Government borrowing

A contributor asked for an update on government debt.

The UK had a difficult borrowing problem in the IMF crash of the mid 1970s when the country ran out of foreign currency to borrow and had to make emergency cuts. The IMF supervised a programme of lower public spending in return for loans.

It had a bit of a domestic borrowing problem in the 1980s as a Conservative government tackled the large inherited borrowings. Interest rates rose to high levels to persuade people to take state debt as investments. As spending came under better control so rates came down, helping economic recovery.

It had a worse borrowing problem during and after the banking crash of 2008. State debt was high going into the crash alongside very high levels of private sector borrowing. Both sectors reined in in the last months of the Labour government. The incoming Coalition, contrary to media reports, raised the levels of state borrowing over their tenure.

On each of these occasions debt interest was over 3% of GDP or 6-7% of total public spending. It was considerably higher immediately after the war when state debt was 250% of GDP reflecting the need to spend and borrow to win the war. Patient work brought the debt under better control in the 1950s.

People ask me if we can afford the sharp build up in gross debt brought on by the policies chosen to deal with the pandemic. I am pleased to report that we can afford it, because interest rates have tumbled so much and because the Bank of England is buying in substantial quantities of the debt. The latest official predictions show net debt interest as a percentage of GDP falling to a tiny 0.8% of GDP next year as debts are rolled over at low rates and as the Bank completes its buying programme. This means debt interest will be at its lowest for the post 1945 period. There is no need to count the interest paid on the debt owned by the Bank of England, as taxpayers and government get that receipt.

The Uk government today can borrow money for 10 years at 0.29%. The stated debt is a large 105% of GDP, but the state itself will own Ā£875bn of that so the true figure for the actual net debt owed by the state is around two thirds of GDP.

These are unusual times when the US, UK, leading EU countries and Japan can all borrow at around zero very large sums of money. It is still not a good idea to go on borrowing at scale for too long, and never a good idea to waste money borrowed. The immediate need for high borrowing is necessary to subsidise people and companies that are prevented from working by lock downs. The sooner we can unlock, the sooner we can get our finances under better control.

The good news is there is no need to worry yet. Markets are allowing all the major countries to borrow plenty at ultra low rates of interest, underpinned by Central Banks buying up a lot of the debt. This only has to change were inflation to pick up, which so far it has not. Japan has been doing this now for several decades with no inflation, with gross state debt at 250% of GDP but net state debt around half that and the interest burden very low.

216 Comments

  1. Lifelogic
    January 15, 2021

    It might help if all this borrowed money was being spent sensibly by the government. Not, as now, mainly pissed down the drain on big government, HS2, renewable subsidies, the war on plant food, the incompetent state monopoly healthcare and the pointless and hugely damaging lockdowns.

    1. Fedupsoutherner
      January 15, 2021

      Agree and Biden already going on about tackling climate change which Boris and Nicola will follow to the letter and even try to go one better. God knows why they think God has chosen them to be saviours.

      1. Narrow Shoulders
        January 15, 2021

        Nicola? Do you think she will still be there after her (alleged) misleading behaviour?

        1. Fedupsoutherner
          January 15, 2021

          It won’t matter who is in charge of the SNP. Climate Change is their flagship policy. They’ve been banging on about being the Saudi Arabia of wind for years.

          1. NickC
            January 16, 2021

            The SNP certainly have wind as their flagship policy.

      2. Lifelogic
        January 15, 2021

        Total Insanity another mad religion. The current % of human used energy worldwide coming from Solar and Wind is just 1.5% so largely irrelevant and anyway these forms of energy do cause large CO2 outputs in construction/maint. and need backup anyway. No real evidence for any climate emergency anyway. More atmospheric CO2
        is on balance a net good in greening the planet and increasing food production.

        1. Hope
          January 15, 2021

          Today we have the idiotic Shapps on TV repeating the same utter rubbish about Brazil, after Brazil closed its borders to UK three weeks ago because of a new strain, while all cabinet warns us of the apocalyptic outcomes if we see each other, have a cup of coffee or do not follow the rules. The lunatics are definitely running the asylum.

          Anyone who questions the Govt. stupidity are non platformed, taken down by big tech or smeared.

        2. NickC
          January 16, 2021

          Lifelogic, I have found out that the 40GW of Wind that Boris boasts about is actually only 40GW nameplate capacity. So averaged over a year that amounts to less than 16GW (offshore capacity factor c38%).

          Where the other 30GW (on average) is to come from the government seems to be coy about. And that’s if they don’t pile home heating and cars on top. If they do, that’s 60GW+ they’re looking for – but no plans to build it.

      3. Ed M
        January 15, 2021

        Let’s fund research to find out exactly what’s going on.

        Then we can silence the greenies. But if there is something going on, then we know what, and better how to deal with, without damaging our economy. In fact, creating new technologies to deal with any solvable problems could boost certain parts of the economy (as well as make our economy less dependant on fossil fuels including having to buy from Norway and so on).

        1. Hope
          January 15, 2021

          The Govt has proved that it has a magic money tree and JR further promotes this notion!

          Could I have some free money please I paid taxes all my working life, or some free food, or some free accommodation, subsidis dmcouncil tax. Better still could I be put up in a four star hotel like criminals illegally entering our country- they get pocket money as well!

          As you say JR, the U.K. can afford it! How irresponsible of you.

          1. Narrow Shoulders
            January 16, 2021

            No. I am afraid not. If you can look after yourself you must use your own money not taxpayers’ first.

      4. Ian
        January 15, 2021

        Nothing will change this Establishment the same EU brain washed , I am alright Jack?
        Big brother has bought most of them , they have no reason to change there spots , after all as far as they are concerned, it is them that are Sovereign?
        I do not say that this applies to our Host and the hand full that are on the right page.
        You vote the same and get the same as we have had for 50 years
        It does not have to be like this,
        Do you want to be free do you want to belong to a genuine democracy.
        Do you want to be proud of our Country?
        Well we did not get to where we are now because our betters.
        Exactly the opposite, no one in Westminster did it not anyone.
        Voting if we are lucky will happen in the Spring it is up to us, how much do you really what your own Country
        Never stop , never loose site of that dream

    2. J Bush
      January 15, 2021

      +1

      It seems unlikely Johnson isn’t aware of the opinion of the general public and if he truly believed in democracy and conservative values, why not listen to them and not just a selective few.

      What would gain him a few Brownie points after the hash made of Brexit (fishing debacle etc) and this covid-19 virus, if he had a few referendums on the points you have raised and let the masses, not just a few selective, decide.

    3. Ian Wragg
      January 15, 2021

      To say nothing of foreign aid which for the most part is wasted.
      I watched Priti Patel threatening us with armageddon if we don’t behave on the same day the Channel taxis brought 120 unknowns to us shores.
      I think she would be better getting a grip on her own job and leave us alone.
      The back benchers are getting restlwitg Boris and the 2 Ronnie’s taking us further down this dark alkey, he has to go.

      1. Hope
        January 15, 2021

        Govt allowed 30-40 million to fly in to the country while placing the nation under house arrest! Taiwan warned WHO in December 2018 and closed its borders. Tedros WHO told the world 14th January no evidence of human-to-human contamination! Johnson gave WHO hundreds of millions more and allowed flights from Wuhan and known world virus hotspots with Valance telling the nation it would make little difference! Here we are still in lockdown. If it is no difference why the lockdown!

        WHO and Govt health advisors told us no difference wearing a face mask now it is mandatory even though it is bloody obvious the quality of each is not determined and of no use whatsoever in the majority of cases. it is about mind control to force compliance.

