Citi comment: UK financials in better shape than we thought
Or those in the city who are concerned about the country’s financial condition – they have reason – one statistic in particular lives on in their mind.
It is not the deficit (down from £19 billion last month, and is falling) nor the total national debt (£2.36 trillion, and only rising steadily).
What they get mad about is the interest payments on that national debt – billions, just wasted!, on paying off old debts.
Today we learn that interest payments for April alone were £4.4 billion.
It’s not good, but a few things here for a start, it’s a lot less than expected. And it’s not like the Chancellor has yet to cut a check for that amount.
It is paid in dribs and drabs over the years.
It is now classified as a cost (accounts, tsch), but it is not cash that leaves the reserve fund.
Even if it were, we might ask where those interest payments go.
Well, they go to the holders of UK government bonds. UK pension funds own around 30% of all gilts, with the Bank of England holding the other 30%. Foreigners account for about 25% and the rest are held by other UK finance businesses and UK households.
So at least 60% interest comes back to us.
It is a transfer of money from the public sector to the private sector, which means that the government cannot control what is done with it. But in other contexts, the borrower will accept it.
The notion that we should stop borrowing money and spend it seems like a sensible thing to do, but it just depends on what we’re spending it on. Tax breaks are bad for Ferrari drivers.
Money is good for keeping old people from freezing in their homes.
The cost of living crisis is likely to be so intense that those worrying about interest on loans or temporary losses will certainly look ruthless.
Rishi has to do something. And its owner looks shaky. He should just go for it.
Credit: www.standard.co.uk /