As the FT notes this morning:
Britain's public finances are taking a beating from what looks set to be the highest debt interest bill in the developed world this year.
The Treasury will spend £110bn on debt interest in 2023, according to a forecast by Fitch. At 10.4 per cent of total government revenue, that would be the highest level of any high-income country — the first time the UK has topped the data set that goes back to 1995.
There is, of course, an easy answer to this problem. As I noted in a letter to the Guardian last week:
There is no need for the Bank to pay base rate on all the deposits [the UK's commercial banks hold with it]. To ensure the effectiveness of its interest rate policy it needs to pay base rate on some of them. Interest on £200bn should be enough to do this. The rest could enjoy interest at a very much lower rate: 0.1% should do. Japan and the eurozone already use such a two-tier interest rate system. If done here this would save around £30bn per year which is enough to meet all pay demands now being made of the government.
It just takes a little political nous to solve this problem. The problem is, that is in very short supply.
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The monetary folly over failing to use tiered interest on QE (so much for Sunak’s supposed financial wisdom), is consolidated by the swaggering folly of his audacity, taking credit for building 200,000 per year. Here are the utterly appalling facts. The UK has the oldest, least energy efficient housing stock in Europe. We have a population of 66m; 28m dwellings, and build 200,000 houses per year (replacement rate? 00.7%). How bad is that? The EU is concerned because 35% of its housing stock is >50 years old.
In the UK 55% of the housing stock is >50 years old. 70% is >60 years old. The matching figure in the UK for the EU 35%, is the number of dwellings is at around 80 years old. This is shocking. Even worse, the houses we build do not meet the energy efficient levels we urgently require – now. And we know that the building regulations, and their implementation have been in tatters; because we still have not even fixed the Grenfell problem.
Where do Britain’s resources go? The Government and BoE are spendthift on squandering treasure on paying interest for nothing at all; the housing stock is a shambolic disgrace; and the NHS has no money and is starved of resource.
And there you have neoliberal Conservative government in a nutshell.
I forgot to add the source I used for UK housing stock: BRE Trust, ‘The Housing Stock of The United Kingdom’ (2020).
John, I don’t quite understand the housing stock age. If 70% is > 60 years old, shouldn’t more than 70% be > than 50 years old? Assuming that > means greater than?
Blooper: “70% is >40 years old.”
I live in a house built in 1947-48, so 55 years old. It’s well built, watertight, spacious. My impression is that new houses are none of these. So people in the UK, with money enough to allow them to choose, tend to prefer older houses. What is being built now, still not affordable to at least half the population, is likely to be the back-to-back slums of the future. Tower blocks built only 50 years ago are coming down as not worth repairing. The Pohl and Kornbluth novel, Gladiator at Law, written in the 50’s, I think, is very good on the future of housing estates!
A mistake in your maths?
75 years old, or built in 1967-8?
Anecdotal special pleading does not make the case. Many older houses are riddled with mould and damp (as C4 News has illustrated several times, causing sickness especially among children). Not all old houses are well cared for; and old houses are quite often badly built. almost all have dreadful insulation and very poor energy efficiency qualities. New houses in the UK are often also poor in design, execution and in insulation/energy efficiency terms. In Europe, especially northern Europe higher standards apply. Our market-profit obsession is killing us. The building regulations have been undermined by austerity (Grenfell et al).
Need I go on?
If Alan Holmans was still alive (the most outstanding housing expert of his generation) then he’d be saying much the same about the UK’s housing stock. What a pity he is no longer with us, but warmly remembered by those in the housing field.
As for Richard’s point about political nous, it is clear that none of that exists at present because there is obviously a bias to growing money using ANY interest rate mechanism because the bias favours capital accumulation – not the practical use of the capital available. And the more cash you have, the more you will rake in.
And that ain’t you and me. We are not in that ‘special club’.
What we have instead is banking and rentier nous.
The interest charge on the CBRA is quite simply daylight robbery – a transfer of wealth from public to private that’s just like the king’s recent pay rise.
People should be outraged by this – but since we are all supposed to be ‘aspirational’ we’ve lost our sense of perspective having been taught to worship wealth.
and the money goes to……?
Mainly some already rich, or richer than average, people I imagine. I wonder what level of tax they pay?
Your recent reference to class war seems apt.
We have a party dedicated to the interests of ‘Capital’.
If only we had a party that represented working people or, as they used to be called, labour.
Anyone going to join this party?
https://socialjusticeparty.uk/
jenw asks about the Social Justice Party. I am awaiting a report on the outcome of last weekend’s Conference.
They needed a Constitution to be able to register as Party. I know that they are currently organising in and around the North-East, which isn’t too good for this Southerner. They have been working with TUSC with some good local results.
So my answer is, “Possibly, with some caveats before I sign.” But it’s on my horizon.
The sort of labour MP I like reading or listening to.
https://labouroutlook.org/2023/07/25/asymmetry-of-power-and-access-to-parliament-is-eating-our-body-politic-jon-trickett-mp/
I am surprised he’s still in the party, though.
Does he have political nous?