    4. glen cullen
      January 15, 2021

      Someone in government is already suggesting that HS2 go fully electric….only another extra billion here and an extra billion there

      And when I say government I don’t mean elected MPs

    5. Cynic
      January 15, 2021

      +1 You can say that again!

    6. DavidJ
      January 15, 2021

      Excellent points LL. If only government would take notice.

  2. Lifelogic
    January 15, 2021

    The mid seventies indeed. Good old Dennis Healey with his IMF and 98% income tax. A double first (Balliol Greats) yet daft as a brush. Ted Heath was there too at the time, reading PPE. Both have much to answer for.

    1. Martin in Cardiff
      January 15, 2021

      Newly-released information reveals that there was in fact no need for the IMF.

      Healey was misled by being fed incorrect data.

      It sabotaged the Labour administration perfectly.

      Now, THAT is the Establishment.

      1. Fred H
        January 15, 2021

        Who convinced him 98% tax was fine?

      2. TIMH
        January 15, 2021

        What’s the source of this ‘newly released information’?

      3. czerwonadupa
        January 15, 2021

        You’ll be repeating next Sunny Jim’s “Crisis, what crisis?”

        1. Lifelogic
          January 16, 2021

          Or Harold Wilson’s big lie that:-

          “It does not mean that the pound, here in Britain, in your pocket or purse or in your bank, has been devalued.”

          When he devalued everyone’s pounds (in pockets, purses and banks) by 14% against the $ in 1967. PPE Oxon again needless to say.

      4. Lifelogic
        January 15, 2021

        98% income tax will sabotage any economy! Anyone daft enought to have that as a policy would be rather easy to mislead I suspect!

      5. Richard1
        January 15, 2021

        That isnā€™t new info it was a claim made by Tony benn even at the time. The fact is the U.K. govt couldnā€™t borrow in the markets what it wanted to so ended up with the IMF.

        Thatcher saved us from the ravages of the 60s and 70s Labour govts (+ Heath), transforming the U.K. economy for all our benefit subsequently. There can never be enough statues to Thatcher.

        1. Lynn
          January 15, 2021

          +1

      6. jon livesey
        January 15, 2021

        Your “Newly-released information” is a Labour inspired urban legend that has been kicking around the Internet for decades. Every time the IMF loan gets a mention, someone pops up with this “Newly-released information”. It’s been going on almost from day one.

        In fact,the Labour Cabinet considered the IMF loan over a series of twenty one full Cabinet meeting, with information coming *from* Healey – he was the Chancellor, remember? If they were still confused after 21 meetings, that’s a condemnation of Labour, not an excuse for it.

        And the IMF loan was not some quirky one-off. It was the last in a series of eight major loans that the UK had to raise, the earlier ones being mostly from the US and West Germany.

        And it’s a ridiculous story anyway. Are we supposed to imagine Treasury officials sloshing bags of IMF money into the vaults and somehow not noticing that the vaults were already full? “Gee, I wonder whose are these billions we already have lying around?”

        Stop trying to rerun an ancient Labour dishonest re-write of history. Labour’s economic management was a total disaster and we were actually very fortunate that the terms of the loan took control of the economy away from Labour, and paved the way for competent economic policies.

        1. NickC
          January 16, 2021

          Jon, Thank you for that information – very valuable.

    2. Ed M
      January 15, 2021

      Education is designed ultimately to impress professors at Oxford and Cambridge – not to impress employers.

      Cambridge and Oxford need to take a lead in offering more practical degrees (and universities further down the chain, even more so, until you reach the ones at the very bottom that should only be really offering courses on things like accountancy, plumbing, how to code etc ..

      And schools just focus a lot more on Maths and English (and one or two classes on how to think logically).

      Meanwhile, we should still support certain Arts courses, as creativity is essential in business – plus we need to help encourage the great writers and poets and composers of the future. A country without Strong Arts is just more dead / soulless / less cheerful and inspired than it needs to be.

      1. jon livesey
        January 15, 2021

        “More practical degrees”? Sure thing. Who needs all those Nobel Prizes anyway?

        1. Ed M
          January 15, 2021

          ‘Who needs all those Nobel Prizes anyway?

          – Your response is fallacious!

          I didn’t say no to degrees focused on creating Nobel Prizes. But more degrees that are more practical. Different argument.

          1. Lifelogic
            January 16, 2021

            Who needs all those Nobel “Peace” Prizes I assume you mean! Even some Economic ones are very dubious.

            Physics, Chemistry and Medicine are generally fine.

          2. Lifelogic
            January 16, 2021

            Al Gore, Obama and many even worse!

          3. Ed M
            January 16, 2021

            ‘Physics, Chemistry and Medicine are generally fine.’

            – Well said.

    3. Martin in Cardiff
      January 15, 2021

      If people had listened to battle-hardened Commander Healey then there would have been no destabilisation of the Middle East and no refugee crisis for Europe.

      “Daft as a brush”, you call him.

      1. Fred H
        January 15, 2021

        Daft. period!

      2. Lifelogic
        January 15, 2021

        Anyone who thinks 98% income tax is a good plan and then has to goes off cap in hand to the IMF is indeed – daft as a brush.

  3. Len Peel
    January 15, 2021

    With fish exports rotting and massive red tape clogging up our ports, we will need a lot of borrowing. just how deep will this Brexit depression be?

    1. Bloke in Wales
      January 15, 2021

      Among remoaners the Brexit depression is likely to be infinitely deep, and permanent.

      The lamentations of their women will be heard for years, and I am enjoying every moment of it.

      1. Martin in Cardiff
        January 15, 2021

        You’ve nothing else in life after all, have you?

        1. Bloke in Wales
          January 15, 2021

          I now have my freedom from an expensive and remote layer of government.

          The next layer to be abolished should be the Welsh Assembly.

        2. steve
          January 15, 2021

          MiC

          How would you know ? You some kind of expert on people’s personal lives, eh ?

      2. Ed M
        January 15, 2021

        ‘remoaners’

        – Brexit should be about uniting the country, not dividing it. Calling people ‘remoaners’, especially at this stage of things, is negative and counter-productive to the success of Brexit.

        Let’s encourage and inspire Remainers with a positive vision of Sovereignty – so that they rally behind and so make it more likely to succeed – and succeed well.

        1. steve
          January 15, 2021

          Ed M

          “Letā€™s encourage and inspire Remainers with a positive vision of Sovereignty ”

          They need ‘inspiring’ but not in the way you think.

        2. BW
          January 16, 2021

          They are not remainers or remoaners anymore. They are rejoiners now. Blair is whipping them up into a frenzy. Hopefully we will never rejoin. It will definitely mean joining the doomed Euro. Something else the SNP cannot grasp

      3. Lester Cynic Beedell
        January 15, 2021

        BiW

        Are you MiC under a different name?

        1. Fred H
          January 15, 2021

          not born there, just finds Cardiff as his Nirvana.

    2. Lifelogic
      January 15, 2021

      The things causing economic problems are manifold:- Covid (perhaps circa 10 times the cost of the 2008 banking crash), this very poor & worse than no deal EU treaty, the absurd zero carbon and expensive energy agenda, the dire state monopoly NHS, subsidised often worthless university degrees, the vast quantity of insane red tape everywhere and still increasing, the absurdly high and vastly over complex tax system, the over bearing size of the largely unproductive (& anti-productive) state sector, restrictive planning, lack of real competition in banking (.2% on deposits and 40% personal overdraft for all thanks to the FCA), lack of a can do optimistic pro growth vision. ……

      It can all be sorted out but there seems to be no political will from this essentially socialist/Libdim Boris administration. Less than four years to the next general election and Starmerā€™s Labour would clearly be far worse still.

