Is bankruptcy inevitable now for the UK

[BringOnTheHandyMan]

In the most layman of terms the UK is actually broke.

Every month we cannot pay the interest on our outstanding debt and thus have to borrow more. (Note this is not repaying the capital, just the interest)

The rate we pay to borrow used to be quite low and that is not the case anymore.
The bond markets have lost faith in the UK and charge us a rate that reflects it.

We have systems we can no longer afford (welfare, NHS etc)
We have little to no growth
We have inflation issues (so printing money is out)
Raising or cutting interest rates is problematic due to having both growth and inflation issues together
Our politicians are scrapping like rats in a barrel and even prior to that they seem incapable of making hard decisions or even facing up to the mess we are in.

We do actually need a PM that stands up and says okay folks we are in deep shit. We are broke. Actually worse than that. In debt and unable to pay even the interest.
So any borrowing we do must be for investing/growing the economy only. All spare money must be used for paying down debt or investing/growing the economy. That means for the foreseeable future all state funding is scrapped. We would enter a period of being very much a 'poor country' and acting like it. If we worked really hard we might be able to turn it around but it would take years, hard decisions and many, many sacrifices.

Since I can't see any party being able to actually do that. Then I honestly don't see how we can go anywhere except an IMF bailout. Then they will play the tough guys and cut the lot anyway.

I try to plan for my retirement but honestly it's sort of impossible.

For those with public sector pensions I wouldn't be sure you will get it paid
For those with private defined contribution pensions, the stock market is vastly overpriced just now and your pension is likely to fall once the AI bubble bursts.
State pension - yip not convinced we'll be getting that
Costs to be budgeted for - healthcare but how much?
Downsize my house - perhaps but will house prices tumble making this impossible.

Does anyone think that any government (regardless of party) can fix the country. If not what happens. The UK used to have no NHS or welfare so do we just go back to that. How long will it be until the wheels come off?

Lots of threads about which benefits should be cut etc but nobody seems to be shouting that actually it ALL needs to be cut regardless of what hardship it causes.

Not really. Imagine that the population remains the same (or even decreases) but the economies of developing countries grow so that their populations have the same income as developed countries - and consume on the same scale.

There aren't enough super wealthy that a one off tax could possibly pay off the national debt.

The nation debt is 3 TRILLION!

You'd have to take 3 million pounds off each of the million wealthiest people in the UK. Some of them won't even have 3 million to give!

A quick google says that there are only a million people in the UK worth around a million pounds.

The numbers don't stack up.

Wealth is relative. The entire World can't become more wealthy. Wealth ebbs and flows between people, countries and continents. Hence why the West is declining as the East is prospering. Quite simply, if person X loses £y pounds, then somewhere else person A gains £y pounds. Of course it's made more complicated by the "funny money" i.e. artificial money created by quantitive easing and other similar financial instruments/sleights of hand, but ultimately, a pound of dollar or yen has no intrinsic value - it just "represents" value, usually backed by the country of issue, it's economy, it's reserves/resources, etc. Relativity between countries/currencies is dealt with by fluctuations in exchange rates etc.

I meant economic growth but significant population growth would also likely be damaging. Significant economic growth beyond what we have today would still be bad for the planet though and we're already at breaking point from what I understand, unless new technology solves the problem

You're probably right - to be fair it was a comment made without much thought when I was tired. But I still believe that if we could pay off even some of it by taxing the super wealthy with a contribution from all who can afford it then it would be beneficial to us all. I wouldn't begrudge my money going to something like that.

The entire world can become more wealthy - that's what economic growth is; the pie can get bigger. Although you're right in that countries can become relatively poorer or richer compared to each other (they get different portions of a pie that is expanding overall).

But the figures are so huge, 3 TRILLION in debt, and 100 BILLION in interest each year, that "one off" wealth taxes simply wouldn't touch the sides. We need systemic changes that will have to effect literally everyone, rich and poor, to start to make a dent. It's a numbers game, making small changes to tens of millions of people makes more of a difference to big changes to a small number of people. And let's not forget at the first whiff of a "wealth" tax, the super wealthy will leave the UK and find themselves a nice little tax haven, so there'll be even fewer wealthy people to tax - we've already lost a lot!

I don't see how. Wealth is relative not absolute. We can create the illusion of people being wealthier, but ultimately, it's still got to be underpinned by resources and reserves which are finite. We can play games such as quantitive easing, fractional banking, etc., but ultimately, exchange rates adjust to reflect the relative differences between countries.

We need to think about double entry book-keeping - a credit matching every debit, or even physics where every action has an equal but opposite reaction.

Money means nothing, it just represents the underlying value, i.e. what you can use it for. Like a house or a piece of gold or a bit coin - it's only worth what you can sell it for or exchange it for. A house is worth the fraction of it's "value" if you break it down into components, i.e. a pile of bricks. Bitcoins only have value because lots of other people want to buy them, just like foreign currency exchanges or stocks & shares, etc. Most things are "worth more" than the sum of their parts, but that's just illusionary and transitory because people are willing to pay for them at a particular moment in time.

Historically, wealthier countries have reserves, whether oil & gas, copper, coal, lead, gold, silver, etc., mixed with other factors such as weather, farming, crops, workforce, etc. In recent times, that has somewhat been skewed by international trading where even "mineral rich" countries have been impoverished by greed/theft of merchants along with wars etc leaving their indigenous populations enslaved and impverished, but things are changing and now wealth is shifting across continents, away from the west, in the same way that wealth shifted towards the west a couple of centuries ago.

