | Permalink

            I just look at their views on the following topics:-
            USA politics…anti Trump pro democrat
            Climate change…pro Greta and little in the way of criticism of Extinction Rebellion
            Taxes…in favour of increases
            State spending…in favour of big increases.
            EU..against Brexit.
            Open borders..for continuation.
            BBC.. against change to current funding method
            Taxing global companies…generally against
            Just a few of their editorial positions.

  2. Lifelogic
    Posted March 6, 2020 at 5:45 am | Permalink

    So how many emergency, suitably isolated intensive care beds, breathing equipment and the likes have been planned for or put in place so far? We might well need them to provided for about 2 million rather sick patients over the next few months. To cope we might therefore eneed as many as 200,000 beds at the peak. So where are they going to be and when Matt Hancock?

    Stop all the absurd renewable, climate alarmist spending and waste (to deal with a non problem in 100 years), cancel HS2, cancel COP26 and prepare to deal with this very, very real and rather immediate problem, the best we can, now please. Matt Hancock did not seem impressive at all on QT last night . He read PPE and was an economic advisor to the “tax to death” socialist Chancellor George Osborne which does not bode well. Unless Osborne did the complete opposite of whatever Hancock advised that is.

    • Nig l
      Posted March 6, 2020 at 7:25 am | Permalink

      Shame you didn’t take a PPE. Then your blogs would have a political dimension giving them credibility rather than an Old Testament approach to anything that doesn’t meet your personal views and needs.

      Matt Hancock or a property speculator. I know who I prefer.

      • Lifelogic
        Posted March 6, 2020 at 4:24 pm | Permalink

        I read Maths/Physics and later Electronic Engineering and not theology. Listening to many CofE sermons and lesson as a young choirboy rapidly convinced me in my atheism, certainly before I was out of short trousers. Though I still love sacred choral music. What is a “political dimension” exactly? Tricking people into voting for you with dishonest promises, bogus science and often blatant lies I assume?

        • Fedupsoutherner
          Posted March 7, 2020 at 7:18 am | Permalink

          Keep going L/L. Your posts are punchy, straught talking and to the point. Full of common sense.

          • jerry
            Posted March 7, 2020 at 8:31 pm | Permalink

            @Fedupsoutherner; Common sense is meaningless unless backed-up with the full facts, as @Nig 1 said – Matt Hancock or a property speculator. I know who I prefer. – especially when the latter’s only knowledge with regards Covid-19 comes from what he chooses to access via the MSM or on-line. Even more so when he admits he is no more qualified than Mr Hancock, not having studied medicine, not even biology! As far as the rights and wrongs of dealing with Covid-19 our Mr Logic might well have taken a PPE…

          • Lifelogic
            Posted March 8, 2020 at 7:43 pm | Permalink

            Thanks.

          • jerry
            Posted March 10, 2020 at 9:18 am | Permalink

            @LL; Your welcome! 🙂

    • Christine
      Posted March 6, 2020 at 7:42 am | Permalink

      The Government should be encouraging the elderly to self quarantine so they don’t catch this virus. Friends, family or themselves can order provisions on-line and have them delivered to their home. Working age people are in a better position to recover from the virus without complications. We must take steps now to protect the economy and the NHS. Luckily children only seem to have mild symptoms.

      • Stred
        Posted March 6, 2020 at 4:51 pm | Permalink

        Don’t forget to spray the provisions in case there is a virus on the surface, which can last for three days. Having run out of gel, I am taking a small bottle of vodka as a substitute.

        • Fred H
          Posted March 6, 2020 at 11:38 pm | Permalink

          vodka might do as a substitute for food!

    • Bob
      Posted March 6, 2020 at 8:18 am | Permalink

      Have world leaders sought advice yet from Greta on handling the pandemic?
      If not, why not?

      • Lifelogic
        Posted March 6, 2020 at 4:13 pm | Permalink

        Good point! Perhaps ask her about nuclear power plant design, how to design aircraft that run on just water, how to stop all wars and some quantum physics why they are at it.

    • Hope
      Posted March 6, 2020 at 9:25 am | Permalink

      JR, on a tangential issue suggest you read an article by Newsome in Con Woman today’s Haewei. Quite damining of your Govt but supportive of senior Tory backbenchers.
      You will note that your Govt has admitted no high risk vendor should participate in 5G, yet it has done the opposite! This raises questions on potential wasted taxpayers money, security risk that never should never be allowed and the civil service, once again, ruling the roost.

      (Civil service ed)got rid of Williamson by getting him sacked over this issue after leaking Williamsons’ texts, Newsome writes. (Named civil servant ed)has too much power and too many fingers in the pie. Patel case has all the hallmarks of another civil service scalp. (Words left out ed)When is the govt going to reverse Haewei decision based on the govts admission and evidence that Haewei is a,great securitynrisk? And when is the multiple conflict of interests of senior civil servants and former politicians going to be investigated including Xxxxx?

      Tory govt cannot be put in a compromising position through aid, trade etc like Italy, Africa and other countries. China is not an ally it is using any means to gain power over other western democracies. Wake up.