    3. Mary M.
      January 15, 2021

      At least we won’t be lobbing Ā£Ā£Ā£Ā£Ā£Ā£Ā£Ā£s ad infinitum over the Channel, once Brexit is properly done.

      1. glen cullen
        January 15, 2021

        With all the EU institutions that weā€™re remaining in Iā€™d like to see our annual cost of dealing with this Trade & Coop Agreement (not FTA)

        1. jon livesey
          January 15, 2021

          Don’t worry *too* much. In those cases we are paying for services we receive, not throwing dosh at Eastern Europeans and French Farmers.

          1. glen cullen
            January 16, 2021

            The new global (EU only) health card will again allow all EU visitors free access to our NHS

    4. Roy Grainger
      January 15, 2021

      Don’t forget those riots due to lack of food that you promised. Personally I’m furious about the economic dfamage caused by Harold Wilson’s election win in 1964 but I try not to keep going on about it.

      1. Lifelogic
        January 15, 2021

        Well Wilson for all his faults did later grant a referendum and did, thank goodness, keep us out of the Vietnam war.

        It was Heath in 73 who is mainly to blame for the EEC membership, the economic insanity of prices and wage controls, three day weeks and much else. He was asked by Enoch Powell if he had taken leave of his senses.

        No as he never seems to have had them!

        1. Billy Elliott
          January 15, 2021

          Wilson and Heath!
          It is sixty (60) respecetivly fifty (50) years ago!
          Sweet Jesus get over it!

          1. Lifelogic
            January 16, 2021

            We are still suffering hugely now from Ted Heath taking us into to the EU (without even asking for voters consent).

    5. Sea_Warrior
      January 15, 2021

      The fish export problem will be gone within weeks.

      1. None of the Above
        January 15, 2021

        I agree.
        Most of the businesses in this Country who have been exporting globally manage the admin very well. The businesses that have only exported to the EU are having to deal with change. Everyone finds change a challenge but there are a few people who don’t manage it very well.
        It takes a little time.

      2. Adem
        January 15, 2021

        Easy to fix. All UK fish to be landed in UK ports, including those fished by the French. If they want to block their fish getting to their market, they then take the financial hit.
        You will find the logistics fixed fast

        1. Narrow Shoulders
          January 15, 2021

          Combative but effective approach

        2. Lynn Atkinson
          January 15, 2021

          +1

        3. Ian Wragg
          January 15, 2021

          Good idea so will never be taken up.

        4. Billy Elliott
          January 15, 2021

          Erm..I guess we have a deal with frenchies now..we can’t just hijack their catch.

          1. NickC
            January 16, 2021

            “Their catch”?? It’s our fish, Billy.

      3. Len Peel
        January 15, 2021

        Youre right there Mr Warrior, all soon bankrupt. And in Scotland all now dead set on independence. Little England!

        1. a-tracy
          January 15, 2021

          Which companies are you predicting will be bankrupt soon Len?

        2. NickC
          January 16, 2021

          Len, Little England is 10 times bigger than little Scotland.

      4. michael mcgrath
        January 15, 2021

        Restaurants in France are due to reopen on January 20th, so perhaps this will help a sudden easing in controls at French ports as “fruits de Mer” return to delight the dining public

        1. a-tracy
          January 15, 2021

          Yes, I thought that too Michael, who was intending to buy this fish with so many restaurants closed? How is the importing company coping without their expected fresh fish?

    6. a-tracy
      January 15, 2021

      No need for any fish to rot Len, if Europe don’t want it, Government should pay for them and use them in hospitals, as an opportunity to change the diets of the UK to get a taste for our own catch. The Freezer companies could use the langoustines instead of scampi when the government sells this on until the export paperwork problems are sorted out in a few days to a week.

      1. hefner
        January 15, 2021

        Always practical, arenā€™t you. Ah, if the Government were to be run by people as clever as you, Hope and a few others on this blog, this country would be paradise on earth.

        1. a-tracy
          January 15, 2021

          Thank you hefner, that’s a lovely thought.

        2. Lynn Atkinson
          January 15, 2021

          Yep. I took that literally.

          1. Fred H
            January 16, 2021

            his sarcasm lost?

        3. NickC
          January 16, 2021

          Hefner, Finding problems is essential. But merely crowing about the problems once found is silly and idle. You find the (real) problems in order to solve them.

    7. Sea_Warrior
      January 15, 2021

      Hearing, from the SNP, that Scottish scallops are having difficulty breaching the anti-trade defences of the Evil Empire, I decided to look at the provenance of the scallops sold by my local supermarket. Amazingly, they come from the South West Atlantic, Patagonia and ……………. Canada. Perhaps Scottish scallopers should sell more of their product here. I’ll eat it.

      1. Know-Dice
        January 15, 2021

        Agreed, build up the local market for all this fresh sea food….

      2. Martin in Cardiff
        January 15, 2021

        They get a better PRICE from the French etc.

        Our farmers export our top grade grain to the French bread industry for the same reason.

        We import lesser quality, cheaper stuff for the masses here.

        You don’t understand much about commerce, do you?

        1. NickC
          January 16, 2021

          No they don’t get a better price, Martin. If they cannot sell to the EU because of EU obstructionism, they don’t get any price. You donā€™t understand much about commerce, do you?

      3. steve
        January 15, 2021

        Sea Warrior

        “Perhaps Scottish scallopers should sell more of their product here. Iā€™ll eat it.”

        ….I wouldn’t.

  4. M Brandreth- Jones
    January 15, 2021

    We haven’t ever seen the likes of the rapidly mutating coronavirus before. All the world is affected .There is mass anxiety and a feeling that humanity is being wiped out by an unseen enemy . We can hardly blame a small event in history as a slight change in our European allegiance . Brexit is not everything.
    There is a way around it but there needs to be a re think about value, the barter system and how globally we work together for humanity to survive.
    There are a lot of unspoken benefits for earth if a smaller portion of the global population survive.

    1. Fedupsoutherner
      January 15, 2021

      I wonder if we will ever truly see the back of this pandemic or if we will live with restrictions on a permanent basis.

    2. NickC
      January 16, 2021

      M Brandreth- Jones, Are you volunteering to make the global population smaller as your own sacrifice, or must it be someone else?

  5. Mark B
    January 15, 2021

    Good morning

    . . . and never a good idea to waste money borrowed.

    And I wonder how many of us when reading the above though, “HS2” ?

  6. Lifelogic
    January 15, 2021

    A Heath yesterday in the Telegraph:-

    ā€œIt would be a calamity for the Tories to give up on tax cuts post-pandemic
    Scrapping the stamp duty holiday would signal that the Conservatives are now a social democratic party.ā€

    Except they have been Social Dem. or Socialist for almost all my life and certainly since the appalling Ted Heath. Why else do we have virtual state monopoly heath care (1948) and virtual state monopoly education and have had all my life? Why else do they still allow the BBC left wing propaganda outfit to be unfairly funded by ā€œlicenceā€ taxes?

    Why else does government spent (and largely waste) such a high % of the UKā€™s GDP?

