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Share your dilemmas and get honest opinions from other Mumsnetters.

to think this country must have loads of money to spend as a country...have we found the magic money tree?

31 replies

chomalungma · 19/11/2020 07:51

I'm old enough to remember a Prime Minister telling a nurse that she couldn't get a pay rise because there's no such thing as a magic money tree.

Yet suddenly we can find billions for the pandemic, billions for the green revolution, billions for extra spending on the Armed Forces.

Don't get me wrong. We need to spend this money on this stuff - but how on Earth are we finding this money?

Are we just borrowing it and hoping we can pay it back later?

Or have we found the magic money tree?

OP posts:
flaviaritt · 19/11/2020 07:53

We are borrowing it, yes.

39weekswithno2 · 19/11/2020 07:54

Of course it's being borrowed. To be paid back by us all.

LemonRedwood · 19/11/2020 07:55

Future generations will be paying it back for a very long time.

We already had large debt and a large deficit. Did you think central government was just keeping billions aside somewhere and not telling anyone?

sophandbridge · 19/11/2020 07:56

They are borrowing it because they want To show Britain as a powerful military force in the same way that North Korea does with the military parades albeit in a less attention seeking way. Johnson is Willy waving to make people think less of his inadequacies in other areas.

chomalungma · 19/11/2020 07:59

@LemonRedwood

Future generations will be paying it back for a very long time.

We already had large debt and a large deficit. Did you think central government was just keeping billions aside somewhere and not telling anyone?

It's just amazing to see the change in tone - all the talk about paying down the debt and reducing the deficit - which was just from a few years ago with Theresa May - has gone out of the window.

I'm surprised that whoever we are borrowing it from hasn't asked us for 'more details on our spending and how we'll pay it back in the future' - or maybe they don't care and we'll just keep paying it back for ages as the interest grows.

OP posts:
Wishing14 · 19/11/2020 08:00

The money being borrowed is insane and makes me scared for my children and grandchildren! When the next pandemic comes along (which will probably make this one look like a walk in the park) goodness knows what we will do!

user1497207191 · 19/11/2020 08:12

Money is relative. If one country borrows beyond it's means, it's exchange rate will suffer making it's currency worth less against others. If several major countries borrow beyond their means, they're all in the same boat, so the balance of payments doesn't change between them.

At the start of the pandemic, the global economic organisations basically told all developed countries to spend "whatever it takes" to counter the virus, medically, scientifically and economically. When most or all countries are doing the same thing, because money is relative, no particular country suffers to the benefit of others.

At the moment, we're all in the same boat, so "printing money", or quantitive easing, or borrowing money, or whatever you want to call it is acceptable for the short term. BUT the time will come when the "old" rules come back into play. If the UK comes out of the pandemic with a healthy population and healthy economy, we'll be fine, especially if we come out of it healthier than some other similar economies. However, if other countries come out of it better, and we're left struggling, then our borrowing will be a millstone around our necks, our exchange rates will suffer, costs of borrowing may rise if our lenders see us as a risk, etc.

Basically, along with other major economies, we have to do what it takes today to keep the country moving. To avoid long term adverse consequences we really need to hit the ground running as soon as life returns to normal for our economy to stay similar or better than other major economies.

TicTacTwo · 19/11/2020 08:15

It is strange to think the government were imposing austerity only 2 PMs ago.

user1497207191 · 19/11/2020 08:17

It's just amazing to see the change in tone - all the talk about paying down the debt and reducing the deficit

Not really - circumstances are very different. In "normal" times when the economy is doing well, we shouldn't be borrowing more and more - we should be self sufficient at least. However, when things go wrong, i.e. war or pandemic or recession, we should be borrowing to keep things moving and prevent the economy getting even worse.

This was where Gordon Brown went wrong. He was still borrowing huge amounts at the height of his "boom" which is ridiculous - it was basically borrowed money fueling an artificial "boom". Any fool can borrow money to give the illusion of prosperity.

Wandafishcake · 19/11/2020 08:20

Sorry if this is a stupid question but where are we borrowing from? Where has billions of pounds to give us and all the other countries in a similar mess?

user1497207191 · 19/11/2020 08:20

@TicTacTwo

It is strange to think the government were imposing austerity only 2 PMs ago.
Even Labour were promising pretty savage spending cuts a decade ago.

And future governments will be imposing austerity again in the next decade or two to get things back under control.

WB205020 · 19/11/2020 08:35

Future generations will be paying the debt back. Like our children’s children will be paying the debt borrowed by our children’s generations etc. It’s a cyclical thing and will continue because we ultimately spend more money that we have. That’s not just governments that most people too. We only finished paying off the debt from ww2 a few years ago for example.

GreenlandTheMovie · 19/11/2020 08:58

We are spending and borrowing to ensure future electability of our politicians. Can you imagine the media criticism of someone in charge said "right, we will manage coronavirus as well as we can without locking down, because it will save more lives in terms of keeping cancer treatment and operations going and save businesses and jobs"? Cue accusations of being a mass murderer and international condemnation from other countries, especially those in southern Europe who have imposed dictatorship style strict lockdowns.

It's troubling, because its partly based on international mass hysteria. And it sets a precedent for future lockdowns eg for a bad flu season. The NHS has exceeded its capacity before in recent winters, so imagine the risk of this being used as justification to lockdown society in future years. In fact, there was a partial lockdown (in terms of freedom of movement) for months during foot and mouth in recent years. Professor Neil Ferguson's dramatic, worst case scenario modelling was also behind that.

