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.

You cannot impoverish large swathes of the population and expect to survive as a society.

The only way out of this is growth.

This means rejoining the EU.

It also means raising taxes and introducing small fees for services that are currently free, for example a small copay (capped per individual per year) for NHS services.

The markets are interested in quick returns for investors, in fairly short term gains. They're not necessarily interested in fundamental structural solidity or in a government trying to establish that, bit by bit. They are freaked out by policies that have nothing to do with short term gains, and the appearance of instability, either personal or political, on the part of leaders. Liz Truss, for instance.

Reform are an untried and unknown quantity. They are reactionary more than right. Labour under Starmer are centrist. The Tories are a party that flew in the face of reason - austerity, Brexit, Boris Johnson, Liz Truss - whose sights are set firmly on the past.

Labour needs to get its act together.

The UK hasn’t had any meaningful growth since 2008, France, Germany and Italy are exactly the same, I don’t see how rejoining the EU is going to change the situation?
Over a million people now claiming full PIP, that’s more than the number of people working for minimum wage, it just isn’t sustainable

Which country has successfully taxed its way out of this position?

What about the public taking more responsibility for being as healthy as they can,where possible? How much would that save the nhs significant sums than pay for the results of some choices?

You mention the NHS - Gojng abroad for treatment? Then you have to take out insurance before you go, in the event that treatment goes wrong.

At a base level prevention is better than cure and would save millions.

But Spain's economy has been doing really well since Covid

I don't think you can impoverish the working population any further by raising taxes.

We need a system overhaul that makes working the default position for the population. Wages should be high enough to ensure basic living without receiving help from the state.
That's addressing the low wage economy, aging population, youth unemployment and the benefits system itself.

I imagine growth being making things to sell to other countries -what do we have that we can sell?
Building stuff means importing bricks, wind turbines, steel for bridges from abroad which is a cost to the country.

And Spain has sensible people in charge. We have thousands of people unable to work ( asylum seekers/ ill who can't get treatment because of a lack of investment in the NHS etc ) for years because we don't process their claims/ invest in the NHS enough etc. Spain has legalised its previously illegal residents and will therefore be able to work andboost its economy.

They aren't trying to attack their elderly by increasing taxes on the old wh may have 50 years work behind them. We have 50 families who own more than the poorest 50% of the population. We should be taxing these super rich more not seeking ways to tax more those who are old or working people who have had the lowest wage rises (0.3% pa on average) for 200 years.

There a fundamental problem with taxing the super rich - they just leave the country. They have numerous properties elsewhere and are very mobile: just as easy for them to work from Switzerland or Dubai or wherever, avoiding tax here.

@mathanxiety

I totally agree with you that the only way out of this mess is growth.

However trying to achieve this by raising taxes is a bit like trying to lose weight by eating more chocolate cake.

You create growth by cutting taxes not increasing them.

As for rejoining the EU I don't disagree with your sentiment, but the reality of trying to do so would at least 5 years of negotiations and discussions which would be hugely disruptive to the main Government job of running the country and hence damaging to the economy. If it was as simple as turning back the clock to the pre Brexit situation then fine but it's not.

The reality is that to fix the economy and Government finances would take 10 years of often unpopular policies whereas the voters want quick fixes in under two years.

So instead we settle for slow managed economic decline.

The reality is that to fix the economy and Government finances would take 10 years of often unpopular policies whereas the voters want quick fixes in under two years.

I don’t think the voters are that daft but we need to be told the long term goals - promising not to raise taxes was a mistake but you can renege on your promises if the greater picture is bought into by the electorate. But immigration is affecting housing, jobs, costing us billions in hotels etc - the fact that they seem unable to control this at all means the electorate has little faith.
(and allows reform a free ride)

You cannot means test the state pension if people are already receiving it, so it would have to be on a sliding scale.

This talk of mean testing the private pension is frightening. With taxes going up and benefits increasing at the same time, the gap between those that work and those that don't is closing. Do people want the same for pensioners? Someone that hasn't worked gets a full state pension while someone that has paid in a fair amount to their private pension doesn't get the state pension? What if someone gets £20k a year in private pension, do they lose their entire state pension? £8k difference is barely anything. It should be as it is now, the person that has worked gets £32k in total while the person that hasn't worked gets the £12k pension.

I think we need to change young people's thinking in that it is NOT necessary for such a huge percentage of them to go to University, waste time for 3 years and then come out expecting to land a job paying them £xxxxx. Yes, University for those who are studying something which benefits the country, e.g. medicine, law, economics, etc, (and their courses should be funded by the taxpayer), but go back to nurses learning 'on the job' - no need for a degree - and encourage businesses to offer apprenticeships again to provide jobs for school leavers. Change the mindset of those who 'don't want to get a job' - it's absolute nonsense.

People who are 'scroungers' on benefits should be forced to take a job for which they are qualified, and if they don't have qualifications they should be set to work tidying the country's roads, hedgerows, etc, and get it looking half-decent again.

Absolutely @PistachioTiramisu Very few jobs actually need a degree. I also agree that tax payers should fund degrees for those jobs that we need as you have listed. This would be paid for by the people that would have done degrees, working full time instead and paying tax. (not directly but as part of the contribution to the whole pot).

Like her or not, you cannot deny that Mrs T was a woman of real ability (& in my view, personally totally honest), plus she knew exactly what her goals were and never swerved from them.

You might not have liked those goals, but that's another matter.