    • turboterrier
      Posted March 6, 2020 at 9:48 am | Permalink

      Lifelogic
      Stop all the absurd renewable, climate alarmist spending and waste

      They cannot because they will not and that is across both political houses
      They have an abhorrent fear of the green issues and using draconian measures as they are ensuring the taxpayer will pay out of fear for their children and saving the world. Few understand the energy generation system and all its intricacy and that renewable energy is intermittent and can never fufill the requirements of the electricity at any price mentality of both houses. There are other options the country should be exploring and investing in, but the fear of the H word not getting past the moderator is enough. Whatever they come or do not come up with it will be our money, and that is the last thought on their mind. Nothing new then? Situation normal.

      • Lifelogic
        Posted March 6, 2020 at 4:13 pm | Permalink

        Indeed.

    • Martin R
      Posted March 6, 2020 at 10:37 am | Permalink

      Couldn’t agree with you more, although admittedly that’s pretty normal. If we had a government of sane, averagely competent individuals they would seize this on opportunity to scrap the ruinous economically suicidal future they have planned for the country and set in stone. They would have every justification. Unfortunately the people running the country are not sane or averagely competent but cowardly clueless zealots obsessed with climate virtue signalling (mad zero carbon) and that’s hardly even the beginning of it as you aver. None of these should ever have been permitted to get within a mile of government in the first place. They are simply not equipped, unless economic, arithmetic, scientific, and technological illiteracy is a qualification. And the other lot are even more incompetent and dangerous, although the mind reels at the very thought of it.

    • Martin in Cardiff
      Posted March 6, 2020 at 4:14 pm | Permalink

      And how are the fragmented, disparate, only-for-profit private sector going to provide that lot in a week or two?

      Without properly staffed national institutions a country cannot respond promptly to unforeseen or even to expected events.

      The Chinese have demonstrated yet again what is required.

      • Martin in Cardiff
        Posted March 7, 2020 at 12:53 pm | Permalink

        Latest reports from China are of NO new cases in Hubei province outside of Wuhan, and new cases there expected to fall to zero within a month.

        WHO rightly says that their heroic response is to be fully commended and sets the example for the rest of the world.

        Their existentialism is humbling, compared with the fatalism of the UK and US.

        Where there is a will there is a way. Where is the will here?

        • Edward2
          Posted March 7, 2020 at 6:43 pm | Permalink

          And you believe the press reports issued by an communist regime?

          • Martin in Cardiff
            Posted March 8, 2020 at 7:40 am | Permalink

            They were entirely correct re the previous SARS outbreak, so I keep an open mind.

            They are endorsed by WHO too it appears.

          • Edward2
            Posted March 8, 2020 at 1:50 pm | Permalink

            How easily pleased you are.
            The fact the WHO just accepts their figures is enough for you.

  3. Ian Wragg
    Posted March 6, 2020 at 5:46 am | Permalink

    How are you going to pay for the carbon zero lunacy which the government is so enthralled with.
    Impoverishing the masses to appease St Greta of Thunberg will create a massive backlash from the public.
    It would seem collective madness has taken over in Parliament.

    • Lifelogic
      Posted March 6, 2020 at 8:06 am | Permalink

      Indeed and why? Abolish the climate change act now and withdraw from all this economic lunacy.

    • Andy
      Posted March 6, 2020 at 9:17 am | Permalink

      We will have to pay less to tackle what you call ‘carbon lunacy’ than we will have to pay if we don’t tackle it. Dealing with man made climate change now is expensive but not dealing with it will cost significantly more. And not just financially.

      • Edward2
        Posted March 6, 2020 at 4:24 pm | Permalink

        We are tackling it.
        We are already spending billions on it instead of other priorities.
        The Climate Change Act and the recent net zero policy pledges will cost hundreds of billions.
        The UK leads the world in its efforts.
        You talk as if we were doing nothing.

        • bill brown
          Posted March 7, 2020 at 2:53 am | Permalink

          Edward2

          Compared to the Scandinavian countries we don’t do enough so Andy does have a point

          • Edward2
            Posted March 7, 2020 at 2:39 pm | Permalink

            They dont spend as much as the UK
            So Andy doesn’t have a point.

            What is enough?
            Is any level of spending enough?

        • bill brown
          Posted March 7, 2020 at 10:32 am | Permalink

          Edward2

          We are doing a lot but compared to the Nordics we wold do much more as Andy points out

          • Edward2
            Posted March 7, 2020 at 2:42 pm | Permalink

            Andy never mentioned the nordic countries.
            Have they passed a Climate Change Act and reduced emissions by 40% in a few decades.
            The UK’s emissions have been lowered to levels they were in the 1880’s

        • bill brown
          Posted March 8, 2020 at 7:35 am | Permalink

          Edward2

          Of course they do not spend as much as the UK that goes without saying

          • Edward2
            Posted March 8, 2020 at 9:16 pm | Permalink

            So we do more in both our via legislation and in the money we spend.
            Glad you agree.

      • Martin R
        Posted March 6, 2020 at 6:05 pm | Permalink

        What man-made climate change? Pray do tell, I’m all ears. You would barely even read the difference in temperature from the Little Ice Age (1 degree C) to today on a mercury thermometer, let alone the even more minute temperature changes of recent decades. By the way, no statistically significant warming at all for the past twenty years. And perhaps nobody ever told you that the 1C rise in temperature from the LIA began the best part of a century before any increase in CO2 could be attributed to mankind’s industrial activities. So no possible connection with that.