    1. Nig l
      January 15, 2021

      That allows them to be electable. I have sympathy for your views but politics has moved past you. As I have frequently commented on in the past the one flaw in all your contributions is that you would never command enough support, 1980ā€™s is history and the voter has moved left, not as far as on the continent but the ā€˜uncaringā€™ market force agenda that you are wedded to also comes with the baggage of ā€˜excessiveā€™ profits etc.

      In that Theresa May was correct. The Tories (and I guess you) represent the nasty party. Like it or not they had to change.

      If they hadnā€™t, the socialists would be in No 10. It seems to me that for you clinging on to some sort of Thatcherite agenda but achieving nothing is preferable to compromise.

      For me pragmatism is acceptable to your alternative.

      1. Lynn Atkinson
        January 15, 2021

        The Socialists are in Nr 10. You think the Red wall voted Tory because ā€˜the voters have moved left?ā€™
        I suppose ā€˜people you trustā€™ have given you these gems of wisdom. We all see Farage without his Brexit lines which he learned so well and which have fed him for 25 years.

      2. Lifelogic
        January 15, 2021

        I am just saying what works in economic terms and what does not. I am certainly not trying to be elected. I am just telling the truth not something I would do were I trying to be elected.

      3. NickC
        January 16, 2021

        Nig1, It is an interesting theory of yours that Thatcher would not get elected nowadays. Have you any evidence for it? Actually it is government interference in the market that gives rise to “excessive” profits – either by apparatchiks in a socialist state, or by corporations in a corporatist state.

    2. Ed M
      January 15, 2021

      @Lifelogic,

      You focus on politics (and you’re right to a degree).

      But the real problem in this country (and Western World) is social / cultural:

      1) Collapse of family life (family life in past used to remind people of their duties towards others, and strengthen them in every sense, as well as remind them that they should depend on their families not the state).

      2) Collapse of Work Ethic (at an extreme level in the past you had the extraordinary work ethic of the Quakers and look at the great companies they created, but work ethic outside the Quaker community as well – in much of the country. Where work is seen as a good thing, and that if you work hard and well and honesty, the money will come – as opposed to just focusing on money and taking short cuts to get there etc).

      3) Collapse of sense of Public Duty / Patriotism

      Only changes to the Media, Education, the Arts, and more can transform all this for the better. Politics can play a role. But is fairly limited – and if it tries to do too much – then will mess up and just make things worse / far worse.

      1. Lifelogic
        January 15, 2021

        Some truth in that certainly.

      2. steve
        January 15, 2021

        +1

  7. Roy Grainger
    January 15, 2021

    Yes. All fine until inflation starts going up, then not fine at all.

    1. Simeon
      January 15, 2021

      Not quite fine, as sovereign debt has to be serviced – an additional cost to the taxpayer – and zombie companies and corporations leveraged to the hilt are a huge drag on economic growth. But I take the point your making. As for the inflation, watch this space!

    2. NickC
      January 16, 2021

      Roy, Indeed. MMTers think two years is too long to be bothered about.

  8. Dave Andrews
    January 15, 2021

    The debt taken on by the UK now has to be serviced by the following generations. And what are they getting in return for that debt? Just about nothing.
    Would you be impressed if you had to take on the interest payments for someone else’s debt?
    The generation that takes on the debt should pay it back.

    1. None of the Above
      January 15, 2021

      The following generations will also benefit from the vaccine and a more secure and knowledgable health service.

    2. Adem
      January 15, 2021

      What do they get? They get austerity, wealth inequality, pensioner poverty [unless you work for the state] and lack of investment.

    3. Narrow Shoulders
      January 15, 2021

      Just print it rather than borrow it, then no paying back just manging the money supply to counter inflation in the future.

    4. Fedupsoutherner
      January 15, 2021

      Hasn’t it always been like this?

    5. jon livesey
      January 15, 2021

      You are forgetting the obvious. Debt is eventually paid *from* the economy, but it went *into* the economy in the first place. It’s a wash, economically.

  9. agricola
    January 15, 2021

    While government and banks act for the benefit of each other, and I would not argue that this is not a necessary strategy for the country, why is there such a great disparity between the world they live in and that which individuals and businesses are forced to endure of much higher interest rates. Is it not long overdue that we had some real competition in banking. Banks give nothing and demand far too much for their product.

  10. Sea_Warrior
    January 15, 2021

    As I read your article, Sir John, there is no need for a wealth tax and I can safely stuff some money into NS&I without worrying about the socialists in No 10 (and 11) applying a ‘haircut’ to money on which I have already paid income tax, will be taxed at 20% VAT if I want to spend any of it, and will be taxed at 40% when I die. A safe assumption?

    Reply Mo investment advice given here

    1. Lifelogic
      January 15, 2021

      If you have ā€œwealthā€ invested in the UK you can suffer taxes with rates up to:-
      Income tax 45%, stamp duty 15%, CGT 28% without any indexation, NI about 25%, (both combined), VAT 20%, Carbon taxes, landfill taxes, fuel duty and the rest and finally inheritance tax at 40%.

      The combined effect of these can easily extract 90%+ of your wealth off you over about 20 years. We have very high wealth taxes indeed already, landlord even pay income tax on ā€œprofitsā€ they have not even made thanks to Osborne, Hammond and Sunak. All taxes are wealth taxes in effect.

      1. Lifelogic
        January 15, 2021

        Missed off Corporation Tax and high reporting and compliance costs too.

        1. JoolsB
          January 15, 2021

          Also those coming out of English universities with meaningful degrees, the doctors and scientists, the very people the country needs, will have an extra 9% tax burden for most of their working lives. Of course those taking worthless degrees will be exempt having their courses written off by Johnā€™s Government courtesy of the taxpayer.

          1. Lifelogic
            January 16, 2021

            +1 and many of those coming from the EU get UK loans to study here will not be repaying and it will not be enforced.

      2. Lynn Atkinson
        January 15, 2021

        Yes the marginal rate well over 90%. Then Sunak deigns to give us a ā€˜tax holidayā€™ on part of stamp duty.
        Boris and his entire rabble Government of untalented people must go.

    2. Rasmus
      January 15, 2021

      The interest rates for NS&I saving accounts are now derisory. Return on Premium Bonds was also reduced in December. Savers are being robbed by low interest rates.

      1. Sea_Warrior
        January 15, 2021

        The ‘yield’ on permium bonds and the interest rate for the Junior ISA exceeds current inflation. The rest of NS&I products are barely worth considering. That said, the government should feel under no obligation to offer a savings service for the population. And it should finance its deficit at the lowest possible rate.

    3. agricola
      January 15, 2021

      Who or what is Mo.

      1. Fred H
        January 15, 2021

        a long distance runner, a spin bowler, a footballer?

      2. Lynn Atkinson
        January 15, 2021

        Typo. ā€˜noā€™ – surely you could see that? Nitpicking nonsense.

    4. Sea_Warrior
      January 15, 2021

      You should be working in the City.

    5. Mike Durrans
      January 15, 2021

      Keep you money under the mattress Sea_Warrior. Then you have control of where it goes.
      My Grannies advice seventy years ago!

      1. hefner
        January 15, 2021

        And Iā€™m sure your grannies became millionaire CEOs later on, didnā€™t they Mike.

      2. Lynn Atkinson
        January 15, 2021

        Iā€™m afraid inflation is used by Government not only to bale themselves out but to steal your Grannyā€™s wealth even secured under the mattress.

      3. steve
        January 15, 2021

        Mike Durrans

        “Keep you money under the mattress Sea_Warrior. Then you have control of where it goes.”

        …..sound advice.

