Does the deficit include borrowing?

jsmoke

jsmoke

jsmoke

Soldato
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So Osborne is borrowing £200B this year. Does this effectively get taken into account when working out the deficit?

In other words, if the government raises say £600B in tax this mean that we spend say £450B + £200B (borrowed) giving a deficit of £50B. These numbers are just examples, I think the deficit is a few dozens of billions for example.

But if the deficit is going down (I think it has been halved) then how come this article claims our debt is still rising, apparently, 'every baby born will now owe £25,000' as opposed to £17,000 before the last election.

http://www.telegraph.co.uk/news/pol...ddict-and-so-is-the-entire-Western-world.html

This must be due to borrowing rates and inflation.

So, we are borrowing more, the deficit is going down, with Osborne using this a scoring point, lending rates are low yet we are still piling up more and more debt?
 
The 'deficit' is the annual gap between income and expenditure of the Government. The deficit is, apparently, reducing but there is still a gap between ins and outs, so our debt is growing
 
Yes, of course while there is still a deficit (not enough income to cover your expenditure) this means you have to borrow, so the debt (the total amount you have borrowed over time) will keep rising

The debt will only start to come down when the deficit turns into a surplus (you have more income than your expenditure) and you can use the excess to start paying the debt.

And since even with the complete fantasy projections announced on Weds, we aren't projected to reach a surplus until the end of the decade, the debt is going to keep increasing till then....god knows to how much :p

But to be honest, the chances of those surplus projections being slightly accurate have as much chance as Osbourne had in clearing the deficit within this parliament (as he said they would do) - basically none.
 
The deficit was IIRC around 165bil when Labour left office, meaning we were borrowing 165bil to pay for everything we were paying for, it was how much income we were missing and had to find elsewhere.

Now when the deficit halves, you are still at 80bil and that is still being borrowed. Problem is once you get to a 165bil deficit, it's because you have enacted programs that spend that money, thousands of jobs rely on such programs. An IT program somewhere employing 100 people, a program to clean up parks somewhere else that is another 1000 jobs across the UK, or in Labour's case, often increasing paperwork in places like the NHS and employing more people to deal with the expansion in back office workers. To cut the deficit you have to bring in more money or cut spending.

SO much waste under Labour, IT programs for the NHS that went billions over budget and never worked, were never delivered. They spent 5billion on an ID program no one ever wanted, everyone said wouldn't work... did never work and was finally cancelled. You have 10 programs like that which were worked on for years and you both waste a huge huge amount of money AND the only way to reduce spending is to basically fire the people working on these jobs.

Borrowing to make genuine infrastructure improvements that can provide long term jobs is how most countries improve their economies. When you start spending the same amount and borrowing the same amount but it's on awful projects that get cancelled, don't work and provide no long term jobs you hurt economies.

Honestly, Labour's legacy is borrowing huge amounts to fund huge spending of which incredibly little actually helped our economy. Things like expensive rail links which, while a pain and awful for those it displaces, can provide long term jobs, can make in this case places like Birmingham a genuine option for businesses to now open offices/companies, they can get workers in or commuters into the area and increase income. That is the plan.

Borrowing isn't bad in and of itself, if it enables long term improvements it's often useful and has been used effectively for hundreds of years. When idiots get in charge borrow more but waste it all, well.... you get a 165billion deficit and absolutely nothing at all to show for it.
 
The capital costs of PFI projects were about £60 billion, the repayments costs will be nearly £300 billion when it is paid off. The country is spending almost £10 billion a year servicing PFI costs.

What a wonderful legacy Gordon Brown.
 
OldCoals said:
Labour signed up to about 550 of the 750 PFI projects but I take your point.
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:)

Not to forget New Labour committed themselves to the Tories spending plans during the first few years of their tenure.

Also, after that, during their profligate and deregulating times (Drunkenmaster really does just go off on baseless and factually innacurate rants doesnt he!) don't forget that the Conservatives backed all the spending plans and were pushing for even more deregulation of the financial services. So they acted no better during 'the good times'

Also, with this current Autumn Statement, Osbournes deficit reduction is based on a massive increase in personal debt! namely an increase of £360Bn borrowed by us! :eek: Nice...just shift the debt from State to Personal....the ultimate privatisation! :D

http://www.independent.co.uk/news/b...nted-binge-in-personal-borrowing-9904499.html
 
drunkenmaster said:
Borrowing isn't bad in and of itself, if it enables long term improvements it's often useful and has been used effectively for hundreds of years. When idiots get in charge borrow more but waste it all, well.... you get a 165billion deficit and absolutely nothing at all to show for it.
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Before the credit crunch, the debt-to-GDP ratio (which is the number that matters) had fallen under New Labour. We've got a medium term debt problem because of the bank bailouts not because of Brown's tendency to undertax.
 
PFI what a con, needed we are told because hospitals had to be built. So we have a brand newish Royal Infirmary which from completion was beset with design flaws with various companies brought in to run the catering or supplying phone and TV access charging exorbitant rates for these services. Not forgetting car parking which although has been abolished at most hospitals remains stupidly expensive, god help you if you need daily treatment, say for cancer as you will need to remortgage your house.

As for the cost to NHS Lothian £184,000,000 to build (£34,000,000 over budget)but the land it has built on is tied to a 100 year list so I believe the final cost will be something like a billion.