        • Lifelogic
          Posted March 7, 2020 at 4:10 am | Permalink

          Indeed.

    • Martin R
      Posted March 6, 2020 at 10:47 am | Permalink

      Saving the planet, admittedly from a horrible fate that doesn’t even actually exist, surely must merit the spending of the trifling sum of a mere £5 trillion, or £188,000 for every household in the land. And if you don’t like that how about a real bargain basement job at £4 trillion for an 80% reduction of plant food. Surely the money will be well spent even though it won’t in practice actually reduce CO2 by one part in a million in the air or lower global temperatures by even a zillionth of a degree. It’s the thought that counts after all. Or at least the virtue thus signalled.

    • UK Qanon
      Posted March 6, 2020 at 3:23 pm | Permalink

      Ian Wragg – in total agreement however too many MPs are following the Establishment Globalist Agenda. Follow the money.

  4. agricola
    Posted March 6, 2020 at 6:12 am | Permalink

    You are better qualified to be content with our situation than I am. Like the weather there are too many variables to be cast iron sure. Coronavirus is one such extreme example. Life will find others over the next thirty years.

    What I don’t like is that while government benefit from our low interest rates the citizenry do not. They get nothing for the money that commercial banks borrow from them but suffer usuary rates when they borrow from banks. It is a criminality the government seem content with as they continue to do nothing about it.

    With money so cheap for the government there is no excuse for not lifting the infrastructure of the UK to a level one would expect in the fifth largest economy in the World. There are smaller economies showing the way. In terms of quality of life we are lower down the list in many respects.on the positive side, under present circumstances, our beloved NHS puts us way above fifth at second apparently. We need to remember this when CV is an unhappy memory and reward those in it.

    • Lifelogic
      Posted March 6, 2020 at 8:11 am | Permalink

      Like the weather there are far too many variables (many not even knowable) to be remotely sure – even for the next day, let alone next year or one hundred years. Remember Michael Fish and his “don’t worry” reassurance on no hurricane a few hours before the south of England was largely flattened.

      • Martin in Cardiff
        Posted March 6, 2020 at 4:55 pm | Permalink

        The French did correctly forecast the 1987 windstorm however.

        • Lifelogic
          Posted March 6, 2020 at 7:32 pm | Permalink

          Indeed but not very long in advance!

          • Martin in Cardiff
            Posted March 7, 2020 at 8:05 am | Permalink

            Yes, the Apollo moon landings were a failure too, weren’t they?

            Missed the landing site by three metres.

          • Lifelogic
            Posted March 8, 2020 at 7:45 pm | Permalink

            Well they were an economic failure what did they achieve?

    • Lifelogic
      Posted March 6, 2020 at 8:12 am | Permalink

      Like the weather there are far too many variables (many not even knowable) to be remotely sure – even for the next day, let alone next year or one hundred years. Remember Michael Fish and his “don’t worry” reassurance on no hurricane a few hours before the south of England was largely flattened in July 1987.

    • Mitchel
      Posted March 6, 2020 at 11:24 am | Permalink

      “no excuse for not lifting the infrastructure of the UK to a level one would expect in the fifth largest economy in the World”

      Like India – which last year overtook France and the UK to become the fifth largest!

      • Dennis
        Posted March 6, 2020 at 3:51 pm | Permalink

        Being any kind of largest means raping the environment – is that good?

      • forthurst
        Posted March 6, 2020 at 4:36 pm | Permalink

        A meaningless statistic which is presumably why the government repeats it endlessly. Try GDP (PPP) per capita: on that score we are mediocre and India is definitely third world.

        • Mitchel
          Posted March 7, 2020 at 1:25 pm | Permalink

          Correct but the original poster was under the impression that the UK still has the fifth largest economy.

  5. Ian@Barkham
    Posted March 6, 2020 at 6:27 am | Permalink

    Good morning Sir john

    As you rightly say this money as is the debt is the taxpayers and theirs alone. From my perspective the concern is Government likes to spend but very rarely shows a direct quantifiable investment return..

    You get the feeling that because Government has access to our pockets, they spend here there and everywhere just to look good. As a result the return can equated to pouring money down the drain.

    It could be reasoned the only reason to borrow is because all previous loans failed to achieve a result. This when coupled to the never ending call on the taxpayer for more funds, demonstrates how inept governments are at management.

    More money needs to be left with those that create it as they have a better understanding of value, how to achieve it and how it is used to improve societies wellbeing.

    Government is to concerned with getting the taxpayer to fund their next election
    ,

    • James1
      Posted March 6, 2020 at 8:12 am | Permalink

      The Budget next week is likely to tell us where the ship of state is heading and whether we have sensible people in charge of it. Certainly any measures that reduce the public sector’s pickpocketing of taxpayers can only be sensible and welcome.

    • bigneil(newercomp)
      Posted March 6, 2020 at 10:15 am | Permalink

      ” the taxpayers and theirs alone” – the poor are taxed before they get their pay – the rich have made sure THEY aren’t.

    • Mitchel
      Posted March 6, 2020 at 11:28 am | Permalink

      Anyone who would-willingly-consider lending this government money at under 1% for 30 years needs their head examining.Pension funds,I fear, are going to get stuffed!

  6. Mark B
    Posted March 6, 2020 at 6:55 am | Permalink

    Good morning.

