UK Govt Raising Minimum £600 Billion In 2 Years.

Figures released by the government yesterday show that no less than £380 billion has so far been raised by the sale of gilts and the issuance of new money by the Bank Of England in the current financial year. The sale of gilts by April should be over £200 billion, and the issuance of new money the same, which is meant to end in February.

The plan is to sell another £200 billion of gilts during 2010. If the QE programme is not ended in February as planned, the sums being raised will go north of £600 billion in two years.

See the report from The Telegraph HERE.

These figures should be compared with the Treasury December Spending Outturn Figures of £800 billion less unexplained accounting adjustments of £185 billion, net £615c billion.

(The spending total in the PBR in November was strangely £50 billion higher. My best guess is that revenues have fallen and the only way to keep the projected borrowing target on track is to adjust expenditure down by a similar amount).

Revenues (Govt Income) were claimed in the PBR to be on target (which seems unlikely) at £498 billion, requiring £178 billion of total borrowing.

If borrowing is actually nearer £300 billion, as I suspect it would be with income down on the previous year to maybe £400-440 billion (why would government revenues be maintained in a 5-6% of GDP recession? They were £496 billion in 2008/2009), and spending ahead of projections made in the PBR, there would certainly be enough cash sloshing around to cover such a figure.

I wonder if the real figures of how much money has gone where will ever be revealed. All we will know for sure is the totals of the money raised. GDP is at £1.26 trillion, so 50% of GDP will have been raised in borrowing or new issuance in two years, while the government is claiming 12.5% GDP as its borrowing requirement.

The totals being raised are not pretty figures, ensuring Britain will owe a £1 Trillion, which is likely to cost about £40 to 45 billion a year ongoing in interest payments.

If you need cheering up after reading this, go outside and ride a toboggan. Here are some people who will still be paying off Gordon Brown’s debts in twenty five years time.

The Tap Blog is a collective of like-minded researchers and writers who’ve joined forces to distribute information and voice opinions avoided by the world’s media.

8 Responses to “UK Govt Raising Minimum £600 Billion In 2 Years.”

  1. Hi I enjoy your analysis. Do you follow Nadeem Walayat’s similar work at marketoracle? I sent him an email asking if he followed yours! Anyway I noticed that your hyperlinks open in the same window as your main page, its quite simple to get them to open in a new window, which most people prefer, and I can send you a quick explanation by email if you would like my email is, drop me a line if you want and my site is
    Best Wishes Dave

  2. tapestry says:

    thanks dave. i visit your site, and link to others from yours, as you make it so easy.

    yes please. i am useless at the tech side of blogging. and have given up on trying to work it all out. are you willing to help?

  3. tapestry says:

    Nadeem has some excellent material. He is a convinced hyperinflationist. I am more of a deflationist.

    He tends to accept official figures as given. I don’t.

    But he writes with more technical knowledge of finance, and has a lot of common sense.

  4. Looks like government is entering into a vicious circle. If they print enough money, we’ll have the classic too much money chasing too few goods. In a word, inflation.

    We’ll go from one extreme to the other and the cost of public spending will soar compunding the deficit.

  5. John Moss says:

    You’re double counting the QE money.

    Debt issuance is set to be £200bn in each of this year and last year. QE has “created” £200bn of new money which was used to buy up old Gilts from the market at 3-4% yield, while they issued new Gilts at 4-5%, which the banks bought with the money they got from selling their old ones, turning a tidy profit at the same time!

    The £200bn of new money created by QE is simply cycling back to the Government as new debt, so this will push up inflation, destroy the value of the pound – and in doing so, push up inflation even more – and ultimately have no effect other than to leave us with higher debts, higher interest bills, higher inflation and the same problem we started with, namely, a state sector which is 15-20% larger than it should be.

  6. Phil Simpson says:

    Looks like government is entering into a vicious circle. If they print enough money, we’ll have the classic too much money chasing too few goods. In a word, inflation.

    We’ll go from one extreme to the other and the cost of public spending will soar compunding the deficit.

  7. Susan Hill says:

    @Phil Indeed. But they never look further than tomorrow.

  8. tapestry says:

    John Moss, I understand your point. I don’t have the split between what they bought with QE money and what they sold on to others. But thanks. The headline should maybe read £400 billion or around £500 billion. With GDP at £315 billion a quarter, that is still a stunning figure.

    Govt spending was over £800 billion to December bar unexplained accounting adjustments of £185 billion. Tax revenues are probably nearer £450 billion than the £500-odd forecast.

    There is a massive disconnect between government income and government spending.

    I also understand the point about inflation, except there is one problem with it.

    It’s not happening.

    On the contrary, people are saving money now, asset prices are not rising (apart from shares which are currently being subsidised by QE money to stop a depression), and gold which is likely being included in the IMF’s SDR mix of currencies at 10%, and the price is being adjusted upwards a little first.

    The problem with the massive is not purely economic. It is to with power.

    If Cameron wins an election and is too aggressive in his Lisbon renegotiation position, or other, the OWG can dump the value of the £, forcing up interest rates or cutting off lending. By being in such a financially weakened position, we are exposed as were basket case republics in the 70s and 80s before they learned their lessons about debt. You put yourself in the power of others.

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