FOR those in the City who fret about the state of the nation’s finances – they have reason – one figure in particular occupies their mind.
It isn’t the deficit (less than £19 billion last month, and falling) nor the total national debt (£2.36 trillion, and only ever rising).
The one they get mad about is the interest payments on that national debt – billions, just wasted!, on servicing old debts.
Today we learn those interest payments were £4.4 billion for April alone.
That isn’t good, but a few things here For a start, it is far less than expected. And it isn’t like the Chancellor has to cut a cheque for that amount right now.
It gets paid in dribs and drabs, over years.
It is classed as a cost now (accountants, tsch) but isn’t cash that leaves the reserve fund.
Even if it were, we might ask to where those interest payments go.
Well, they go to holders of UK government bonds. UK pension funds own about 30% of all gilts, the Bank of England owns another 30%. Foreigners own about 25% and the rest are held by other UK finance businesses and UK households.
So at least 60% of the interest just comes back to us.
It is a transfer of money from the public sector to the private sector, which means the government can’t control what gets done with it. But in other contexts, the debt botherers would approve of that.
The notion that we should stop borrowing money and spending it sounds like prudence, but that just depends what we are spending it on. Tax breaks to Ferrari drivers are bad.
Money to stop old folk freezing to death in their homes is good.
The cost of living crisis is likely to become so acute that those worrying about interest on debt or temporary deficits will surely look heartless.
Rishi has got to do something. And his boss is looking shaky. He should just go for it.
