The chart below illustrates what has happened so far this year. It shows the cumulative deficit for both 2007 and 2008. In other words, it is the "running tab" telling us how much the government has borrowed as each month passes. For example, the data for February gives us the amount of borrowing for January and February, while the July data tells us how much was borrowed during the first seven months of the year.
Government borrowing seems to be slipping out of control. Clearly, Darling doesn't like to say no when his colleagues ask him for a little extra spending money.
So far this year, the government is down about ₤15 billion. That is about ₤9 billion more than the same period last year. What is more, the 2007 public sector deficit wasn't exactly a model of prudence and caution.
So where are we heading with this spendfest? If the government keeps on accumulating monthly deficits like it has during the first three months of this fiscal year, the annual deficit is likely to come in somewhere between ₤50-₤60 billion. In other words, the deficit could be as high as 4 percent of GDP. That will bring the debt to GDP ratio to about 39 percent of GDP.It is just one more sign of the growing economic calamity that the UK economy is cooking up. Lets go through the list. We have rising inflation, while growth is slowing rapidly. The housing market is crashing, while the banking system edging towards insolvency. The external deficit is the third largest in the world, and our net international position is about 25-27 percent of GDP in the red. Now, we can add a growing fiscal deficit and rising public sector debt.
What a mess we are building up for ourselves.
8 comments:
Alice, I spy a double negative.
Borrowing is positive, surely?
:)
Lots of expensive war in recent years...
B. in C.
asteve, I am a very poor editor, and I will re-read and see if I find any obvious typos and grammatical errors.
(Sorry, I'll be more explicit...)
Both graphs are titled "borrowing" and your graphs show negative numbers now...
I'm also a bit confused about the red line... the idea that the line crosses 0 is also perplexing... we've got somewhere in the ballpark of £0.5 to £1.0tn in gross government debt... depending how you calculate it.
asteve,
During the beginning of the year, they run surpluses and then move into deficit. Borrowing here is defined as a negative, which it is for the taxpayer.
Alice
Alice,
Good post. Some comments:
- Have you tried tracking the price the government has to pay to offload the debt, or the bidding interest shown by it's buyers? That'll be the canary in the coalmine for whether the government is having problems persuading people to lend it money.
- As for the media, why would they care? Most people would never understand the issue, and most of the rest expect to benefit from the government's largesse. It won't be a media issue until it explodes. See Fannie and Freddie.
- "All this borrowing will, one day, have to be paid back". Ha Ha Ha. That'll be the Tories' problem. And the problem of all those suckers who haven't been born yet. Unborn people don't vote.
- "Darling doesn't like to say no" Indeed. That's why he got the job.
- "the growing economic calamity that the UK economy is cooking up" Let's be clear about the blame. Labour is cooking it up. Like they always do.
I'm looking towards the point where the bond vigilantes come out and tell the Goblin King how much he can spend. I hope it's soon.
Nick
So, the government is exempt from the credit crunch.
Ta, Alice, I was being a tad slow there. I'd misinterpreted what you meant by "cumulative" - I should have guessed "cumulative annual" - but my brain wasn't properly engaged.
:-)
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