Wednesday, February 20, 2008

Do You Know How Big the PSBR Is?

In the 1970s and 1980s we all used to wait with baited breath for the latest trade figures or the latest PSBR (public sector borrowing requirement, for those born after 1975) deficit. I have no idea what the latest trade figures are. Do you? For some reason the media doesn't report them any longer. Probably too frightening. Until today, I had no idea how bad the PSBR had got. Allister Heath informs us that for the financial year 2007/8 the total has already reached £26.8 billion, with the final figure expected to be nearer £40 billion. This is the kind of economic stability we are supposed to be impressed by, apparently.


Old BE said...

The trade deficit is huge, the pound is down, inflation is on the up, living standards are falling. Anyone would think it was a Labour government.

Anonymous said...

When are you going to make the font bigger Iain? It's too small and hard to read since the change. PLEASE make it bigger! Some of us are having trouble reading it now

Anonymous said...

Add on Northern Rock and PFI (Public Finance Initiatives) and the PSBR is near £90 billion.
Great init.
Brown did have an unexpected Tax Surplus of £14 Billion in Jan 2008
To put it bluntly the Country is in the shit, with credit drying up.
To cut the Trade deficiencies Tesco needs banning to stop all the TAT coming in to the country.

Anonymous said...

Gordon Brown is indeed the Charles Ponzi of our time as is becoming increasingly apparent now that the chickens are coming home to roost.

Anonymous said...

If it's bad now, how much worse is it going to get once the coming recession really starts to get a hold and the vicious circle of reduced tax revenues and increased benefits payments due to increasing unemplyment begins to bite? And the big question - just where did all the money go? This is an enormous s**t sandwich, and we're all going to have to take a bite...

Bob Piper said...

The reason no-one talks about the PSBR anymore is that little old lady Mrs Thatcher signed up to the Maastricht treaty, with it's charmingly titled 'Stability and Growth Pact' which changed the way in which public sector borrowing was measured in EC countries to the general government financial deficit (GGFD)

Anonymous said...

Well done Iain for highlighting this!
I thought the figures were scary, but I doubt they will warrant a headline in the news media any time soon.
When things go belly up, I imagine a lot of ordinary voters will echo the sentiment "I didn't realise how bad the finances were for UKplc", despite feeling the pinch in their pockets.
We have political journalists reporting that Brown and the government have got away with bad news and they equate that as bad for the Conservatives! Its worse for the poor sod in the street too, but apparently that doesn't matter in the minds of some journalists.

Johnny Norfolk said...

This was only reported by the BBC when the Tories were in power.

Now its Labour they avoid upsetting their friends

Wrinkled Weasel said...

I don't do the economy, but I came across this document regarding Northern Rock, and its assimilation into the public spending requirement for statisitcal purposes.

It can be found here,

but I think it is worth quoting. It has already been got at by Labour spin doctors in two crucial aspects. The first is that it refuses to classify the NR aquisition as "Nationalisation", and warns that precise information on the cost of this is not available for reasons of commercial confidentiality.

Here it is.

Northern Rock plc will be classified to the public sector for statistical
purposes, the Office for National Statistics has announced today.
Northern Rock plc will be classified as a public financial corporation
from 9 October 2007, when the support arrangements provided by the
Bank of England were amended. Prior to this date it was classified to
the private sector.
The decision is in line with international statistical guidance. It should
not be confused with ‘nationalisation’, which is a term commonly used
to refer to public ownership. National Accounts classification is
determined by control of ‘general corporate policy’, which does not
always coincide with ownership.
The decision is based on a judgement that the public sector has the
power to control Northern Rock plc’s general corporate policy. This is
largely due to powers that the Bank of England has taken as part of its
secured lending facility arrangements through covenants in the loan
agreements. While amounts are outstanding under this loan, Northern
Rock plc requires permission from the Bank of England before
undertaking certain activities – for example, entering into any corporate
restructuring; making substantial changes to the general nature of the
business; making dividend payments; and acquiring or disposing of
certain types of assets.
This decision also required ONS to examine the structures and
arrangements used in Northern Rock plc’s borrowing programme,
which involves securitisation of mortgage assets. The ONS judgement
here is to also classify to the public sector the UK-resident special
purpose vehicles used in the securitisation programme.
The exact impact of Northern Rock plc’s inclusion in public sector net
debt cannot be stated at this time because it was not possible to collect
the relevant data from Northern Rock plc in advance of this
announcement and it would have involved disclosing commercially
sensitive information. However, the reclassification will be reflected in
the Public Sector Finances dataset as soon as possible.

Anonymous said...

that's forty billion pounds in the 'good times'... what happens if we do hit a recession?

Forty billion can turn into one hundred and fifty billion very very quickly

Anonymous said...

The only quality press left, i.e. the FT, comments on it frequently.

Having said that...I can't remember what it was!

But our finances are now in pretty bad shape!

Anonymous said...

So, basically our economy has doubled in size since Major was PM but we have a PSBR half the size.

Sounds like a good deal to me.

Anonymous said...

Oops! This won't help will it?!!

UK housing market close to collapse, analyst says

The Times 21/02/08

Britain’s housing market is a “house of cards” that is set to implode after years of reckless mortgage lending, chronic oversupply of new flats and widespread fraud, a leading analyst said yesterday....

Wrinkled Weasel said...

Anonymous said

When are you going to make the font bigger Iain?

try pressing ctrl and + and quit the porn

Chris Paul said...

Thought for a minute you might express this figure as a % of turnover. Without that it's almost meaningless. Or you might help by stating the figures for the USA where much loved fiscal levity and down turn of the right have really done a number on their economy.

