Wednesday, December 09, 2009

Just how much is the Government Borrowing?

The sheer scale of National borrowing it so utterly enormous it is hard to comprehend.

Understanding clearly the enormous difference between a billion here and a trillion there is almost impossible to do; so I thought I would borrow an excellent illustration from an American site ( which tries to show just how much space this kind of money would take up if it was piled up in cash.

These illustrations are based on tightly packed brand new $100 bills, and of course the biggest note we have is only £50 so at current exchange rates the amount stacked if it was in in sterling amounts the same would look half as big again.

Here is what $100,000,000 (£60m) looks like:

Packed tight in bundles it would fit on a single pallet. Cliff Richard is worth about £60m. It is about enough to build half the Kingskerswell bypass, buy two Eurofighter jets, pick up a second-hand Boeing 747 or completely rebuild a city centre shopping mall.

Torbay council spend this much annually on running all the schools in Torbay.

Here is what $1bn (£600m) looks like:

It's half a lorry full of money. Very few individuals have this much worth: Richard Branson, maybe Sir Paul McCartney.

For £600m you could buy the famous Gerkhin building in the City of London, or build a second Wembley Stadium.

Torbay Council spends this much over the four years of it's electoral cycle. It is what the Government will be paying out every week on interest on the national debt next year and beyond.

Here is what $1 trillion (£600bn) would look like:

The man in the red shirt is shown for scale again, but you can hardly see him down in the bottom left-hand corner, the pallets are stacked two high and yet still the picture can hardly fit on my blog. This amount is - roughly - the same as the current national debt figure of £730,000,000,000 shown on my debt counter above.

According to projections in the Budget, public sector net debt, the accumulated stock of outstanding Government borrowing, will reach £1.37 trillion in 2013/14. This is roughly $2 trillion, in other words this picture shows just half the money that Britian will eventually owe under this Governments plans.

At the moment the Government is quoting an annual overspend of 12.5% of national product. What that means is that the Government, who spend about half the national output, is borrowing about a quarter of the money it is spending every year. Alistair Darling has said he wants to 'half the deficit' by 2014 - which some lazy reporters state as 'halving the debt' but what that means is that the annual amount by which the government is short will fall from 25% to about 12%; the debt will pile up but half as fast as it is at the moment.

This is like a loss-making business CEO saying 'in five years I will halve our losses' - no chief executive would be given that long by his banks, and neither will Britain PLC.

When Labour came to office the country owed £350bn, exactly one quarter of the debt we will end up with when they leave. The taxpayer will have to service this enormous debt pile and then, sooner or later, make an effort to pay it down. Even then we will probably have higher taxes and borrowing costs and a weaker currency than any other European country for decades ahead. And the depressing thing is that even now the Government feel no need to accept that this is a problem, in today's pre-budget report the Chancellor came up with hardly any cuts and virtually no new tax-raising measures; he fools no-one.

Consumer and business confidence will not return for as long as the prospect of either economic collapse, runaway inflation or skyrocketing taxes and interest rates hangs over our heads; and that threat won't go away until this massive debt burden is faced up to.

Above all enormous national debts make this country weak, the foreign investors -Chinese, Indian and Arab Governments, overseas bankers and Sovereign Funds who have lent the money will be calling the shots here for years to come.

1 comment:

Anonymous said...

Marcus, the Trillion is not showing for me, in Firefox or IE.