The deficit - over 85% of it is the cost of the bank bailout!

[ColdComfortFarm]

Ok, I've been really shocked by the figures cited for the size of the deficit - over 927bn. And recently I've wondering what the point of cutting 1bn by axeing child benefit was in the face of such a huge debt. Now I have discovered that more than 85per cent of the deficit is not profligate Labour spending, but the cost of the bank bailout that saved the country from total financial collapse. The deficit in April EXCLUDING the bank bailout was 156bn (not pocket money but nowhere near 927bn). The cost of the bank bailout was £850bn source here: www.independent.co.uk/news/uk/politics/163850bn-official-cost-of-the-bank-bailout-1833830.html
Economists and people who seem to know about such things on Mumsnet keep saying that no real money has actually gone to the banks - that there are guarantees which have not been used, and which are being paid for very handsomely by the banks, and money spent on shares, which have risen in value....so are we being sold a totally artificial panic? It seems so.

What sort of debt is not a paper debt.

Money that has been spent and has to be paid back?
Which is very much not the case with the bank bailout. That is more akin to money in a savings account and investments, which will eventually come back, probably with a bonus.

I am not an expert on it, but I actually happen to agree with you on this. I am just pointing out your inconsistencies. Yes, it is a good question, why aren't Labour talking about it. If the crisis is so great, how are they able not to cut foreign aid? Seems a bit strange. Why cut disability allowance and leave foreign aid unchanged?

OK, I'll stop being grumpy then
I have no idea why labour isn't talking about this. No idea at all. Maybe they think nobody will understand it, so go on the radio and talk about the poor ladies on Woman's Hour instead. Look, I think that ideally, from my perspective as an ordinary person who is kept awake at night by the prospect of paying my tax bill and the impossibility of paying off my overdraft, the country would have an overstuffed piggy bank full of lovely spare cash. But that is't going to happen, is it?

Of the nearly £1 trillion national debt, less than £100bn is directly attributable to the bank-bailout. That's the money we spent on shares and which will only be recovered once the shares are sold & when conditions improve. The rest is there to guarantee liquidity and is not in the national debt statistics. To this £1 trillion we are adding each year (if the spending carries on at the same rate) about £180bn... the interest payments alone are sucking yet more billions out of the economy that could have been spent on public services.

The deficit, however, is the (forecast) sum of money the government needs to borrow because its expenditure exceeds its income.

One of the government's assets is its investments in Lloyds and RBS which should over time return a profit.

The point about disability allowances is not to pay them to those who are not disabled to the extent of being unable to work.

Chil1234, what was the national debt before the banking crisis? Did we borrow the money to provide guarantees for the banks and are we paying interest on it? Why did the deficit jump from about 3% to 11% all of a sudden? Was it as a result of the banks failing to lend money to businesses etc. and the government making up the shortfall by deficit spending? Historically how bad is a deficit of 11% of GDP?

Cost of UK debt falls to lowest since 1980s - lower than many other European countries. news.bbc.co.uk/1/hi/business/8415703.stm
From the Office of National Statistics:
In the financial year 2009/10 the UK recorded general government net borrowing of £159.8 billion, which was equivalent to 11.4 per cent of gross domestic product (GDP).

At the end of March 2010 general government debt was £1000.4 billion, equivalent to 71.3 per cent of GDP. www.statistics.gov.uk/cci/nugget.asp?id=277

JohnHemming, I invite you to explain this lovely policy re the disabled to the very frightened users of this board, including the woman rated fit to work, despite having such severe epilepsy that she had a fit DURING THE ASSESSMENT and had to leave in an ambulance.

Is the deficit 159bn? What is the interest payment on national debt? Is it about 180bn?

By disability allowances, do you mean ESA, as surely DLA is paid regardless of ability to work?

On ESA, how is ability to work decided? I've just read through 31 pages of notes from the DWP and I'm none the wiser. It would seem, regardless of how many points you score, the decision as to which group you go into comes down to the assessor, is that right?

I found the section on those receiving chemotherapy treatment particularly interesting. It seems those who are recovering from chemo won't be required to work, so long as the Secretary of State deems it so. Will he be reading each application himself?

Hubbly, astonishingly Osborne can't tell the difference between DLA and ESA. He has spoken about getting people 'off DLA and into work'

He never fails to astound me CCF.

What was the defecit as a percentage of GDP when Healey had to go to the IMF? Is 11% a figure that we have not seen before historically or was it similar in the recession of the early 1980s?

deficit

@Claig.... Chart of UK National Debt
2006... £463bn
2007... £500bn
2008....£525bn
2009... £616bn(includes bank bailout)
2010... £771bn estimate
2011....£932bn estimate

GDP
2007....£1399
2008... £1448bn
2009....£1396bn (crisis year, global trade knackered)
2010.... £1451 estimate
2011... £1520 estimate

The debt and deficit as a % of GDP is increasing sharply because GDP has been at a standstill for the last three years.

If you look back at the chart, we ran some monumental deficits and National Debts to pay for the World Wars and subsequent rebuilding. This one often comes up in the 'why keep on spending' Keynesian position. But, since about the 1970's, it's been rather lower.

I think the OP is confusing the national debt with the budget deficit.

I agree with you coldcomfort, as someone else said today, if we bowed out of the EU we would save more than enough to deal with the deficit. And all of those people talking about Women doing non-jobs in the public sector. Just think of the scale of all the Men doing non-jobs wrt to the EU.

Leaving the EU would be terrible as it would lead to a decrease in exports

@claig.... Not sure when Healey went to the IMF but the debt as a % of GDP went from over 60% early seventies to just over 40% mid seventies. So we're doing worse in that respect. The 1976 deficit numbers I'm still researching

The financial situation is worse now then it was in the 1970s

Who are we paying interest to and who does the government borrow from?

so in 2007, 2008 national debt was steady at about 500bn. I seem to remember that Gordon was prudent and had been previously paying off national debt, which he was criticised for, because he wasn't reinvesting that money in the economy. Looks like the national debt has rocketed as a result of teh banking crisis.

Have you got similar figures for the deficit. What was teh deficit like in Thatcher's recession and when Healey went to the IMF. Is our current deficit way beyond what it was them? I can't see why it would be, because isn't the increase mainly as a result of the recession indiced by the banking crisis? and we have had recessions before when the deficit also must have risen.

It sells gilts on the bond market

Stuff here about deficit 7% apparently