    6. glen cullen
      January 15, 2021

      I’d still like to know the governments future plans for the EU VAT tax system ?

      1. Wonky Moral Compass
        January 15, 2021

        Me too. Surely, the system is ripe for reform and a good opportunity for us to demonstrate our sovereignty? Or would such a move fall foul of the agreement?

      2. Iago
        January 15, 2021

        No change, I imagine.

      3. Everhopeful
        January 15, 2021

        I think Mr Gove mentioned this.
        He wants a lower, simpler (!!) purchase/sales tax.
        Sounds uber ominous.

  11. Mike Stallard
    January 15, 2021

    OK So how about cutting out some waste? HS2 is classic. Then Track’ntrace. During the pandemic, billions have been splashed about all over the place, often the wrong place.

    Then there is the massive amount of bureaucrats in local government, in the NHS, in the military and in education which stultify the professionals at the cutting edge. There is so much to doā€¦

    If we could be freed up to get on with it, if we got some rewards and some co-operation from other people again (think the 19th century railways), we could be what we are – world beaters.

    We need to encourage the elite, the hard working, and stop bleating about the ones who cannot and will not keep up.

    1. J Bush
      January 15, 2021

      re: the track and trace debacle. This government claim they want to protect the vulnerable. Lies.

      Support Workers are being taken away from their specific role of supporting vulnerable people to support track and trace.

      Over the last 10 months vulnerable people have lost face to face support when it was reduced to phone support due to the lockdowns. Now these vulnerable people, many of whom live alone, are getting no support. For what? A failed project that has cost and continues to cost the tax payer a fortune!

      It is a national disgrace.

  12. oldtimer
    January 15, 2021

    Food commodity prices are going up. Inflation, on the items we buy, is here today. It is only a matter of time before the western world discovers the costs of plucking the magic money tree. To that can be added government obsessions with huge uneconomic projects – such as HS2 and its numerous green delusions – for a wasted decade or more.

  13. jerry
    January 15, 2021

    Funny how when ever the national debt is debated our host always mentions the 1970s, never the massive debts that existed back the 1950s caused by WW2, nor is it mentioned that the three term Tory govt of the 1950s not only financed a start to that debt repayment but also over saw great social and infrastructure improvements – for example the New Towns and slum clearance plans might have been announced by the post-war Labour govt but it was by large the following Tory govt who both expanded upon and enacted such projects.

    But of course back then the UK actually made physical products, the sector we we know today as “Services” was vastly smaller and self-serving, if the bloke in No.11 is reading this, we need a ‘Big Bang’ in our manufacturing sectors post Brexit and now Covid-19, not a seco9ind Big Bang in the City….

  14. Ian Mackenzie
    January 15, 2021

    A National Emergency??? Ba!! Why are we only now talking about 24 hour programmes for COVID-19 injections. I am a Clinically Extremely Vulnerable 78 year old who would go in to RBH at the drop of a hat for a shot. At 3am if necessary! For goodness sake there are fewer people around! This is not a 9-4 nuisance it’s a 24-7 challenge. Let’s meet it head on! Ian Mackenzie RG41 4AJ

    1. Rasmus
      January 15, 2021

      Let the politicians inject vaccines out-of-hours. It is a stupid idea for logistical and clinical reasons. The emergency services of the NHS would struggle to cope with even small numbers of serious vaccine-related complications such as anaphylactic reactions.

      1. jerry
        January 17, 2021

        @Rasmus; But surely if 24 hour CV19 vaccinations have an ambulance & crew on station, or were centred on existing hospital locations that have 24/7 A&E departments? After all anaphylactic reactions can occur at any time, any setting, such reactions are not unique to vaccine-related complications.

    2. Mark B
      January 15, 2021

      Well said, Ian.

  15. Everhopeful
    January 15, 2021

    And guess who gets no interest on his poor little savings and is intentionally forced to spend them? And takes a hit again when the government debt is inflated away?
    Yup…good old Tommy as he crawls out of the trenches.
    Heā€™ll put up with any old sh*t.
    And NONE of it was of his making!

    Pardon. What say? Oh..it was the virus what done it. Ah….I understand now….

    1. Mark B
      January 15, 2021

      +1

  16. Richard1
    January 15, 2021

    An excellent summary. We must indeed hope that we donā€™t see inflation take off and higher interest rates or the picture would turn rapidly. An unknown is the effect of all the state-held debt. In theory QE needs to be unwound and the bonds held by the BoE sold back into the market, or it will be inflationary. But no sign of that yet, and early attempts to reverse QE in the US have had to be quickly reversed.

  17. Everhopeful
    January 15, 2021

    Steve Baker +++++

  18. middle ground
    January 15, 2021

    Broadly agree with what you write, John, however the two issues are:
    – Quantative easing is like a drug, a tactical solution that becomes an addiction over time.
    – As resulting asset prices rise, there is a serious danger of inequalities building over time. Some of the USAā€™s current political problems bear this out.

  19. Ed M
    January 15, 2021

    Great article

  20. Peter
    January 15, 2021

    ā€˜The good news is there is no need to worry yet.ā€˜

    Negative interest rates?

    Further destruction of pension funds?

    The Great Reset?

  21. BW
    January 15, 2021

    About wasting money. Is it true we are having to contribute Ā£290 million to support the EU army project?

    1. Sea_Warrior
      January 15, 2021

      I hope not – we could buy a frigate with that!

  22. Aden
    January 15, 2021

    Why no mention of the 14 trillion pounds of pension debts owed to the plebs?
    Why is it that its just the money owed to banks that matter?
    Why are the pension debts hidden off the books?
    A couple of months back you partially defaulted on the pension debts. Why not tell people how much they have lost because of that?

    1. Martin in Cardiff
      January 15, 2021

      They’re not debts they’re contingent liabilities – money which may have to be paid in the future but over a long period.

      Think.

      1. Fred H
        January 15, 2021

        may have to be paid? Trying for a job in the Treasury?

        1. hefner
          January 16, 2021

          Donā€™t play the fool, even if that suits you rather well. Not that long ago people were getting Defined Benefits Pensions now these have disappeared replaced by Defined Contributions Pensions. What will the current generation of 20-30 year old people get when they turn 70 or 75 or whatever the retirement age will be in 40 years time?

          Do you really think this represents the ā€˜March of Progressā€™?

          1. Martin in Cardiff
            January 16, 2021

            Many ordinary employed people over the Channel still have Defined Benefit pensions.

            The BBC won’t tell the masses here that.

  23. Narrow Shoulders
    January 15, 2021

    The state owns a large portion of the debt. Why doesn’t it own all of it?

    Created money is already inflationary, this money exists so why pay interest to the banks to create it? The Bank of England should create it all and not pay interest. At the same time the ability of the banks to create money should be reigned in to curb inflation once demand increases; and it will be as they will not be holding government debt as a guarantee for their own liabilities.

    Government should not be paying interest on created money

  24. villaking
    January 15, 2021

    And to think you were so alarmed at the prospect of Corbyn borrowing a fraction of this amount

    1. Martin in Cardiff
      January 15, 2021

      Ah, now then…

      1. jon livesey
        January 15, 2021

        “Ah, now thenā€¦”

        Indeed. Borrowing this order of money to re-open bankrupt Welsh coal mines? What a boost to the economy that would have been.

        1. Martin in Cardiff
          January 16, 2021

          No one proposed that.