I live in a city where the oil industry decline has already resulted in lots of jobs being lost in recent years. Most of my friends who work in it have spent lockdown under threat of redundancy. So many businesses have closed down that the city centre is full of empty units and is becoming so depressing that people avoid it. Yet you never hear anything about it on the news or the daily briefings. It's all about different ways to restrict our civil liberties. This is going to take decades to recover from, because the high Street generates a lot of the money, through business rates, that local authorities use to fund other services.

BarbaraofSeville · 19/11/2020 11:01

@Wandafishcake

Sorry if this is a stupid question but where are we borrowing from? Where has billions of pounds to give us and all the other countries in a similar mess?
I think it's from places like the World Bank or the European Central Bank, but there's also government bonds, and National Savings - if you by premium bonds or take out other NS&I products, what you are actually doing is lending money to the government.

But I do wonder who would lend money to the UK government commercially when the interest rate paid is virtually nothing. I know its low risk, but still.

NoIDontWatchLoveIsland · 19/11/2020 11:07

Oh my god is this a joke? We are borrowing crippling amounts against our children's future. The government are doing it because the alternative is worse.
Even then many of us are unsure its all been wholly necessary - it worries me a lot.

Youngatheart00 · 19/11/2020 11:10

Quantitative Easing - commonly known as ‘printing money’.

Government issue bonds to investors which they pay a ‘coupon’ (interest). The debt will need to be serviced for a long time if never (or in the distant future) paid back.

I can’t see a way we won’t have considerable tax rises as well as some form of austerity measures in the next decade.

DGRossetti · 19/11/2020 11:14

Don't forget we've already spent £100 billion+ on Brexit this far.

That's before/on top/outside of anything else.

You could have bought a country for that. Or built 100 hospitals. Or 20 million houses. Or upgraded every mile of rail network.

Hell, you could have half an HS2 for nothing with that.

Just bear that figure in mind whenever you discuss any other figures. We could call if "a Brexit".

That's before we check to see that any "new" spending plans are really new, and not just last years on a new slide.

So £16.5 billion (over four years) = roughly 1/6th of a "Brexit".

and so on.

By the way, when is that extra £350 million a week (that's £18 billion a year or around 1/5th of a Brexit) going into the NHS ???????

chomalungma · 19/11/2020 21:32

We are going to have a massive debt burden from this.

For those of you who know - does the interest rate change on our borrowing?

OP posts:
Dee1975 · 20/11/2020 07:21

Yes of course it’s being borrowed!
In regards to ‘no money tree for nurses’ there is no doubt they are underpaid. They do an amazing job. No matter what they earn they will be underpaid.
However - the reason for the justification for borrowing money now (and not borrowing money for nurses pay rise) is because this is a one off and if there wasn’t any government support for business and workers, the country would be on its knees.

chomalungma · 20/11/2020 07:27

Debt is now £2.1 TRILLION.

Just wow.

And then we are borrowing more money I guess for increased defence spending....

But when you owe £2,1 trillion, I guess another £16 billion is not a lot.

OP posts:
Youngatheart00 · 20/11/2020 09:25

@chomalungma consumer interest rates are usually linked to the Bank of England base rate (currently at an all time low of 0.1%) and some are forecasting that will turn negative - crazy. This should mean our borrowing costs as consumers are also at an all time low, but the reality is Lenders will price for risk. And as economic conditions deteriorate lenders will restrict credit or make it more expensive (we saw this in the last financial crisis with the ‘credit crunch’). So in practice, I don’t think the debt we hold or take out in the next few years will be any cheaper, no.

user1497207191 · 21/11/2020 08:44

At the end of the day, we, as a country, have to do what we have to do now, and worry about the consequences later.

Just like some of the 3 million self employed who've been excluded from Govt support, who are having to borrow just to pay their bills and rely on food banks.

The country, like the 3 million excluded, have no choice. It's all about doing whatever it takes to get through the current situation and hoping, both on a country level, and personal level, that things get back to normal quickly, and then we can start to think about paying off the debts.

chomalungma · 21/11/2020 09:46

It's all about doing whatever it takes to get through the current situation and hoping, both on a country level, and personal level, that things get back to normal quickly, and then we can start to think about paying off the debts

£24 billion on new defence spending?

We are doing a lot of extra spending on things on top of this pandemic.

OP posts:
sst1234 · 21/11/2020 10:10

There is no magic money tree. Our GDP is smaller now than when Theresa May made that comment so it’s truer now than it was then. It being borrowed, and not even for investment. Like when someone uses there credit card for everyday expenses rather than starting a business. Interest rates are low, which helps, but they won’t stay low forever. And when they do go up, inflation follows.
Long story short, yes a pandemic is underway but the economic impact of this lockdown will kill more people in the future than the pandemic itself today.

user12743356664322 · 21/11/2020 10:27

The Conservatives have clearly done a good job of indoctrinating people with their ideology.

Austerity is ideological. As economic policy it is a damaging and destructive abomination that has been proven to be a failure.

Public finances are not the same as household finances.

Public borrowing is not the same as an individual borrowing to pay their bills or buy a car. Public borrowing used to stimulate an economy results in growth, then when the economy is growing again the borrowing reduces. Whereas borrowing money to buy a car won't result in a payrise.

Plus all the other tools governments have at their disposal. Like printing money or increasing/reducing interest rates (also can't do that with your personal finances...).

No magic money trees necessary. That was a political fallacy used to manipulate people. Very effectively by some of the posts here it would seem.

No wonder people vote for such terrible governments if they buy this ideological bullshit.

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