According to the Office for National Statistics this morning UK national debt is £2,492 billion.
Except, of course, it is not.
The Bank of England still owns £831 billion of the UK's national debt.
And in the figure for the supposed national debt it is claimed that £293bn of the national debt is due to the operations of the Bank of England. (Cell B469 on table PSA8B_2, here,because they know how to make things easy to find). This is also not true: there is no such liability on the books of the Bank of England. This figure arises because the ONS quite deliberately ignores assets on the Bank of England balance sheet which are financed by its supposed debts and only counts a selected set of liabilities, which is straightforward nonsense.
So what is the true figure?
Actually, it's not £2,492bn less £831bn less £293bn. That's because part of the £293 billion artly overlaps the £831bn, as far as it is possible to work out. But what is certain is that £182bn of loans made by the Bank of England to commercial banks to support small businesses during Covid is treated as a liability of the Bank of England even though there is an asset to match it (cell F151 on table PSA9A of the spreadsheet already linked).
So what is national debt, at most? It is £2,492 less £831bn less £182bn, or £1,479bn. That is £1,013bn less than the ONS say.
And no, for the record, the balances on central bank reserve accounts held by commercial banks are not part of the national debt. They are part of the money supply and that is something very different.
So, first of all, as ever, the Office for National Statistics is pumping out false information. And second, terrible decisions are being based on that information. I call that wholly inappropriate accounting.
And that is before we ask the question whether the remaining sums - which are balances on savings accounts held with the government - are even debt at all, which I suggest that they are not.
But let's just worry at the moment about the fact that the Office for National Statistics gets its figure for the national debt wrong by over £1 trillion this morning.
Why on earth would it want to do that?
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id like to see who we owe it to &what weve spent it on
how much weve frittered away
how much is capital investment ?
as a society we do need an adult conversation about this beyond the maxed the credit card nonsense
Sorry – I do not have the time
I wasnt thinking of you doing it , Richard
youre busy enough
I was thinking that the information should be coming automatically through official Govt. channels
Fear.
Fear is the key.
This both “matters” and “doesn’t matter”.
It doesn’t matter to me if the “National Debt” is 1, 2 or 3 trillion… what matters is whether the size of the National Debt the “correct” one to enable our nation and the people in it to thrive.
However, we do not live in a world that thinks this way (yet?) and “The size of the National Debt” is being bandied around in debate to justify Austerity. Consequently, your efforts to quote an accurate number for this ARE important.
The first and most important point is that the report is all about PSNB and PSND – Public Sector Net Borrowing and Public Sector Net Debt. The key word being NET.
The largest number they quote is £2,492 billion and this is “Gross Debt (Maastricht)”. Lost in the mists of time I spent hours…nay, days and weeks… discussing the details of the “Maastricht criteria” for entry into the Single Currency. (What a wasted youth!!). The point about this number is that it is about the largest possible number you could possibly come up with and it was deliberately so – the aim being to prevent any creative accounting to allow highly indebted countries in to the Single Currency. It was a starting point for discussion about indebtedness…. not the end point.
In that spirit, we should look at this number the same way.
First, Cell K469 gives us £2,198 billion which is where holdings of gilts and cash across different arms of Government are netted out… and the ONS release does give this number. That, after all is what “net” means.
So why exclude the Bank of England and the Asset Purchase Facility? I really don’t know.
To quote from the ONS Glossary (helpfully rovided at the end of their publication)….
“Public sector net debt represents the amount of money the public sector owes to private sector organisations
(including overseas institutions) and is often referred to by commentators as “the national debt”.”
Last time I checked, the APF was NOT a private sector organisation!! So from their own definition they are getting it wrong.
[Could it be a statistical hangover from the Maastricht Treaty where the concern about monetary financing by Central Banks was acute in the run up to Monetary Union…. but that is over 30 years ago and surely we have moved on.]
So, my preferred figure is £2,198 billion less £715bn (the par value of APF gilt holdings) or about £1,483 billion.