        2. Fred H
          January 16, 2021

          The coal mining industry had been in crisis for decades, crippled by excessive costs and international competition. Far more miners lost their jobs in the 1960s than in the 1980s. No government, be it Labour or Tory, could afford to keep propping up unviable mines indefinitely.
          The slow demise of coal mining has been a tragedy for many communities, and the cause of much suffering. But more mines were closed during Harold Wilsonā€™s two terms in office than in Thatcherā€™s three ā€“ and yet he remains a Left-wing hero.

        3. jerry
          January 17, 2021

          @jon livesey; Oh dear, someone obviously didn’t bother to actually read the last Labour election manifesto, preferring to believe the lies printed in the MSM….

    2. a-tracy
      January 15, 2021

      Yes, but the rest of the World weren’t borrowing at the same rate and that is what would have caused the imbalance.

  25. hefner
    January 15, 2021

    bankofengland.co.uk ā€˜Official Bank Rate Historyā€™
    ā€˜It had a bit of domestic borrowing problem … Interest rates rose to high levels to persuade people to take state debt as investmentsā€™: that is one of the most disturbing statements I have read from Sir John, and God knows how many of them there have been in the last five years.
    Bloody hell, with interest rate at 17% in November 1979 remaining above 10% till September 1983, anybody with a mortgage, specially a variable rate mortgage, a few points above the BoE rate was rather unlikely to be among the ā€˜people to take state debt as investmentsā€™.

    1. Hope
      January 16, 2021

      +1

  26. a-tracy
    January 15, 2021

    Is this low borrowing rate (0.29% for 10 years) the reason that this government slashed the prize rate on premium bonds in Dec 2020 from 1.4% to 1%. I’d have thought you’d want to encourage people to put Ā£1000 away it at least covers their funeral costs! Who are they borrowing this money at 0.29% from?

    1. hefner
      January 15, 2021

      According to the Money Advice Service the average cost of a burial with service was Ā£4,300 in 2019, a no service, only cremation could be had for as little as Ā£1,700 if one can find the proper cremation service. Most of cremation companies (eg, Co-Op Funeral) are more likely to charge from Ā£2,500.

      A recent death in the family cost us Ā£3,600.

      1. a-tracy
        January 15, 2021

        Simple low cost cremations can cost 75% less than the average funeral cost in the UK google them they are available ā€˜The Simpler Cremation Serviceā€™ Ā£980.

        1. hefner
          January 16, 2021

          Thanks

  27. ukretired123
    January 15, 2021

    Brexit has allowed us to see our defined “Contingent Liabilities” much clearer than EU pooled borrowings and uncertainty in this vital area of potential icebergs that failed companies only notice on hindsight.
    The SNP fail to notice of mention this EU pooled nightmare millstone.

  28. Ed M
    January 15, 2021

    Dear Sir John,

    I strongly believe a think tank needs to be put into place to figure out how best to deal with the virus over the next 5 to 10 years.

    Technology / system is going to have to be developed where people can be quickly and efficiently jabbed against new variants of the virus (i.e. the UK, South African and Brazilian variants – after 10 years, we could have even more dangerous variants – but I am not being an alarmist. I strongly believe we can develop the technology / system to deal with. But needs some government thinking / planning).

    Also, what is the short, medium and long-term plan to deal with North Korea and Iran?

    1. jon livesey
      January 15, 2021

      “I strongly believe a think tank needs to be put into place to figure out how best to deal with the virus over the next 5 to 10 years.”

      Good sense, and you already got your wish, because the Govt announced this morning the creation of a new UK research project to do exactly that.

    2. David Brown
      January 15, 2021

      I agree with you, the key to Covid and financial payback is to a 5 to 10 year plan. |I favour a 10 year plan. Financing Science to carry out on going studies and improvements to both vaccines and hospital care ie medications is the way forward.
      Covid is going to be around in the world for decades and it will always find a way into Europe.

  29. beresford
    January 15, 2021

    Today it is reported that the ‘R’ rate has dropped to 0.7 following the closure of schools. Not that I think closure is a good thing but it does illustrate the stupidity of closing everything but schools and then wondering why there is little effect.

    1. Everhopeful
      January 15, 2021

      ā€œScientificā€ advice has changed.
      Children, it was said, did not get or transmit.
      Now we are told the young are dying.

      1. Al
        January 15, 2021

        As I understand it, the original strain was asymptomatic in the young and mainly killed the elderly or those with pre-existing conditions. The young could still carry and transmit it.

        The new strains that are evolving are affecting younger age groups more severely and are more likely to kill in those ages.

    2. Mary M.
      January 15, 2021

      ‘Today it is reported that the ā€˜Rā€™ rate has dropped to 0.7 following the closure of schools’. What or who reported that?

      Nothing to do with the closure of schools. Schools haven’t been open since the end of the Autumn Term.

      The ‘R’ rate was possibly on its way down anyway, as is normal with most viruses.

      As an aside, an elderly friend who had been self-isolating and had not left the house for two months, and who would answer the door wearing a visor, went into hospital yesterday having fallen and broken a hip. Tested Covid-positive on admission, despite seeming well. The hospital went ahead with the operation. Still well this morning by all accounts. Curiouser and curiouser.

      1. jerry
        January 17, 2021

        @Mary M; Your first and second paragraphs are a direct contradiction to each other!

        The R# has come down since the schools closed for the Christmas holidays, with no other changes until 4th Jan (10 day previous to your comment), yet you claim the suggested plunging R# apparently is nothing what so ever to do with the fact the schools have been closed since mid December.

        If your elderly friend is CV19 positive and has been using on a visor, without a mask over both mouth and nose, there might be the answer…

  30. Ed M
    January 15, 2021

    How about government create a Minister for Covid to best deal with the pandemic over the next 5 to 10 years.

    Unless we get this pandemic under control (not forgetting all the new variants popping up that are more resistant to vaccine – and could be even more so in the future) as quickly and efficiently as possible, our economy could be decimated.

    It is solvable, I’m quietly confident. But we need someone just focused on this huge problem – and on this huge problem alone (working closely with the PM, the Health Minister, Chancellor of The Exchequer, the Minister for Science, Research, and Innovation, and others).

    1. Martin in Cardiff
      January 15, 2021

      Because that person – a Tory moreover – could then be held responsible for the failures.

      You delegate everything to “agencies” whom you can then blame instead.

      Do keep up.

      1. steve
        January 15, 2021

        MiC

        Blair is responsible for the agency culture in this country.

      2. Ed M
        January 15, 2021

        @Martin,

        You can’t have an agency running something of this magnitude. No-one in their right mind would propose this in Parliament. I think you’re being over critical of Tories – and we need to keep party politics out of this serious issue.

        Best to you, sir

    2. Caterpillar
      January 15, 2021

      Ed M,

      Is this serious or tongue-in-cheek?

  31. IanT
    January 15, 2021

    It’s called Creative Bookkeeping in industry…

  32. hefner
    January 15, 2021

    Fraction of Japan debt owned by foreigners 6-8%, fraction of UK debt owned by foreigners, at least 25% possibly 30%.
    Japan 3rd country by nominal GDP, 4th in GDP ppp.
    UK 5th country by nominal GDP, 9th in GDP ppp.

    1. acorn
      January 15, 2021

      We are a generous country, of the Ā£2,421 billion of savings certificates (Gilts) issued, we allow Ā£661 billion to be held by foreigners; and, we pay them interest as well! Its another form of overseas aid.

      The rest is owned by MFIs, Insurance and Pension funds. UK households hold very little directly. The Bank of Japan has swapped some 70% of government bonds back into cash that bought them originally and Japanese households just hold on to that cash. It is claimed that over 64% of Japanese households are totally debt free!