Another example of poor financial decisions by people who would struggle to handle their children's pocket money. Yet we continue to pour money into a service where wasting it is now endemic with the active encouragement of our politicians who try and persuade us they are protecting the NHS.

Governments have always wasted money though some more than others and it is the ordinary person that invariably picks up the bill. There was not a hope in hell of bringing the deficit down to the level the Tories were promising when they came to power but hey lests blame the opposition for that also.
 
I know, it's lucky we got a Government that was against this model of PFI with it's high cost, public preservation of risk and non-transparent liability structure

In an interview in November 2009, Conservative George Osborne, subsequently Chancellor of the Exchequer in the coalition, sought to distance his party from the excesses of PFI by blaming Labour for its misuse.
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Osborne said:
The government's use of PFI has become totally discredited, so we need new ways to leverage private-sector investment . . . Labour's PFI model is flawed and must be replaced. We need a new system that doesn't pretend that risks have been transferred to the private sector when they can't be, and that genuinely transfers risks when they can be . . . On PFI, we are drawing up alternative models that are more transparent and better value for taxpayers. The first step is transparent accounting, to remove the perverse incentives that result in PFI simply being used to keep liabilities off the balance sheet. The government has been using the same approach as the banks did, with disastrous consequences. We need a more honest and flexible approach to building the hospitals and schools the country needs. For projects such as major transport infrastructure we are developing alternative models that shift risk on to the private sector. The current system – heads the contractor wins, tails the taxpayer loses – will end
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Oh wait...

Despite being so critical of PFI while in opposition and promising reform, once in power George Osborne progressed 61 PFI schemes worth a total of £6.9bn in his first year as Chancellor.
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:(
 
Mr Jack said:
Before the credit crunch, the debt-to-GDP ratio (which is the number that matters) had fallen under New Labour. We've got a medium term debt problem because of the bank bailouts not because of Brown's tendency to undertax.
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Although some may argue that the 'light touch' regulation by New Labour partly caused the crash, which brings me to a point, how come Labour allowed more deregulation than the Tories, if they did, I thought the Tories were in even more favour of deregulation?
 
jsmoke said:
Although some may argue that the 'light touch' regulation by New Labour partly caused the crash, which brings me to a point, how come Labour allowed more deregulation than the Tories, if they did, I thought the Tories were in even more favour of deregulation?
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Just to go back to the OP.
In case you didn't understand it.
The 'deficit' is NOT the amount of money the country owes.
The 'deficit' is how much EXTRA money the country owes each year.

If your have a debt of £100, and your deficit is £50, then the next year your debt is £150 with interest added. If you half your deficit to £25, then the next year you owe the £150 plus an additional £25, so £175 plus interest.

We haven't repaid ANY of the debt we owe at all. This has increased year on year, and Labour still whinge about too many cuts, too much saving, yet we've repaid nothing, and haven't reduced the deficit to zero yet.

When we get to a zero deficit, we will still owe stacks of money, but at that stage we can start to try to service our debt.
The idiots who say the debt isn't high in comparison to GDP are idiots. We won't get a free year of GDP at any stage along the line. The deficit and indeed the debt does need to be dealt with, but labour will be incapable of doing so, as they've never ever managed to achieve anything.

Do you understand the different in 'debt' and 'deficit' now OP?
 
Lumeycom said:
I still don't understand 'who' it is that lends all this money?
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Readers Question: Who Lends the Government Money


The UK public sector debt at the end of 2011 was close to £1,000 bn. See: UK National Debt (now up to close to 1.4Trillion in 2014)

On this debt the government have to pay interest payments, which are around £43 billion a year. (interest payments on UK debt)

To finance the National debt, bonds are sold through the Debt Management Office (DMO) on behalf of the government to the private sector. Most of this government debt is bought by financial institutions such as:
•Pension funds
•Building societies.
•Investment trusts
•Private individuals

Therefore, the interest payment is paid to those who buy the government bonds and gilts.
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jsmoke said:
Although some may argue that the 'light touch' regulation by New Labour partly caused the crash, which brings me to a point, how come Labour allowed more deregulation than the Tories, if they did, I thought the Tories were in even more favour of deregulation?
Click to expand...

New Labour did allow more deregulation because, essentially, New Labour were Tory-light with a bit more social conscious. Blair believed you could harness the unbalanced growth of financial markets and use it for good instead of realising that the system was broken and toxic and needed to be reformed. It's an easy mistake to make because freed financial markets do generate a lot of short term growth; growth that fed New Labours projects to improve the NHS and address inequality through tax credits, etc.

However, while New Labour de-regulated slowly, the Tories in opposition were calling for even more de-regulation. Months before the credit crunch George and Dave were in the US praising the subprime market and how it democratised home ownership (which, by the way, is true. Subprime does wonderful things for the people who don't default in a growing market, it's just that they have massive downsides as well) and calling on Gordon to free the markets from their shackles.

This would have made the credit crunch even worse. It's likely, as well, that a Tory government would have handled the crisis worse. Say what you will about Brown and Darling, it's impossible to dent that they acted decisively and with international support to intervene and prevent a total collapse of the banks. It may be argued on the counterfactual that the greater short term pain would have paid off but it's fairly unquestionable that bailing out the banks prevented the crisis becoming even deeper in the short term.
 
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