The P³ wants to tell us that because the govt has been financing with QE – money issuance – then the deficit is small. However, he’s confusing – perhaps because he is confused and perhaps because he wishes to do so – two different things, the deficit and the borrowing requirement.
The apparent deficit was forecast to be £355 billion. It may have turned out to be slightly less.
The QE figures are reliable. The Bank of England injected £336bn into the economy in the year. That could be, and was, used to buy UK government debt. The fact that repurchases might have been at current rather than issue prices does not matter. The fact is the Bank supplied £336bn so that new issue government bonds could be purchased by those in the financial markets at no real net cost to themselves once the sale of their existing gilt holdings to the government was taken into account.
The consequence is clear. The deficit was, maybe, £19bn at most. It is likely that it was smaller. There was then almost no net new, or real, government borrowing in the 2020/21 year at all.
General government deficit
General government deficit is defined as the balance of income and expenditure of government, including capital income and capital expenditures. “Net lending” means that government has a surplus, and is providing financial resources to other sectors, while “net borrowing” means that government has a deficit, and requires financial resources from other sectors. This indicator is measured as a percentage of GDP. All OECD countries compile their data according to the 2008 System of National Accounts (SNA 2008).
The deficit is that gap between revenue and spending.
The borrowing requirement is how much of that is funded by borrowing not, say, money issuance.
Even if we accept the idea that the borrowing was minimal that tells us nothing about the size of the deficit. It tells us about how the deficit was financed.
But then neither economics nor accounting are the P³’s strong point, are they?