@Badbadbunny

"Historically, wealthier countries have reserves, whether oil & gas, copper, coal, lead, gold, silver, etc., mixed with other factors such as weather, farming, crops, workforce, etc. In recent times, that has somewhat been skewed by international trading where even "mineral rich" countries have been impoverished by greed/theft of merchants along with wars etc leaving their indigenous populations enslaved and impverished, but things are changing and now wealth is shifting across continents, away from the west, in the same way that wealth shifted towards the west a couple of centuries ago."

It's not really 'recent times'. Resources have been a negative indicator of wealth since the industrial revolution. Mercantilism and imperialism put an end to wealth being tied to resources. Mercantilism ensures that wealth is generated in nations where end goods are manufactured, not where the resources are. A classic example is the cocoa trade. Ever wondered why you don't see any chocolate made in Ivory Coast on the shelves despite it being the worlds biggest producer of cocoa? Why does Ivory Coast remain dirt poor while chocolate is made in some of the richest countries in the world? Why did England get rich on the textile trade when they don't grow cotton? Having huge natural resources has been more of a curse than a blessing for the past 250 years.

Wealth is not a static pool of resources. It's the total economic output of goods and services a society produces, and it grows over time, primarily due to increases in worker productivity driven by innovation. Developed countries are vastly wealthier now than they were in the past.

This was the central concept of Adam Smith's The Wealth of Nations, published in 1776. It's considered the foundation of modern economics.

I see that Capital Economics is now forecasting Government borrowing to rise from £132 billion last year to £145 billion this year.

By comparison the entire education budget is £122 billion and the NHS is £242 billion.

The level of Government borrowing is getting out of hand and if there is a change of leadership then there is a real risk that it will get worse.

Still lower than in 2023, when borrowing was £120billion but 6% of GDP, its currently 4.2%, even IF the 145bn figure is reached, its still lower, as GDP has grown.

What i don't like is the focus on all of this now, yet 3 years ago, it wasn't a problem and no one on the right mentioned it........ indeed Sunak is often mentioned on here as the UKs best Chancellor/PM.

Our borrowing costs almost tripled under Truss.

However, at least, according to the files released yesterday, the Govt, even if some backbenchers disagree, does want to cut welfare costs but getting on top of borrowing is going to be very difficult when Defence spending has to double.

10yr gilt yields slowly falling too, will help with future borrowing.

@Alexandra2001

What i don't like is the focus on all of this now, yet 3 years ago, it wasn't a problem and no one on the right mentioned it........ indeed Sunak is often mentioned on here as the UKs best Chancellor/PM.

We were barely out of the covid restrictions/lockdowns back then. Now three years later, we should be bouncing back, but weren't not.

You’re the one who mentioned fun, not me.

We’ve been broke for a long time, as have lots of major developed countries who have grown their societies on debt. It’s nothing new. There are lots of ways of changing your wealth.

If your family found themselves short of funds, would your only approach be to cut costs? Would you stop feeding your youngest child? Yes, cut costs where you practically can but then the next approach is to make more money! Invest! Grow!

What’s funny, is that if your family gets into hardship (which any can unless they have significant wealth or family help), you won’t be expecting your children to miss out will you. You won’t be turning down benefits will you?

It’s easy to say cut the benefits, but I guarantee you’d all be wanting them if your life got hard. It’s hypocritical.

Which countries have bounced back?

The UK has had the 2nd fastest growth, over the last 2 years, of any G7 country, but unfortunately, Covid then Ukraine, followed by very high inflation, took away many peoples discretionary spending power.

We poured money away, almost all of which has ended up with energy companies and the banks, not too mention fraudsters - around £11bn lost over that.

The huge amount of borrowing the Conservatives took out, now has to be repaid, then there is the additional Defence spending required, for far too long Defence was ignored by the Tories.

What do the academic economists say? Not pundits, but the actual economists.

Mixed but i ve never read of any mainstream independent economist saying we are about to become bankrupt or need an IMF bailout.

All that nonsense is just the disgruntled 'right, pee'd off that they lost the last GE.

However, we do need to get a grip on public spending and borrowing.

Thank you. I read and hear things from all different sides and want to think "what does the academic economic community say".

@Alexandra2001 I agree with you that the handwringing now is a little odd. It’s the same with youth unemployment, it’s been higher than it is today but that’s ignored.

and any woman whose husband is a bit of a lazy arse is encouraged to leave him and live off her part time job and the State aka other people's money.

But AI wasn't a year or two away at the previous time

AI is happening now.

...and the issues with AI cannot be addressed easily at all nor can the unemployment it will cause.

Listening to R4's Farming Today, even fruit picking & packaging cannot escape, with 1 grower reducing his workforce from 30 to 10.

The "concern" over unemployment is all to do with using it as a stick to attack Labour with, same as the 'right blame Labour for the poor state of our armed forces.... despite the fact it takes many years to build new ships etc etc

I mean whole families used to live in one room and whilst I'm not suggesting a return to that people will just have to get used to having far less space if they can't afford otherwise. Alternatively live on the street I guess but I can't imagine that would be fun. The whole UK needs to start living according to how rich (or not) we actually are, not how rich we used to be.

Sorry but this is just wrong. The IMF have issued several warnings about the UK's finances. The bond markets have been flashing red for a while now re our financial viability. Todays telegraph is running an article about the IMF.

Loads of real economists are talking about the UK and even the bank of England head guy said it.

I mean whole families used to live in one room and whilst I'm not suggesting a return to that people will just have to get used to having far less space if they can't afford otherwise. Alternatively live on the street I guess but I can't imagine that would be fun.

So previous generations had access to more social housing and many still benefit from it but anyone else should live on the streets? Thats unrealistic