    With so many more new people, all supposedly working and paying full tax and NIC, I am surprised that that government even needs to borrow ?

    • Lifelogic
      Posted March 6, 2020 at 4:27 pm | Permalink

      The low paid in much less than the get back in benefits and services.

    • Hope
      Posted March 6, 2020 at 5:15 pm | Permalink

      What is worse the amount of NI numbers do not match the mass immigration figures!

    • Ian Wragg
      Posted March 6, 2020 at 5:20 pm | Permalink

      Especially as we are assured that all these people they are Importing are professionals with their own houses and schools plus they have medical insurance.

  7. Strrd
    Posted March 6, 2020 at 7:18 am | Permalink

    If interest rates are so low, why can’t the government borrow, £600 bn and buy 30 new ultra safe nuclear reactors at the much lower price that other countries are building them. There are about five certified designs to choose from. Then we wouldn’t have to spend £6,000 bn paying for the Climate Change Committee plan that the government has adopted. By the way sll but two of our existing nukes will have to be closed within ten years.

    • Martin in Cardiff
      Posted March 6, 2020 at 4:57 pm | Permalink

      Even if the reactors were as safe as claimed, the waste that they produce is not.

      That problem is going to be bequeathed to future generations.

      • Stred
        Posted March 7, 2020 at 5:40 am | Permalink

        I suggest you read Sustainable Energy Without the Hot Air. The waste could be stored safely in an underground space the size of an Olympic swimming pool while the radio activity decreases. Or the plutonium can be used in a different type of reactor.

        • Edward2
          Posted March 7, 2020 at 2:44 pm | Permalink

          Correct Stred.
          The deaths caused by coal, oil and gas exploration are thousands of times greater than clean nuclear.

          • Martin in Cardiff
            Posted March 8, 2020 at 7:44 am | Permalink

            Yes, more people choke to death on carrots than are eaten by lions, so carrots are more dangerous than lions.

            Thanks Ed.

          • Edward2
            Posted March 8, 2020 at 1:48 pm | Permalink

            Ridiculous comment.
            You demean the many thousands who toiled and who died in these dangerous industries.
            Nuclear is hated by the green movement yet it could provide clean energy for us all.
            Ask the French.

  8. formula57
    Posted March 6, 2020 at 7:21 am | Permalink

    But what should one think if one does not go along with the notion that State spending is dependent upon State debt?

  9. Dave Andrews
    Posted March 6, 2020 at 7:23 am | Permalink

    And what have we got for the £1.8tn of debt, much of which has been added in the last decade?
    This isn’t wise investment, but the consequence of government unable to row back on spending.
    When times are bad, the government has to borrow to fulfil its obligations. What times are good, government uses low interest rates to borrow yet more to bribe the electorate. Result – the debt always grows.
    One day, interest rates won’t be so low and the government will be looking at a pile of debt it can’t pay off, but has to refinance with unattractive terms.

  10. Andy
    Posted March 6, 2020 at 7:39 am | Permalink

    Debt it a terrible idea. It means my generation picks up another bill for your generation’s failure to control finances.

    By far the biggest share of my taxes are spent on old people – pensions, old age perks, social care, extra NHS treatment.

    Then a massive chunk of my tax goes on your debt. Another massive chunk goes on the military.

    All wastes of money.

    I pay a lot of tax. I want it to go on education and health and things that actually help people. Not on interest repayments, warships, nuclear weapons and old folk who spend it on half a dozen holidays a year.

    • Edward2
      Posted March 6, 2020 at 4:30 pm | Permalink

      What would you do when millions of old people lie destitute in the street?
      Would you walk on by ?
      Having already paid their taxes into the system over a lifetime they are entitled to help and welfare in a time of need.
      As you are, as all poor, ill and disabled are..
      That is why the major element people pay into to get a pension is called National Insurance.
      Your open stated discriminatory ideas are appalling.

    • Glenn Vaughan
      Posted March 6, 2020 at 4:50 pm | Permalink

      “I pay a lot of tax.” Andy

      You are the hero in your own fantasy.

    • Dave Andrews
      Posted March 6, 2020 at 5:14 pm | Permalink

      It’s also our generation voting in spending governments. We have ourselves to blame as much as anyone else.

    • Alan Jutson
      Posted March 6, 2020 at 6:00 pm | Permalink

      Andy

      Only half a dozen Holidays a year Andy, come on its more than that.

      It’s my money which I have earn’t and been taxed on, so I will spend it on what I want, and at the same time its keeping many of the youngsters in work so they can purchase the throw away things they like to have for five minutes.

      Money has no value unless you spend it !

  11. Nig l
    Posted March 6, 2020 at 7:42 am | Permalink

    As usual, thoughtful, well put etc. Yet another measure for government spending, spun as sensible, in fact as sensible as the umpteen previous ones, all broken for the usual unavoidable reasons and needing to be reset.

    The problem I have is that seemingly forever we spend on current account, more than we take in and despite fixing roofs when the sun is shining, a successful economy etc, you have no solution to get us in balance, in other words a perpetual increasing overdraft,

    You are kicking the can down the road. If it doesn’t matter now when will it?