Those are the qualities that have been sadly lacking in her successors in the 21st century. Ability, honesty, definite goals and the ability to stick at it.

As you say, it is difficult to see any current politician (Andy Burnham included) who has them all.

Applying to join the EU would put the UK in a queue with Moldova, Ukraine, Albania etc etc. It would be more sensible to apply to join the European Economic Area, which would permit a useful boost to trade, and put the UK in a better position if it ever does apply to join in the future.

Not most of it, but about 50% of it.

This could change significantly if we were willing to drill like Norway.

The situation on energy is complex, but IMO we need a three pronged approach :

Advance nuclear and make sure we get at least 3 plants underway.

Continue with North Sea development. So green lighting fields like Rosebank and encouraging investment in the North Sea rather than making it unattractive through excessive taxation.

Continue with wind and solar deployment. Probably more on the solar side as wind is doing well. We also need a lot of infrastructure upgrades to handle the power transmission, and diversifying our interconnection capability (for example Dogger Bank to Germany/North Sea Power Hub) would be a good idea.

The correct strategy is not Net Zero, nor is it drill baby drill, but a sensible balance between those two points.

Unfortunately at the moment energy policy is dictated by idealists, and if you adopt idealist strategies you get idealist outcomes (ie everyone getting poorer is a secondary considerable to the desired ideological outcome).

Joining the EEA would be sensible, and would probably be a Brexit more in line with peoples expectations.

However, growth is not in Europe. European economies (including the UK) are generally tapped out. The opportunities for growth in trade are with the US and Asia Pacific.

Part of the reason I think UK economic performance has not declined more following Brexit is because we have strong trade links with the US, and over the past 6 years the US economy has been performing strongly.

We also have CTPPT which again is trade with an area of strong economic growth.

I believe we have now pretty much taken the pain of Brexit re economic performance and opportunities await. This doesn't mean we don't have to make considerable changes to the welfare state, but it does mean that we would be crazy to try to go back into the EU now after we have come so far without exploring the opportunities the new trade regime presents.

Fortunately I don't think the EU would have us anyway, and the requirement of us to join the single currency in order to rejoin would skewer any politicians attempts to go back in. I guess there is the possiblity that the EU might relax this requirement if their economic performance continues to worsen.

The issue with what the UK has done in trade is that it will take decades to really see benefits. Trade agreements take time to bed in and be used, they are not quick fixes. Our current agreement with the EU is the only trade agreement ever made to make trade harder between us and our nearest neighbours.

Stepping back, this is a continuing mistake that politicians can barely acknowledge. Labour are finally starting to talk about it, but at a point where their own party is starting to look unstable. Reform would not exist if they could deal with the EU properly. The Conservatives are the worst. They made this mess and they once would have been the party to be clear eyed about the economic benefits. Instead we are still in this deluded state of our top political class either being empowered by being anti EU or too frightened of the electorate to admit that this terrible is corrosive and will keep hurting our economy. Britain is a capable country but someone has to face this properly.

Lots of discussion of Thatcher. She at least was not an idiot on Europe, engaged with it and the UK brought its ideas to the table and implemented the single market which was a substantial reason we became a richer nation. There is no one in any party I see with that kind of ability or ambition.

I just can’t understand people’s lack of economic reality.
Of course going further left is going to produce an increased shitshow as if things aren’t bad enough.

I don't think you know what you're talking about or rather you have an agenda to talk down the UK.

Countries cannot technically go bankrupt and UK debt to gdp is actually on par or lower than many, not all G20/OECD countries.

Gilt yields are only slightly higher than most G20 countries and until Iran, were falling sharpely.
The vast majority of our borrowing is long before Truss caused yields to treble.

Tax take overall far exceeds Welfare spend and growth in Q1 is higher than pre GE under Sunak, which we constantly get told, was a golden legacy for Labour....

......but under Reeves, it means "i wish they'd bring in the IMF....

Yes we do need to address Welfare, so that means scrapping Triple Lock, tougher criteria for PIP, slashing SENDs spend, get parents to actually parent instead of relying on the state to do it - UK has many times more SENDs children than any other country in Europe (why? something in our water perhaps??) and reduce free childcare, to those that genuinely need it, not those who earn 80 or 90k..

Of course you and others on the right, will be up in arms about most of that....

People on 80-90 are paying 40% tax -and you also want to hit them with tens of thousands in childcare - this is another lefty sop to the ‘poor’ why should only some get it -you do realise that everyone wants more children to be born - or is it just a good idea for the benefit receivers, lower paid to get it .

and you want parents to parent -well they will if they can’t afford to work due to childcare costs but if one parent is at home thats a big hit to income tax -good idea??

That gap in LFPR is primarily due to differences in how it's counted. The US calculation includes everyone age 16 and older, with no upper limit. The UK calculation includes everyone aged 16 to 64.

If you look at prime-age labor participation (ages 25 to 54), the rates are very similar, with the US at 83.8% and the UK at 87.5%.

So you're comparing apples and oranges.

The total US national debt is much larger, but we have a much larger economy to support it. As a % of GDP, they are not that different, 101% for the UK vs 120% for the US.

https://www.imf.org/external/datamapper/GG_DEBT_GDP@GDD/CAN/FRA/DEU/ITA/JPN/GBR/USA

Additionally, your long-term borrowing costs are higher because the bond markets perceive the UK to be a riskier lender than the US. A US 30-year bond currently yields about 4.7%, vs 5.7% to 5.8% for a UK bond. This also allows the US to borrow more because our interest costs are lower.