There will be some legitimate differences on this exact number depending on whether you use ‘par value’ or ‘market value’ (or cost for APF purchases) but these are small.
On a separate note, do I detect a small, partial victory with regard to “interest costs”? Whilst the number quoted is still the wrong one it is very clearly and explicitly stated that this is due to RPI up lift and buried inside they note that this is a “volatile” number.
Clive
We are very close…..
And they do read this stuff at the ONS
No one else critiques their work that often
Richard
Richard,
Has the ONS ever responded to the outstanding matters after your earlier correspondence with them on Debt and Reserves?
Clive has opened an interesting issue on the APF and Private Sector Organisations. How on earth can the APF fit the ONS definition? The Maastricht point is also telling (the thought that neoliberal Breixteers are following Maastricht!). I wonder how these issues might be pursued to flush out the principles behind what “rules” they are actually following behind the curtain? A Treasury FOI request?
Always glad when you return to this issue. It is important.
I keep asking for replies and do not get them
Great analysis. So this is easily digestible by the public and possibly even media, could you create a pie chart for this breakdown of National Debt, including the point about savings accounts? Infographics are such a powerful tool and the light you shed on this (and other areas) needs to be more widely seen. Thanks
“According to the Office for National Statistics this morning UK national debt is £2,492 trillion.”
I guess you meant “billion”
Corrected
Same “trillion” for “billion” typo in the last paragraph, I feel.
Sorry
For what its worth – I have replied to @ONS twitter making your £1000bn. point with a link to this post.
https://twitter.com/JeremyAndrew11/status/1627976148729622528
It’s a really serious matter if even the officlal statistical service is putting out what seems to amount to propaganda , This when the BBC seems to becoming an ever more non-subtle transmission belt for Pentagon/MOD messaging and losing any curiosity to ask even mild questions.
Thanks
This is such fantastic insight, thank you.
I like that you’ve linked directly to the spreadsheets so we can work through it ourselves also. I’m not aware of anyone else that is looking at and challenging the ONS figures the way you do. I’ve tried to understand the national accounts myself but after looking at spreadsheets all day as part of my job, it is the last thing I want to do in an evening!
We kind of take these statistics at face value and for the ONS to be £1 trillion out is not exactly immaterial……have you ever corresponded with them on this and had any feedback?
They really do make it as hard as possible
Have had a reply from ONS (below) – which seems to be purely technical – not sure it really answers the point about whether this gives a true reflection of public debt, and doesnt seem to deal at all with the £831 bn that govt owes itself??
Fraser Munro @Fraser_ONS_PSF Replying to @JeremyAndrew11 and @ONS
Only liquid assets fall under the international definition of net debt. TFS loans are counted in the wider balance sheet measure PSNFL. An explanation is provided in the Psf bulletin.
The counter party TFS assets are not liquid so fall outside of the international definition of debt.
I have had that exchange
It is absurd to suggest that sums owed by UK banks can be ignored in this way with massive implication for public policy
Of course the ONS can compare internationally compliant data but they already have about six deficnti0ons of national debt but very oddly none which gives an indication of anything like the truth and that is what is needed now
Have sent a tweet Also noting @RichardMurphy suggesting they produce a ‘repayable debt’ alongside their international-compatible definitions. Obviously won’t come to anything.
Sorry
I am @RichardJMurphy
It also raises the question :
What is the figure for national assets?
Most billionaires would pay a lot for the right to tax 65m people.
£750bn non-indexed linked for the next 50 years even at 3% p.a. discount is £18.75trillion.
Which about the same as national assets held in property , land and business assets.
But its not the historic account that is the problem but the ongoing prospects for the UK economy. A 5.5% current deficit in the last quarter does not auger well.
Its manageable, but only if there is growth or a reduction in consumption, for which many options exist.
National Context Accounting and Planning is what is required.
Only you seem be up to the task.
The ONS say they have a new statement on asserts coming soon
I will be interested to note what they do