to not give a monkeys about the deficit?

[StuckInTheMiddleWithYou]

I genuinely think we should ignore it.

If we don't pay it back to whoever we owe it to, would it be the end of the world?

It does seem a bit odd that they have never even attempted to justify the need to pay it back, seemingly immediately.

Why?

Well, we spend about £650 Billion a year, and to do that we need to borrow about £160 billion as we don't raise enough in taxes.

So if we stop paying out debts, or people think we won't then we will need to cut our budget by 25% anyway.

probably a bit more as the rest of the world would stop trading with US - the financial markets in London would shut down and we would become a 3rd world country. International bankruptcy is not quite as cosy a personal government sanctioned insolvency.

What Coalition said. If the UK doesn't pay its debts then it will never get lent money in the future. (or only at extortionate interest rates). The UK govt relies on borrowings to function. If the lending dries up then it will have to cut back hugely - and very suddenly. And there won't be any credit available in future for emergencies.

Also, all the time we have huge debts, we are racking up interest on those debts. That eats into money that could be spent on other things.

This may well make me sound very thick, but here goes! I thought the deficit was not actually the amount of debt we are in, its the difference between what we spend and what we raise. So they are just trying to cut the amount we spend, so that it matches more to the amount raised in taxes. If that makes any sense?

I know we have a national debt as well, but I thought that was a different thing to the deficit.

Someone that knows about these things - please come and put me straight!

It's not about paying BACK the debt. That's at about £900 Billion. It's about reducing the rate at which the debt is increasing to persuade lenders that we will be able to pay them back.

Otherwise, either they won't lend to us or will only do so at terrible rates.

Ok, so if that's true, curlymama, why can't we just borrow more money and not sell off parks, libraries, wreck the country etc.

Am I missing something here?

StuckInTheMiddleWithYou - got credit card bills? An overdraft? Gonna ignore them as well??

Curly - I'm not sure but I think it's as follows:

Deficit = annual difference between what we spend and what we raise. That gap must be filled by borrowing.

National debt = amounts borrowed in previous years (to fill the deficit gap) that we haven't paid off yet.

You are right curlymama.

Don't owe the deficit to anyone - need to borrow to pay for it.

You cannot ignore the deficit. That is the same as saying to an individual 'spend as much as you like regardless of your income' - sooner or later (probably sooner) the bank will put a stop to that!

StuckInTheMiddleWithYou - borrowing more would be like getting another credit card and using it to pay off an old one.

Not a sensible solution in the long run.

Deficit = Difference between what we spend and what we earn - we need to borrow to cover this.
About 150-160 Billion.

Debt = Total amount we owe. About £900 Billion.

If someone owed you £90, and were paying you back £3 a week, would you lend then £15 quid until next Friday? How likely if they said, "oh I'm going to stop paying you back that £3"?

Stuck - you are missing that in order to borrow more someone needs to be willing to lend it to you!

If you have no expectation of being able to repay it then they won't.

I would've though that, that would be something we would do when the recession is over, coalition.

You don't ask a person who is on the verge of bankruptcy to make higher payments. Quite the opposite. You help them get out of the mess and then sort out repayments.

To all you people that are cleverer than me - thank you!

Stuck - I have no idea!

Hmm can't we at least have a payment holiday?

StuckInTheMiddleWithYou - We CAN borrow more money and not make cuts. Only the lenders will go, "Yeah, right, lets make the interest rate 20% then we might make our money back before you go bust"

It's like going to doorstep lenders to keep up your mortgage payments.

I have another question if you don't mind.

If we are meant to be one of the worlds richest countries, who do we manage to borrow 9 billion quid from??

Stuck- the problem is that having massive debts and not reducing them makes it less likely that we'll get out of the recession because it reduces confidence in the Uk economy and increases the required rate of return by investors in the UK economy.

As other posters have already said, doubt over a sovereign's ability to repay debt increases the interest rate for new debt.

The rates required by investors in the UK depends to an extent on the rate at which the government can borrow money (government debt is a proxy for the "risk free rate" as the risk of default is seen as low). The return required on private investment (debt or equity) is priced at government rate plus risk premium.

This is massively important to new investment in the UK. If you are an investor setting up (eg) a car plant, you would look at what rate of return you would need on your investment to justify your risk. If interest rates in the Uk were (eg) 12% and in Germany they were 8%, you need your car plant to make more money in the Uk than in Germany to justify that decision. Therefore, you'd probably just put it in Germany.

We need overseas investors to have confidence in the UK.

The whole world is in recession - who is supposed to be this 'higher being' that helps countries out of their recessions?

The first world has been spending beyond their means for decades. Sooner or later it was going to come back and bite us in the bum. That has now happened.

If we wanted to have a bit of leeway when things were bad, we should have massively raised taxes without increasing spending during the booms. We didn't. We are now paying the price.

It's simple really.

curly - everyone. Your pension fund included, no doubt.

China's government also holds large amounts of foreign government debt.

StuckInTheMiddleWithYou - It's not about the repayments. It's about borrowing MORE money. We need to borrow £150 Billion every year to keep things running. Cutting the deficit is about reducing the amount we have to borrow every year. That's not borrowed over the year - the repayments will be over 10-20 years - so the debt is growing each year.

Who lent us the money :- newsimg.bbc.co.uk/media/images/47356000/gif/_47356069_gilt_graph_466.gif

Who lent us the money