How much more will Darling have to borrow?
Mark Bathgate 2:36pm
The figure of £178 billion in the Budget – for 2009/10 – is by no means the full story. For that we have to turn to the Debt Management Office, which is in charge of flogging the IOU notes. It just now confirmed that it will need £223.3 billion by the end of this financial year - £5 billion more than expected. And a staggering amount, which I suspect the government simply could not raise if it did not have the Bank of England printing presses working overtime.
Why the gulf between the two? Because of the bank crisis. This financial year a further £42 billion has needed to by pumped into the banks in various forms – not just Lloyds and RBS, but the smaller bank failures like Northern Rock and Dunfermline Building Society. The government needs the cash – to bung it to the banks – but it doesn’t want to count this in the national debt figures. Darling also revised down his estimate of the end cost to taxpayers of this mess to just £10billion. That looks like very wishful thinking. The risks – particularly given the near £300billion of dodgy debt RBS has just passed off the taxpayer via the Asset Protection Scheme – is that losses will be far greater. Bad as the debt numbers look, there’s a lot of sugar coating still going on via the “hope for the best” approach being taken to the banking crisis costs. When the hugely optimistic growth forecasts are taken into a account, the forecast for deficits are very much the best case scenario.
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Nick
December 9th, 2009 3:07pm Report this commentThe real "sleight of hand" is the expectation of GDP growth of 3.5%. Throughout the noughties UK GDP has averaged 2.5% and only ever reached 3.5% briefly in mid 2004.
So in a decade of very rapid global economic growth and large public spending increases the UK "only" averaged 2.5% growth.
How on earth in the next decade of slower global growth as the world deleverages itself from the excesses of the last ten years can Darling possibly justify pencilling in 3.5% growth ?
Chris M
December 9th, 2009 3:09pm Report this commentBank of Scotland, Royal Bank of Scotland, Dunfermeline Building Society? We've bailed them all out right? Can we move Scottish independence on a bit quicker and make Scotland liable for the banking mess it's created?
JohnOfEnfield
December 9th, 2009 3:09pm Report this commentI just love the euphemism "Best case scenario".
You really mean "he lied".
Nicholas
December 9th, 2009 3:11pm Report this commentLabour cancelled TSR2 on the basis of a £800m deficit. But of course that was when they were largely in the pocket of the Soviet Union so political considerations of sabotage may have come into play.
Philip Walker
December 9th, 2009 3:14pm Report this commentDon't forget, some of that gross issuance is to cover redeemed debt: £17bn in all. So the actual cost of the bank bale-outs is 'only' £25bn this year.
MB
December 9th, 2009 4:18pm Report this commentRBS appears to be in the middle of an orderly wind down - how can the loss associated with that be only £10bn. Especially when it seems to be a major creditor to just about every company/quasi government entity with debt problems
Nick
December 10th, 2009 2:04am Report this commentQuite a chunk of goverment debt is redemeed this year. They have to reborrow to pay it off.
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