The National Audit Office published a review of UK debt last week. It was an incredibly important document, and I managed to miss it at first. Its relevance comes down to one key issue. It tells the truth. This is rare on this issue. By this I mean it reports the true level of UK government debt. This is its opening presentation of key facts:
£1.3 trillion in net debt in Whole of Government accounts
This suggestion that the UK government’s debt is £1.3 trillion contrasts dramatically with the Treasury view of debt, which is reflected in this data, issued recently, and which is what the media usually report in their desire to suggest that the UK economy is being crushed by a government debt mountain that is apparently unsustainable and a burden on generations to come
Therefore Spudda is right and we can borrow much more! Because, you know QE debt doesn’t count.
Might be worth giving the next few lines from the same NAO report.
£1.6 trillion 2015-16 public sector net debt
£2.0 trillion 2015-16 WGA net liabilities
£47,000 2015-16 WGA government debt per UK household
£28 billion interest cost of government debt in 2015-16
2.2% implied interest rate on government debt in 2015-16 WGA
£47 billion forecast central government net cash requirement for 2017-18
£80 billion cash needed to repay the principal of gilts falling due in 2017-18
Oh, NAO agrees with the Treasury then? In the footnotes we get the explanation:
The difference in borrowing in the WGA in comparison to public sector net debt is mainly due to the elimination of
debt holdings by various parts of the public sector, most notably the Bank of England through its quantitative easing
programme and the Debt Management Office’s holdings that are used to manage the government’s short-term cash
requirements. The WGA borrowing figure, therefore, represents the debt held by private sector investors, domestically
Or, as we might put it, Treasury owes the BoE the difference. And we’ve been told a number of times that that BoE QE debt is going o be released back into hte markets at some point. The Federal Reserve is already doing it with the American equivalent.
So, Snippa’s distinction between what is owed to BoE and what is owed to the general public doesn’t work then, does it?