    2. Lynn Atkinson
      January 15, 2021

      Yep – too many ā€˜new Britishā€™ allowed into Britain. None are moved into Japan. Itā€™s a cohesive society.

    3. jon livesey
      January 15, 2021

      You forgot that the Japanese use chopsticks, are shorter, eat a lot of fish, and have three alphabets. It’s about as relevant.

      1. hefner
        January 15, 2021

        If it is what you understand, who am I to try to convince you that Sir Johnā€™s point about Japan is a bit shaky?

  33. Nig l
    January 15, 2021

    Off topic. I see we vaccinated more people yesterday than has been achieved to date by so I think a little crow is in order.

    Maybe the one eyed Remainers could confirm to me that the sanctity of maintaining the pan EU approach to protect the project, obviously except Germany for whom the whole project is about past guilt and solely to their benefit, is preferable to the safety of their individual citizens.

    I wonder how Peter and the Dutch are doing?

    1. Martin in Cardiff
      January 15, 2021

      Those curtains just keep on twitching, don’t they?

      1. Nig l
        January 15, 2021

        Shame yours donā€™t or more accurately your eyes, wide open might help you see further than your mirror.

      2. Fred H
        January 15, 2021

        yep . The Danes lagging well behind us.

    2. jon livesey
      January 15, 2021

      Well, they unfortunately seem to have chosen the wrong Vaccine. Pfizer announced a production delay this morning.

      Had we remained in the EU scheme, by abuot now we would have thinking of leaving the EU.

    3. None of the Above
      January 15, 2021

      Living off confiscated sandwiches, I suppose!

  34. ian@Barkham
    January 15, 2021

    Here is a thought, all this extra borrowing instead of being lumped at the door of the taxpayer, it gets paid down by the State trimming itself to be fit for purpose.

    The State is to over bloated and to over full of itself, its time for all of us to be in it together. The them an us is actually the State expanding while demanding the taxpayer cuts back.

    1. Lynn Atkinson
      January 15, 2021

      +1 and debt forgiveness in the U.K. of the SME sector and individuals who have lost due to the Govt Cv strategy.

    2. JoolsB
      January 15, 2021

      Great idea Ian and no better place to start than parliament. What happened to cutting the number of 650 self serving MPs down to 600 John? Parliament, the Lords, the whole public sector could be cut in half and we wouldnā€™t notice any difference except in the vast amount of money saved.

      1. Ian@Barkham
        January 15, 2021

        I am reminded (although a different moment in time) that the UK used to run a country and an empire on one tenth of the administrators we have now.

        The US At 350 million has just 450 elected members in the house of representatives

    3. BW
      January 16, 2021

      Start with the House of Lords

  35. Pieter C
    January 15, 2021

    The current National Debt is around Ā£2 trn, Covid will probably necessitate total final Government borrowing of , say, Ā£1 trn when the cost of increased unemployment and other benefits are included, depending on how long lockdowns continue. Analysis of the Climate Change Commission’s recent White Paper suggests a cost in the order of Ā£2 trn. Then there is the Government’s liability for the projected deficit on public sector pensions which is currently approaching Ā£2 trn. All this produces a possible total deficit of Ā£7 trn by 2050. Government borrowing is indeed very cheap at present, but signs of increased future inflation suggest that this may well be short-lived.

    1. Nig l
      January 15, 2021

      And when we get to negative interest rates, pretty close I think, that will be a tax on wealth, penalise the prudent and reduce Banks profitability further, potentially shutting off finance to the business community.

      They are obliged to hold vast deposits in government paper as capital buffers and will now be charged to do it.

      Government ā€˜ponziā€™ scheme or what?

  36. acorn
    January 15, 2021

    This comment will be a waste of effort but here goes. The government doesn’t borrow its own monopoly fiat money from anyone. It pretends to borrow money by issuing Gilts to match its spending. It must always create and issue its units-of-account, before it pretends to borrow them back again.

    QE purchases of gilts merely restores the position of the banking system to what it would have been if the government had just spent on an overdraft at the central bank in the first place.

    While QE is progressing, we have the ridiculous situation where the debt management part of HM Treasury is doing ā€œanti-QEā€ and draining bank deposits due to the ā€œfull funding ruleā€, only for the bank part of HM Treasury to undertake QE and put those bank deposits back. It truly is moving money from the left pocket to the right pocket and back again.

    As for negative interest rates, it gets even more ridiculous. QE [Quantitative Easing] built bank reserves, allegedly to encourage the banks to lend more. Now negative interest rates are being used in the hope of reducing bank reserves, in the hope that banks will lend more. If you think we are entering the land of absurdity, you wouldnā€™t be far wrong.

    Read the detail of how the system actually works at the Gower Initiative for Modern Money Studies.

    1. Nig l
      January 15, 2021

      Correct and of course because it is beyond the comprehension of the average person and doesnā€™t directly hit their wallet they have no interest and so governments get away with it.

      Your average MP isnā€™t that bright either so they will do nothing. Sir JR might share some thoughts but again the ā€˜truthā€™ might be too unpalatable.

    2. Everhopeful
      January 15, 2021

      ā€œThose who can make you believe absurdities, can make you commit atrocities.ā€
      Voltaire.

      1. hefner
        January 15, 2021

        Would you apply this quote to a recent PotUS?

    3. jon livesey
      January 15, 2021

      If the UK were a small closed economy with a non-convertible currency, you would have a point, but as it is…..

  37. Enrico
    January 15, 2021

    I read your article with interest until I came upon this from yourself.
    and never a good idea to waste money borrowed.

    Pity no one thought of this in government as a for instance Ā£22bn down the pan on track and trace but Iā€™m certain there is much more!!

  38. The Prangwizard
    January 15, 2021

    Sir John, in his own view, never makes a mistake and never gets his forecasts wrong. However, I detect the dawning of some realism in his recent writings on all this money fakery, and on Brexit not being delivered. It seems he may be preparing the ground now so he can continue claim he got everything right again.

    Reply I do seek to make accurate forecasts. I did signal problems with both the Irish Protocol and the fishing settlement and did not vote for the deal. QE is currently possible. I will flag if it becomes unwise.

    1. Fred H
      January 16, 2021

      examples of ‘forecasts’ he got wrong?

  39. formula57
    January 15, 2021

    “The good news is there is no need to worry yet.” is surely true for those who did not worry in 2008. Then of course we saw the start of this madness, all to avoid the horrible end of write-offs of what could be seen to be vast excesses of debt that had become unaffordable for the borrowers.

    As is clear, the QE manoeuvres facilitated a sort of business as usual approach that has given us zombie corporations and banks, none of which has any real future but very few of which can be put out of their misery lest that induces a general collapse.

    So we have an endless horror, just like Japan, with ever more QE as government buys everything and the ultra rich get richer (and greedier) selling it to them. Risk can no longer be priced and sub-optimal investment decisions are now the norm. Brace for impact, as they say in aviation circles.

  40. glen cullen
    January 15, 2021

    Its been brought to my attention that the new educational programme on BB2 at 1pm called ā€˜ā€™Bitesizeā€™ā€™ is in fact a love fest for Greta Thunberg, with her views described as facts and reading of her book without any counter position put forward and argued

    Greta is on the show every day

    Our 12 year olds are being brainwashed

  41. Malcolm White
    January 15, 2021

    Dear Sir John,
    I don’t wish to hijack this blog post, so am happy if you do not publish my comment as such, but would be interested on your thoughts regarding that which follows. (Perhaps it could be the subject of a future post by yourself.)

