There is no end to the borrowing.
In the Budget the government forecast £43 billion of public borrowing this year. Most forecasters now expect this to be around £65 billion, given the extra commitments added and the decline in tax revenues.
We need to add to this the £37 billion they plan to spend on buying banks shares. We also need to add the £18 billion they are borrowing to finance the cash and guarantees they have given to Abbey Santander to get them to take the deposit liabilities of Bradford and Bingley. The government has put an extra £3 billion capital into Northern Rock.
This adds up to a huge £123 billion of extra borrowing this year. That’s £2050 each for every man woman and child in the country.
Starting borrowing requirement £43b
Extra spending and reduced revenue in year £22b
Bank shares purchase £37b
Bradford and Bingley £18b
Northern Rock extra capital £3b
When the Bradford and Bingley deal was reported we were told that Abbey Santander had bought the deposits and branch network for a positive sum. We were not told that in order to buy these deposit liabilities the taxpayer of course had to put up a lot of cash. On the HMT website the detail is revealed. It states:
“The Financial Services Compensation Scheme has paid out approx. £14 billion to enable retail deposits held in B and B and covered by the FSCS to be transferred to Abbey. The Treasury has made a payment to Abbey for retail deposits not covered by the FSCS, amounting to approx £4 billion.” The FSCS was granted a Bank of England loan to be replaced with a government loan. The government stands behind the FSCS.