  12. Kevin
    Posted March 6, 2020 at 8:03 am | Permalink

    “The Bank of England, 100% owned by the state on behalf of taxpayers, owned £435 bn of that. If you deduct that…”

    Are you of the view that the Bank of England is under no obligation ever to “unwind” this £435 billion of Quantitative Easing (in spite of your previously stated opposition to QE, as expressed, for example, in the post, “The distorting problems caused by very high London home prices”)?

    • acorn
      Posted March 6, 2020 at 5:31 pm | Permalink

      The Gilts that were swapped back into the currency that bought them originally, do not belong to the BoE, they belong to the Treasury that created and issued them via the NLF originally.

      Those Gilts the BoE holds from QE now have zero capital value but still pay interest which the BoE pays back to the Treasury. The capital in those Gilts was turned back into “reserves” (digital money issued by the Treasury to Commercial Banks); and, some will have been converted into physical money (cash notes and coins). All backed by bits of paper from the Treasury.

      When the original owner of the Gilt that sold it, gets his money back by way of a deposit into his High Street bank account, his Bank also gets a “reserve” credit into its BoE account. That way the commercial bank’s balance sheet continues to balance.

      If the ex Gilt holder flush with his deposit now spends it on another savings product in some other institution, his Bank will then transfer its “reserve” to the BoE account of that other institution. That way both banks continue to have balanced balance sheets. Simples.

    • Hugh
      Posted March 8, 2020 at 7:47 pm | Permalink

      Ifyou can deduct the £435bn why not double it, and deduct that. Why stop there?

  13. Narrow Shoulders
    Posted March 6, 2020 at 8:05 am | Permalink

    Out of interest how does a country pay back £1.3 trillion?

    Do we have a 25 year endowment that is guaranteed to pay out?

    Do you never see this repaid?

    At some point it will need to be serviced at proper interest rates which could easily double or triple the repayments.

    Aren’t you viewing this in the short term?

    • Lifelogic
      Posted March 6, 2020 at 4:28 pm | Permalink

      “Out of interest how does a country pay back £1.3 trillion?”

      By devaluing the currency each year.

  14. oldtimer
    Posted March 6, 2020 at 8:30 am | Permalink

    It would make sense for the government to refinance it’s long term debt at lower rates if that is feasible. That does not mean it makes sense for politicians to splurge it on vanity projects. I saw a suggestion that Mr Johnson is now pursuing the idea of a tunnel to Ireland, instead of a bridge which seems to have fallen foul of actual, practical objections. Another nonsense waste of money like so many favoured by politicians. Others have already pointed out the absurdity of the so-called climate emergency measures. These are based on guesses that are even more unreliable than the guesses about the spread of COVID-19. At least the medical scientists are honest enough to admit they do not know how this virus will spread. Such is the arrogance of climate “scientists” that they claim not only to know what global temperatures will be in thirty or fifty years time but also how to stop it happening! How much longer and at what cost must we tolerate such nonsense?

    • Lifelogic
      Posted March 7, 2020 at 4:06 am | Permalink

      Indeed though the Covid-19 spread is fairly predictable now and looks rather dire.

  15. Ian Kaye
    Posted March 6, 2020 at 8:51 am | Permalink

    This is what I have been going on about on a couple of postings

  16. dominic
    Posted March 6, 2020 at 9:00 am | Permalink

    DEFEND PATEL FROM CONCERTED EVIL led by the BBC and vile Civil Service

    If they bring down this most decent and moral of politicians then the London metropolitan will rule the roost. I see her as the saviour of the conservatism and the party. Johnson is not the future of this once great party, Patel is. She must be defended

    • rose
      Posted March 6, 2020 at 9:16 pm | Permalink

      This eleventh and a half hour left wing attack on Amber Rudd at Oxford is interesting: it had got out that she had been misled by the civil servants and dropped in it over Windrush. So now she is being witch hunted and demonised so that the senior civil servant who has flounced out in a flurry of media attention can be exonerated. In preparation for…

      • rose
        Posted March 7, 2020 at 12:51 am | Permalink

        I am trying not to be suspicious about the fact that I can’t find the 92 names who supported the Home Secretary. The Telegraph gives a link which then goes to the previous day’s letters, and the rest of the internet is equally unhelpful. But I would like to know who they are. Any ideas?

    • Fedupsoutherner
      Posted March 7, 2020 at 7:08 am | Permalink

      Too right Dom.

  17. Newmania
    Posted March 6, 2020 at 9:00 am | Permalink

    You are not worried about future taxation ? Super ; politicians never are, its credit for you now, cost for someone else later. Evading responsibility for the Brexit recession is worth as much of our money as you can force us to borrow.
    Questions:
    Are you suggesting the Bank of England can write off its stock of UK bonds – yes or no ?
    If a debt (excluding pensions liabilities) already headed above 90% is fine then why did you fight two elections on the basis debt was too high under New Labour when it never exceeded 35% GDP ?

    The sort of people who believe in alternative medicine believe in an alternative economics which claims the only constraint on free money printing is current inflation or interest rates. This is only true if you can foretell a future of perpetual tranquillity and growth. Its rubbish ..just utter and complete rubbish
    Tax is at a 50 year high .Debts close to a 50 year high .Growth on a low trajectory.Policy governed by political bribery not returns
    Is there no-one left who is ashamed to see our country do this to itself?