    Hyperloop Transportation vs HS2

    I recognise that a few billion pounds has been spent on HS2 and that the Government has given the go ahead to continue to build it. However, isn’t it time that the Department of Transport had another look at the project to consider its value and its cost benefit ratio. Especially, when one is able to see that, as a mode of transport, it will be obsolescent, if not obsolete, by the time it turns a commercial wheel.

    What’s the point of spending Ā£50 billion (or more) to get from London to Birmingham in 52 mins vs 82 mins – assumes that the train runs at its maximum speed for which there is some doubt – when the Hyperloop system under construction in the UAE between Abu Dhabi and Dubai is expected to make a similar journey in 12 minutes and serve 10,000 passengers an hour.

    Construction costs per mile also appear to be less and, because of its efficiency, it will make better use of renewable energy from solar and wind, thereby enhancing its green credentials and the Government’s target of net zero by 2050. This would also put us in a leading position in technology development.

    While money has been spent on HS2 much of it is to do with the terminals and the route, both of which would have needed to be done anyway. So, it’s not a total loss. It would therefore seem that now, as Global Britain, would be the time to ditch the 200 year old railway track and rolling stock idea and move to Hyperloop technology.

    I have never been a supporter of HS2, but Hyperloop is a step change that would really join up the North and South and may cost less than HS2, especially if HS3 is thrown into the mix as well.

    Best regards, Malcolm White

  42. London Nick
    January 15, 2021

    Sir John,

    Yes, borrowing is currently cheap, but shouldn’t we be using the money we can borrow in a productive way – such as building up our manufacturing industries – rather than squandering it?

    NICE (the National Institute for Healthcare Excellence) is responsible for determining which health treatments the government is willing to fund. The upper spending threshold is, I believe, around Ā£30,000 per QALY (quality adjusted life years). In November last year however the non-political, financial journal MoneyWeek calculated that, in its response to Covid 19, the government had spent approximately Ā£1 MILLION per QALY. That has obviously increased since then.

    So why is no MP – you for instance – questioning this? Everybody is waffling instead of focusing on precise numbers. Why don’t you ask the government in a written question for ITS precise assessment of how much it has spent per QALY, and how they justify this?

    Best wishes, Nick

  43. Mike Durrans
    January 15, 2021

    Its now time that Britain brushed the eu to one side and adopted the World Finance Centre Trading model as the Eu are not negotiating in good faith.

    London is strong enough to thrive without the foreigners of europe

  44. Derek
    January 15, 2021

    No need to worry until there is a run on GBP. Government will have no choice but to raise interest rates and Gilt yields.

  45. David Brown
    January 15, 2021

    Sir JR, On today’s topic I fully agree with you. Your commentary is carefully thought through, it’s clear from what you have written that in the past Britain borrowed in isolation to what the wider world was doing. Today we have a global emergency affecting all the major countries who are borrowing at record levels. The current interest rates are very low and this gives the opportunity to repay over at least 10 years probably more. On balance I don’t feel the Gov has or had any option faced with such a serious pandemic. We are going to have to live with Covid for many years to come despite vaccinations.
    From a personal perspective I’m looking at where we will be in 10 years rather than a much shorter period.

  46. Caterpillar
    January 15, 2021

    “The immediate need for high borrowing is necessary to subsidise people and companies that are prevented from working by lock downs.”

    I am pleased that this recognises that not working can increase social welfare and can therefore be subsidised. I think this insight deserves broader consideration, particularly as much of the world economy has been oscillating around real ZIRP for many years. This is a big signal for something about the economy.

  47. Fedupsoutherner
    January 15, 2021

    Why do I get the impression that most of the over 80’s getting the vaccine think life can now go on as normal? I hope they are being told very clearly that is not the case.

  48. Will in Hampshire
    January 15, 2021

    I commend the Bagehot column in the most recent edition of The Economist to our host and all contributors. Taking a long view of the Trump presidency, the author challenges British conservatives from the Prime Minister downwards to admit to the demeaning compromises they have made in accommodating the White House incumbent.

    1. London Nick
      January 15, 2021

      The hysterical anti-Trump bandwagon is quite absurd. Firstly, the trigger for all this wailing and gnashing of teeth – the Washington fracas – was nowhere near as serious as all the lefties make out, and was NOT Trump’s fault. At no point did he encourage violence or lawbreaking, and he condemned it afterwards. And secondly, irrespective of that, Trump was a better choice – both for Americans and for us – than any of his opponents. So let’s cut all this Trump-bashing nonsense out.

      1. hefner
        January 16, 2021

        ā€˜Rex Tillersonā€™ (Trumpā€™s Secretary of State till 2018, former Exxon CEO) ā€˜says he had to use maps and photos with two bullet points to hold Trumpā€™s attentionā€™.
        ā€˜His understanding of global events, of global history, of US history was really limited. Itā€™s really hard to have a conversation with someone who doesnā€™t even understand the concept for why we are talking about thisā€™.

        Interview with ā€˜Foreign Policyā€™ magazine 2021/01/11 rex-tillerson-interview-trump

        Maybe people should read this interview before boarding the Trump-supporting bandwagon.

        1. Hope
          January 16, 2021

          …Because all previous US presidents were geniuses! Struth what a comment. Come on Hef, try the Russian hoax guff it has more credibility.

  49. Fred H
    January 16, 2021

    you don’t like the last line?

  50. Lindsay McDougall
    January 16, 2021

    You insist on looking at this through the wrong end of a telescope with rose tinted lenses.

    The Government is on a huge spending spree – and was even before the pandemic struck in March – and is unwilling or unable to finance it honestly through taxation.

    The Government’s chosen method of financing this spending boom is QE, the UK method being staggeringly regressive. It effectively results in a handout to the richest 5% of the population while taxpayers have to pick up the tab. Asset price inflation has been huge.

    The Bank of England has deliberately kept interest rates well below inflation with the specific intention of making life easy for a spendthrift government. This is leading to a stagnant economy.

    There is only so much investment capital available and if the State gobbles it all up, the private sector is starved of investment capital. Which sector is going to improve our disastrous balance of payments? It is the private sector which has to improve our export performance and drive import substitution, both of which tasks need investment capital.

    And it’s not as if the public expenditure bonanza is useful; it certainly doesn’t yield a financial return on investment. I’ll keep it brief:
    – HS2 is a lemon – Ā£100 billion cost, Ā£45 billion extra revenue
    – Welfare expenditure is excessive and out of control
    – People like Marcus Rashford are trying to increase Universal Credit by the back door
    – Increased health expenditure without non-tax revenue is just a burden
    – An extra runway at Heathrow will yield only extra transit passenger revenue
    – Public transport subsidies yield no return
    – 5G might yield extra revenue but human beings are the weakest link in communications
    – Many of the Regulators are overmanned or unnecessary e.g. Ofgen
    – The Institute of Race Relations is unnecessary; there is already full equality in law

    So let’s end the pretence that there is virtue in all this Government borrowing.

    1. a-tracy
      January 17, 2021

      1.How many single parents are on Universal Credit In the UK in each region?
      2.How many single parents on Universal Credit work more than 30 hours?
      3.How many single parents on Universal Credit work more than 16 hours and up to 30 hours?

      4.How many couples with children are on Universal Credit?
      Same question as 1 and 2 above (hours per couple)
      What is their average wage top up?
      What is their median wage including UC? Gross and Net of tax.

Comments are closed.