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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