    Reply No I am not saying write the bonds off, but pointing out when the Treasury pay interest or capital back for them the state gets the money, usually paid back as a dividend to HMT.

  18. Everhopeful
    Posted March 6, 2020 at 9:20 am | Permalink

    The debt might be manageable but surely it would be much better to live within one’s means?
    The West has created unaffordable Welfare States.

  19. John S
    Posted March 6, 2020 at 9:39 am | Permalink

    You mention debt as a proportion of public spending. Surely, we should be talking about debt as a proportion of GDP. Public spending is and has been going through the roof for as long as I can remember. Therefore 4% debt to public spending is nothing to be proud about.
    I agree with the other comments about waste in the public sector and this madness of striving for a carbon neutral economy to tackle a non-existent threat.

  20. Lifelogic
    Posted March 6, 2020 at 9:52 am | Permalink

    BORIS JOHNSON’S proposed bridge linking the British mainland with Northern Ireland is now more likely to be a tunnel, the Scottish Secretary has announced!

    Could this governments concentrate the corona virus, Brexit and things that are important to people for this year and next. Cancel HS2, the zero carbon lunacy and almost anything that is more than about 5 years off. Deal with the here and now please, there is more than enough to be done with out floating daft, very expensive, wasteful, futuristic dreams.

    • Martyn G
      Posted March 6, 2020 at 4:52 pm | Permalink

      Agree, it will next be proposed that we build a bridge (or tunnel) to the USA. Mad? Of course it is. Just heard BJ saying that government was in contact with supermarkets etc to ensure no loss of food etc during the virus crisis. Just been to nearby Waitrose to buy food and usual fortnightly modest 4-pack of toilet tissue, only to discover all shelves stripped bare of tissue. Went to Co-OP, same same – bare shelves. To another, smaller shop – totally bare of toilet tissue. How long will it be, I wonder, before food stuff also starts disappearing? Oh, and I expect soon to see spies flogging hideously expensive toilet tissue in the streets. Would love to be wrong but…..

  21. BOF
    Posted March 6, 2020 at 10:01 am | Permalink

    Sir John, while I respect your reasoning, what concerns me is the incontinent spending by Government on pointless projects (like HS2) while the tax payer is burdened with the highest rate of taxation in 50 years.

    Perhaps you could do a study of what the cost will be to acheive zero carbon, how it will be paid for and whether enough money could be raised from borrowing to cover the cost. So far I see no information from Government on this kind of detail.

    The Green party must be delighted. With only one MP, their policies are implemented.

  22. Richard1
    Posted March 6, 2020 at 10:01 am | Permalink

    67% debt / gdp is indeed the relevant figure. A big danger of the low interest rate environment is money going on wasteful projects. HS2 is a major example. We frequently hear, in effect, that because interest rates are so low there’s no such thing as a bad investment. This is of course quite wrong and we need far more discussion of the concept of opportunity cost of capital, a concept probably unfamiliar to the large majority of politicians, especially those on the left, who’ve never worked in private industry, and to civil servants.

    Boris must not waste time. With the tax code now 10m words, having doubled even under mr Osborne who had tax simplification as an express objective, we need a massive push by govt to a simpler and flatter tax system. We need to be competitive now we are out of the EU or we may as well have stayed in. Every cut and change will bring howls of outrage from the left, amplified on the BBC. So take the fight early on In this Parliament.

    • Lifelogic
      Posted March 7, 2020 at 4:00 am | Permalink

      Indeed.

  23. Richard1
    Posted March 6, 2020 at 10:37 am | Permalink

    Off topic but please could actors, tv faces, tv and film producers, theatre directors, authors, Etc, please take note of the wise words of the football manager Jürgen Klopp, who declined to give his views on Coronovirus as he is a football manager who knows about football. Other people he said are better qualified than him to speak about Coronavirus. Let his example stand before all those luvvies, as yet again they treat us to their views on topics of the day which are completely outside their fields of expertise and experience, global warming, trade policy, fiscal and monetary policy being examples.

    • Lifelogic
      Posted March 6, 2020 at 4:36 pm | Permalink

      Actors field of expertise is, I assume, remembering their lines, looking either attractive or sometimes very ugly or just odd, pulling different expressive faces as needed, being good at self publicity, being drivel by emotion rather than logic and putting on different voices and accents. Perfect training to advise us all on climate change, energy systems and the likes!

      • Martin in Cardiff
        Posted March 6, 2020 at 7:36 pm | Permalink

        Hedy Lamarr invented frequency-agile radio communication.

        • Fred H
          Posted March 6, 2020 at 11:47 pm | Permalink

          Martin – – how did I manage without knowing that?

          • Martin in Cardiff
            Posted March 8, 2020 at 7:47 am | Permalink

            Well, you’ve somehow managed without knowing plenty besides, so you tell me?

            Now, what of LL’s silly claim, that only people of a narrow speciality such as his are entitled to comment?

          • Edward2
            Posted March 8, 2020 at 1:45 pm | Permalink

            One minute you say we should accept what experts tell us and not question their opinions now when Lifelogic says we should be wary of those self proclaimed experts like famous acors who have little formal expertise you argue the opposite way.
            Make your mind up.

    • Andy
      Posted March 6, 2020 at 7:16 pm | Permalink

      The Tory party, which you support, has literally spent the last 4 years deriding experts. And now it tells you to listen to experts.

