£18bn cuts to public services

There was a very interesting edition this morning of The Bottom Line with Evan Davis, well worth a listen. I wonder if the Chancellor of the Exchequer listened to it, he might learn something.

Truss has indicated that benefits will be cut.

I think that this last week has been a good lesson in how government raises income for expenditure.

Most of government expenditure is raised through the issue of guilts - government bonds - which in turn becomes government debt.

So say a pension fund will buy a bond from the government, which the government promises to repay at a later date plus interest. So in effect the government has borrowed money from the pension fund.

So that is one of the reasons this past week for the huge kerfuffle because the interest that will be added to these bonds
has risen a lot, and Kwartang has not shown how he thinks the government will be able to repay this debt.

That is where normally the OBR steps in to reassure (or not) the markets that the bonds are secure and the government can repay.

Tax is another income stream and usually used to repay the debt.

But it isn’t necessary for government expenditure.

There is also QE.

But I’ll let maizie explain?. Just going out with the dog.

Do you ever think we're living in a parallel universe? This government just goes from bad to worse. Three weeks in and they've done a Boris style U-turn already! Granted it's the right thing to do, but it doesn't look good for Truss and her merry band. Keep making mistakes Liz! That's fine by me

Just in the middle of getting dressed and it occurs to me really government borrowing is just like anyone applying for a mortgage or for a project.

You have to be able to convince the bank that you are a long term safe bet and that they will get their money back.

You have to disclose details of income and how you are going to earn it.

The same for guilts.

PS they are called guilts because they are usually seen as a safe bet in which to invest.

And the reason governments use bonds for expenditure is because usually unlike revenue income,mit is controlled by the government. So they know what they need/want to spend and raise the appropriate amount, which may or may not be greater than the revenue take over a period of time.

According to the news, the back benchers and apparently Penny Mourdant are calling for a rise in benefits.

I do not think all is well and cosy in the Conservative ranks, Ms.Truss would never have been my choice.

I really don't want them to keep making mistakes who will this benefit ?
It will benefit the Labour Party but they are not in government now and it is likely to be a while before the next election

It certainly won’t benefit the Labour Party either rosie1959, it will make the task of rebuilding the services much harder than it’s already going to be when they get into power - every cut now makes the task ahead a higher mountain.

Casdon

It certainly won’t benefit the Labour Party either rosie1959, it will make the task of rebuilding the services much harder than it’s already going to be when they get into power - every cut now makes the task ahead a higher mountain.

I was talking more in terms of Labour's popularity.
Surely it would be better for the country if the present government succeed in their aims to reboot the economy
Your post picks up my point of when Labour get into government it could well be quite a while yet

MaizieD

Oldbat1

HS2 is a total waste of money and should never have been started. The environmental damage is unforgivable for what realistic benefit? The nhs and education are far more important.

At least it's keeping some people in work, Oldbat1. This is not, IMO, a good time to be throwing them into the benefits system... Especially if the DWP is going to have an at least 10% real terms cut in funding....

I will declare an interest in this one. One of my family is working on HS2. It's not just in the planning stage.

It's keeping many highly skilled people in work.

I agree rosie1959 as much as I do not agree with this form of conservatism I do not want to see them making mistake after mistake as it will only cause harm to the U.K.

As for HS2 we need investment in U.K. infrastructure.

This happens time and time again in the U.K., whatever proposals are put forward there is a loud cry of No it’s the wrong sort/place/time.

there is a loud cry ofNoit’s the wrong sort/place/time.

But sometimes that's true.

volver

^there is a loud cry ofNoit’s the wrong sort/place/time.^

But sometimes that's true.

I cannot disagree with you in that.

The bottom line is we need investment in infrastructure in the UK

The bottom line is we need investment in infrastructure in the UK

and I agree with you about that.

We’re a railway family and don’t believe that HS2 is a vanity project. Our railway system is archaic and needs updating and it isn’t possible to do so just using the current tracks. We were waiting at a level crossing the other day and a goods train went through that was carrying Tesco things: first time I’ve seen that. I’ll ask my ex about the reasoning behind HS2 when I see him. He has explained the need for it before but I’ve forgotten what he told me. But it isn’t just about getting from a to b a few minutes quicker.

volver

^The bottom line is we need investment in infrastructure in the UK^

and I agree with you about that.

That would mean state expenditure which the form of economics espoused by Truss and the right wing of the Tory party would be an anathema.

That is why they keep chuntering on about growth - they don’t mean state lead growth they mean growth being led by the market.

rosie1959

Casdon

It certainly won’t benefit the Labour Party either rosie1959, it will make the task of rebuilding the services much harder than it’s already going to be when they get into power - every cut now makes the task ahead a higher mountain.

I was talking more in terms of Labour's popularity.
Surely it would be better for the country if the present government succeed in their aims to reboot the economy
Your post picks up my point of when Labour get into government it could well be quite a while yet

I don’t think it is going to be possible for the Tories to reboot the economy now, trust has been lost both by the public and by financial institutions across the world. The bottom line is that the population don’t want to see any further deterioration in public services to benefit the rich but not those who depend on public services i.e. 99% of the population. For what it’s worth I don’t think it will be ‘quite a while’ until Labour are in power, I think it will be within a year.

Whitewavemark2

Just in the middle of getting dressed and it occurs to me really government borrowing is just like anyone applying for a mortgage or for a project.

You have to be able to convince the bank that you are a long term safe bet and that they will get their money back.

You have to disclose details of income and how you are going to earn it.

The same for guilts.

PS they are called guilts because they are usually seen as a safe bet in which to invest.

Am not sure about the last part of your comment, as I understood them to be called gilts, the meaning of which was perhaps the word golden?

Casdon not quite sure how Labour could be in power within a year the Conservative party are highly unlikely to call a general election
Vote of no confidence that doesn’t result in a change of government necessarily

GILTS = Government Issued Long Term Stocks.

prentice yes that’s right golden because they were the safest to invest in. The U.K. government along with USA, Japan etc were seen as the safest investments. Guaranteed to get your money back plus interest.

Now because the markets are not convince that the U.K. has a safe economic plan, U.K. bonds are at present being considered a higher risk, and so the market is demanding higher interest.

Nothing to do with being gilded or doused in gold

? certainly not at the moment.

They may be doused in another substance though?