The Jubillee Debt Campaign has written a briefing entitled 10 key facts about UK debt. They are worth sharing.
Ten key facts everyone should know before discussing debt issues in the UK:
1. A quarter of UK government debt is owed to the UK government itself
2. Three-quarters of UK government debt is owed to people and institutions in the UK
3. Of G7 economies, only Germany has a lower government debt (as a proportion of GDP) than the UK
4. The UK government can currently borrow at the cheapest interest rates in its history
5. The UK government is paying virtually the lowest amount of interest on its debt in recorded history, as a proportion of GDP
6. UK government tax revenue (as a proportion of GDP) is the third lowest of G7 countries, and well behind other European countries
7. The debt of the UK's private sector is more than four times as big as that of the government
8. Unsecured personal debt in the UK is rising rapidly
9. The UK economy has the largest deficit with the rest of the world of any rich country
10. The UK's finance sector is the most exposed to a crisis of any G7 economy
For a more detailed explanation of each key fact read the briefing on UK debt.
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Hi Richard
Thank you for this – very useful. Regarding point 1 do all other countries who indulged in QE account for it in the same way? It seems nonsensical to me unless the government wanted a debt to GDP ratio as high as possible to justify shrinking govt expenditure. Or am I being too cynical?
Russell
The UN government accounting framework, which is in standard use, requires this
Would it be right to suggest that rather than fetishizing over the government debts and deficits, the real household analogy should apply to our trade imbalances with the rest of the world?
I remember, during the 60s and 70s, the balance of payments and as to whether they were in surplus or deficit, would regularly make the TV news and was widely reported in the newspapers. We regularly ran surpluses until the oil price shock of the early 70s and after the depredations of the Thatcher era we now nearly always run deficits.
Posted onto Fb. Thanks. 🙂
🙂
Once again – thank you – great stuff.
1 and 2 are somewhat misleading as it implies that no government debt is held outside of the UK which is clearly not true.
Both are true
More than 25% of Gilts are held by overseas investors.
Obviously statistic 1 includes statistic 2 – which is a bit misleading.
Yes
But also obvious
These points omit the most important point: that the so-called public debt isn’t a debt in any meaningful sense. It is the savings of the non-government sector. The talking point about the government being able to “borrow at low interest rates” is perpetuates the completely wrong view that bond issuance is a borrowing operation for the UK Government. It is nothing of the kind. Bond issuance is something that the UK Government does voluntarily – it is a policy choice – to provide the non-government sector with a completely safe way of saving and earning a bit of interest.
Accepted
Nicholas says:
“These points omit the most important point: that the so-called public debt isn’t a debt in any meaningful sense. It is the savings of the non-government sector.”
That of course is much too far-removed from what people ‘know to be true’. (Mark Twain: “‘What gets us into trouble is not what we don’t know. It’s what we know for sure that just ain’t so.’)
A progressive party wouldn’t get that across to the public in an entire Parliamentary term if it tried, and had positive media support, let alone ‘sell’ it in six weeks of fervid election campaigning. The first response would be (indeed, is) we’d better ‘get it back then’ with swingeing wealth taxes. I think we’ve been here before. It has a track record of not making rich ‘pips squeak’ and then creates the sort of backlash we’ve had for four decades.
“The talking point about the government being able to “borrow at low interest rates” perpetuates the completely wrong view that bond issuance is a borrowing operation for the UK Government. It is nothing of the kind.”
Nothing of the kind ? Hmmmm……..it IS something of the kind. Treasury bonds if they are to to be of value have to be redeemable at sometime in the future so there is an implicit debt to be repaid in the future……
I’m floating the idea that we’re looking at an arrangement which can perhaps be usefully compared to a mortgage. We don’t have debt anxiety about a mortgage. We may be concerned about the ability to keep up with payments if there is a personal financial crisis like serious illness or job loss….but we don’t beat ourselves up about that. ‘Nobody’ regards their mortgage as a debt they think of it as an investment. It produces (all else being equal) a physical asset which is a roof over the head etc for as long as we need, with the substantial advantage that we can live in it while paying for it ….and it’s cheaper than paying rent and we have something to pass on to future generations.
That’s a far cry from the nonsense of government spending ‘maxing-out the credit card’.
The analogy may not be perfect, but it makes better sense to me than most of the fantasy bidding and counter bidding masquerading as political debate at the moment. In large part I blame the media coverage which treats the entire farrago like a TV game show.
But mortgages have to be repaid
Government debt is not repaid
And does not need to be repaid
Of course Government debt does have to be repaid, as many investors rely on the maturity proceeds to meet their cashflow needs.
Like many corporates though, borrowing is often repaid via the issuance of new borrowing.
PS Might I also ask why you have appeared with two identities with different genders here this morning?
So it is not repaid
It is rolled over
And has been since 1694
So your point is not true
“Government debt is not repaid”
It is repaid if it is in the form of treasury bonds because they are redeemable. If they weren’t they would be worthless.
Do you want people to believe in money for nothing ? Because they won’t. They don’t believe you.
I am not sure what you are trying to say here Andy
Technically the debt is repaid
But technically my skin keeps falling off and yet I still have skin
The reality is that the debt is not repaid just as my skins renews itself
Both 1 and 3 are incorrect,
1. While 25% of debt may be owed to the BoE and hence due the guarantee, to itself, the other side of the balance sheet is central bank reserves to the banking sector, which is still a liability to the private sector. They are merely a callable perpetual bond paying base rate.
3. Both Canada and the US have largely funded public sector pensions and France has a partially funded system. Including UK public sector pension liabilities would push debt to GDP close to 200%
That is not to say that I don’t agree the UK should borrow massively using 50 year bonds at current low rates to fund decarbonisation.
You think a bank deposit that the Bank of England can control is a liability akin to normal debt? Try again….
And thank heaven we have not got a funded pension scheme – think how overvalued pension assets would be in that case
Has the national debt as an absolute number always been going up? I know that the debt to GDP ratio has fluctuated but has some of the debt ever been paid back? The £1.7 trillion is never going to be paid back in full but is it desirable to even try to reduce it?
Inflation will eat into its true value over time. Reducing the deficit’s contribution to the overall debt is a more realistic objective.
There have been tiny repayments in I think 8 years (from recall) since 1945
But we are talking tiny sums
Andy, the securities issued by a currency issuer are not a debt in the ordinary sense of the word because the currency issuer is not financially constrained. Therefore servicing those securities is never a problem. There is no solvency risk. A currency user has to obtain currency from someone else first before it can make a payment. A currency user needs to earn income, sell assets, borrow, or have prior savings first, before it can make a payment. The currency issuer simply keystrokes a number into a reserve account. In what sense is that a burden on the government? Obviously it is not a burden. The word “debt” connotes a burden. It is the wrong word to use in this context.