      Mr Hancock today proudly claiming the government was working with supermarkets to avoid Coronavirus shortages. The supermarkets responding: “Eh? No one has spoken to us.” What a shower.

      • Edward2
        Posted March 6, 2020 at 9:50 pm | Permalink

        Some experts get their predictions wrong.
        If you have two experts with very different opinions which one are you going to believe?

  24. acorn
    Posted March 6, 2020 at 11:06 am | Permalink

    The public sector net debt (PSND) to GDP ratio is purely for public consumption to perpetuate the myth that the government has to borrow its own unique monopoly money before it can spend. Discounting the Gilts created by the NLF and held by the BoE via the APF is smoke and mirrors accounting. Alas you can fool 99% of the people all the time.

    PSND is somewhat less than the “to maturity” cash flows associated with the National Loans Fund (NLF) liabilities that were £2,469 billion the last time it counted them. The financing costs of this “borrowing” were £51 billion in last years NLF Accounts of which the Consolidated Fund handed over £40 billion.

    For youngsters studying public sector accounting, the NLF Accounts are required reading, it is where the magic money tree lives; honest! https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/818269/NLF_Account_2018-19_FINAL.PDF

  25. BW
    Posted March 6, 2020 at 11:33 am | Permalink

    It appears nobody is bothered. Especially Parliament. 3.1 % pay rise. If nothing else it is morally indefensible. 3.1% of £75000 is a lot more than 3.1% of my pension which won’t even cover the rise in council tax. I know I know it’s an independent body. You can do nothing about it. You can only stop the pay rises of the peasants.

    • Fred H
      Posted March 6, 2020 at 3:42 pm | Permalink

      The salary is not so outrageous, but 650 of them is too many. Worse still the costs of keeping the Lords in the manner to which over 800 enjoy being accustomed.

  26. miami.mode
    Posted March 6, 2020 at 11:56 am | Permalink

    All very laudable, but policy made purely on current circumstances of extremely low interest rates. Doubtless if it proves difficult in the future to maintain these figures, then the parameters will be altered. When the facts change etc.

  27. Martin R
    Posted March 6, 2020 at 12:09 pm | Permalink

    Apparently in the future the country is to be powered by something called renewables. Of course these renewables need themselves to be renewed every twenty to twenty-five years, if they even achieve their brochure life that is, which is not a given. So as this is our future I thought I’d take a look at what wind is doing today, an averagely cold day with temperatures near to freezing. I see the windmills have got up to a wonderful 1.8 GW, slightly over 4% of demand. The rest being made up by proper power stations as always. Nor sure how much installed wind there is now but last year it was a bit over 22 GW apparently. So we’ve got at least 22+ GW installed and it’s actually producing 1.8 GW on a cold winters day. Impressive, I don’t think, and not particularly unusual when the temperature falls. So is this really what these raving lunatics think is going to be able to power the country in their zero carbon wonderland in the future when they’ve blown up all the fossil fuel power stations?

    • Fedupsoutherner
      Posted March 7, 2020 at 7:05 am | Permalink

      Martin I helped run a Scottish anti wind farm group and we pointed this out years ago. They now have a station where developers get paid more to switch off than when they are operating. No doubt more will be erected and people wonder why they are struggling to pay their bills. My provider has informed me my bill will be around £6a month more. How are people going to find this money on pensions or a single low wage with all the other utilities bills going up?

  28. Peter
    Posted March 6, 2020 at 12:21 pm | Permalink

    Two out of five comments from one individual today.

    Probably more of his words than the article itself – if I could be bothered to count.

    I have to say that I agree with SM’s comment yesterday that this diary has consequently been turned into a repetitive ‘Almanac’ .

    • hefner
      Posted March 6, 2020 at 9:58 pm | Permalink

      Incontinence?

  29. ian
    Posted March 6, 2020 at 12:23 pm | Permalink

    The super bot highway is the answer to your prayer. Its has the capacities to recover all fuel duties lost to gov though clime change and would be ready for sale to the stock market in 7 or 8 years for at least 400 billion pounds.

  30. Lifelogic
    Posted March 6, 2020 at 12:35 pm | Permalink

    It seems that Warwick Council plans to increase council tax bills by 34% in order to raise £3 million to “tackle climate change”. It is going to do this before even holding the referendum they are obliged to.

    Is the government going to stand by while they do this. It will surely be voted down by the residents unless the people of Warwick are dafter than I think they are. How much with the referendum and all the refund admin cost tax payers?

  31. BillM
    Posted March 6, 2020 at 12:52 pm | Permalink

    The BoE, owned by the State, lends money to the State? Sounds very much like counterfeiting to me. So, because the State has loaned money to itself there is no debt? Hmm, I wonder just how many mortgagees would want to take advantage of that deal?

  32. Lester Beedell
    Posted March 6, 2020 at 1:06 pm | Permalink

    Our local council, South Glos have declared a Climate Emergency, I phoned them and asked the reason for declaring a Climate Emergency….. it’s because the UN have published reports backed up by hundreds of scientists around the world!
    I asked her what the level of Co2 is in the atmosphere and she didn’t have a clue, 0.o4%, she advised me to take it up with the UN, I said that I wanted to take it up with the council because they were implementing it and she kept spouting the same nonsense
    I’ve now emailed one of the councillors but I’m not expecting a reply but I’m not giving up!
    I want to know how much this will add to the council tax bill

    • The Prangwizard
      Posted March 6, 2020 at 4:07 pm | Permalink

      My Parish Council has done the same. The rot is deeply embedded.

    • Lifelogic
      Posted March 6, 2020 at 4:08 pm | Permalink

      The more people believe in the alarmist religion the less about science, climate, energy, physics and engineering they seem to know.

    • Edward2
      Posted March 6, 2020 at 4:32 pm | Permalink

      You should inform them that the UNs IPCC climate reports have not declared a climate emergency nor warned ofthe possibility of human extinction within a few years.

    • bill
      Posted March 7, 2020 at 2:58 pm | Permalink

      OMG, what has happened to our country? Councils taking it upon themselves to adopt UN recommendations? Surely that is a matter for the elected Members of Parliament and our Government to decide for the whole country not lowly town councillors?
      Do none of these latter folk read the scientific data on the subject? Why even the Director of the IPCC stated Climate Change policy is not environmental policy. It’s all about money.

      “IPCC official Ottmar Edenhofer, speaking in November 2010, advised that: “…one has to free oneself from the illusion that international climate policy is environmental policy. Instead, climate change policy is about how we redistribute de facto the world’s wealth…””

  33. Mark
    Posted March 6, 2020 at 1:30 pm | Permalink

    The debts of the country are not just those of the state. We need to recognise the international position, including international borrowing to fund mortgages and businesses.

  34. Progress gone Viral
    Posted March 6, 2020 at 1:51 pm | Permalink

    Now is the time to establish the principle of electronic voting in The House. The reduction of physical interactions, post Virus, including the SNP MPs who are likely to crowd around the Speakers Chair and generally will not behave themselves. Padlocked to their bench?

  35. Iago
    Posted March 6, 2020 at 6:35 pm | Permalink

    It seems we oiks are not to be told where the latest corona virus cases are. At 2.27 pm today the Telegraph reports 87 cases, location unknown. For the other cases, cities are no longer specified, only counties, with the exception of London and Manchester and cities in Scotland. I suppose we are not to be trusted with reasonably specific information. I hope that people will remember that the government and its ineffable civil service did nothing, I repeat nothing, to prevent the virus reaching this country.

    • Lifelogic
      Posted March 6, 2020 at 7:37 pm | Permalink

      In Italy it seem 10% of those infected need ventilation equipment. How many do we have or can we botch together in a few weeks?

    • LinJ
      Posted March 6, 2020 at 9:41 pm | Permalink

      And nothing to counter the manic panic of the MSM. It has just been allowed to set its own agenda – when the setting up of a dedicated website by our own government, with statistics and proper advice and directives would have countered all that.
      So not only was there any attempt to ensure our safety, but no attempt to inform and advise the people, even belatedly.
      This government and our PM are losing all the goodwill they gleaned last autumn.

  36. DOMINIC
    Posted March 6, 2020 at 6:35 pm | Permalink

    This Tory government’s embrace of sovereign debt to finance their Green, carbon-neutral political pandering will bankrupt each and everyone of us.

    Johnson doesn’t give a rat’s about environmental issues and yet he’s playing politics with this issue and he’s using our future wealth to do it.

    He was given a mandate to behave like a proper Conservative and yet he’s mirroring the stupidity of Greta and her Marxist infantilism.

    I’ve never trusted Johnson. I don’t like his cheery, verbal persona. he uses it to conceal his empty soul and the absence of belief

    We want a proper radical and reforming Conservative government and WE AIN’T GETTING IT

    Fake Tories, all hot air

    • Martin in Cardiff
      Posted March 6, 2020 at 8:29 pm | Permalink

      Radical and Conservative are mutually exclusive terms, and so should they be.

      You actually want something else, but which would smuggle itself past the voters under the Conservative label.

  37. Irene
    Posted March 6, 2020 at 9:12 pm | Permalink

    While you worry about taxes, levelling up/down/sideways, entrepreneurs, home ownership, etc etc etc – where I live our 3 nearest supermarkets have been denuded of toilet rolls, pasta, tinned veg and frozen chips. Shines a whole new light on immediate priorities, wouldn’t you say?

  38. Matthew
    Posted March 7, 2020 at 12:40 am | Permalink

    I’m constitutionally anti-debt, and naturally risk-averse, though I love massive risk-taking in the economy in private hands.

    State Debt invariably gets out of hand, and creates an excuse for the Left to pursue endless spending, which ultimately the Right cannot control and must painfully mop up the mess, while being yelled at about their preference for ‘austerity’.

    That being said: I trust your wisdom. So if thou shalt deem it safe, then it must be so under your careful Vulcan control.

    All hail Sir John of Oxford and the assorted Shires thereunder!

  39. Lindsay McDougall
    Posted March 7, 2020 at 3:43 pm | Permalink

    State debt at 67% of GDP is low only by contemporary European standards. Elsewhere and in times past it is not so low. In the 90s and 00s we managed to get it down to between 30% and 40%, which provides for contingencies. You are constantly – and rightly – banging on about our sovereignty. To enjoy the full benefits of sovereignty, we need to ensure that our freedom of action is not constrained by debt.

  • 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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