Labour voter is on the money above.

The correct response to this post is : "So What?"

Anonymous said...

It's less prominent in the news nowadays than in the 70's because it's easier to finance without crowding out private sector borrowing, given the much larger and more liquid financial markets.

Until, that is, those markets decide they won't finance it anymore, and then panic. But what will trigger that is the debt to GDP ratio rising well above the current level of about 40%.

I am slightly concerned about the level of the deficit, but there are so many other economic indicators in NuLab's Britain to be more worried about. We are just about to see the inevitable end of the ruinous road we've been on since 1997 (or more accurately since 2000, when NuLab ditched most Conservative economic policy). I don't envy the next Conservative government. If Labour's economic inheritance in 1997 was golden, the Conservatives' in 2010 will be turd-like.

Not a sheep said...

I blogged about this very matter two months ago - - "Britain's current account has recorded its worst deficit since the late 1980s, making Britain's national balance sheet worse than the United States' for the first time since Nigel Lawson was Chancellor of the Exchequer."

But also note that "The amount families and businesses are having to set aside for mortgage and debt payments hit the highest level since the early 1990s, in the latest sign that the record mountain of UK lending is causing serious pain. The household debt service burden rose to 13.6pc of income - the highest level since 1991, while the equivalent measure for non-financial businesses hit 28.8pc of their profits - the highest since 1992."

Anonymous said...

Surely 'bated breath' ?

CityUnslicker said...

Labour Voter - not a bad shout that. After the recession of the 90's nebt debt reached 43% of GDP, now it is creeping up toward 39%.

However, we have just been through the boom and are now entering the bust. Typically the rise and fall is from top to bottom 10%.

History suggests that by the depths of the the coming downturn net debt will be 47-49% - worse than the previous government.

Iain is right to be worried, we should in the times of plenty have been lowering debt since about 2003 - instead it has been creeping up slowly.

Anonymous said...

...and we never hear about the balance of payments now. I wonder why?

Anonymous said...

The balance of payments doesn't matter much in the short term in a world of floating exchange rates, though it's absolutely critical in a world of fixed exchange rates.

Of course the eleven years in a row under this government in which we've had a deficit for all that time, quite unprecedented in our history, are deeply worrying, but monthly deficit figures are pretty meaningless.

Anonymous said...

Don’t believe one optimistic word from any public figure about the economy or humanity in general. They are all part of the problem. Its like a game of Monopoly. In America, the richest 1% now hold 1/2 OF ALL UNITED STATES WEALTH. Unlike 'lesser' estimates, this includes all stocks, bonds, cash, and material assets held by America's richest 1%. Even that filthy pig Oprah acknowledged that it was at about 50% in 2006. Naturally, she put her own 'humanitarian' spin on it. Calling attention to her own 'good will'. WHAT A DISGUSTING HYPOCRITE SLOB. THE RICHEST 1% HAVE LITERALLY MADE WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. Don't fall for all of their 'humanitarian' CRAP. ITS A SHAM. THESE PEOPLE ARE CAUSING THE SAME PROBLEMS THEY PRETEND TO CARE ABOUT. Ask any professor of economics. Money does not grow on trees. The government can't just print up more on a whim. At any given time, there is a relative limit to the wealth within ANY economy of ANY size. So when too much wealth accumulates at the top, the middle class slip further into debt and the lower class further into poverty. A similar rule applies worldwide. The world's richest 1% now own over 40% of ALL WORLD WEALTH. This is EVEN AFTER you account for all of this ‘good will’ ‘humanitarian’ BS from celebrities and executives. ITS A SHAM. As they get richer and richer, less wealth is left circulating beneath them. This is the single greatest underlying cause for the current US recession. The middle class can no longer afford to sustain their share of the economy. Their wealth has been gradually transfered to the richest 1%. One way or another, we suffer because of their incredible greed. We are talking about TRILLIONS of dollars. Transfered FROM US TO THEM. Over a period of about 27 years. Thats Reaganomics for you. The wealth does not 'trickle down' as we were told it would. It just accumulates at the top. Shrinking the middle class and expanding the lower class. Causing a domino effect of socio-economic problems. But the rich will never stop. They will never settle for a reasonable share of ANYTHING. They will do whatever it takes to get even richer. Leaving even less of the pie for the other 99% of us to share. At the same time, they throw back a few tax deductable crumbs and call themselves 'humanitarians'. IT CAN'T WORK THIS WAY. This is going to end just like a game of Monopoly. The current US recession will drag on for years and lead into the worst US depression of all time. The richest 1% will live like royalty while the rest of us fight over jobs, food, and gasoline. Crime, poverty, and suicide will skyrocket. So don’t fall for all of this PR CRAP from Hollywood, Pro Sports, and Wall Street PIGS. ITS A SHAM. Remember: They are filthy rich EVEN AFTER their tax deductable contributions. Greedy pigs. Now, we are headed for the worst economic and cultural crisis of all time. SEND A “THANK YOU” NOTE TO YOUR FAVORITE MILLIONAIRE. ITS THEIR FAULT. I’m not discounting other factors like China, sub-prime, or gas prices. But all of those factors combined still pale in comparison to that HUGE transfer of wealth to the rich. Anyway, those other factors are all related and further aggrivated because of GREED. If it weren’t for the OBSCENE distribution of wealth within our country, there never would have been such a market for sub-prime to begin with. Which by the way, was another trick whipped up by greedy bankers and executives. IT MAKES THEM RICHER. The credit industry has been ENDORSED by people like Oprah, Ellen, Dr Phil, and many other celebrities. IT MAKES THEM RICHER. So don’t fall for their ‘humanitarian’ BS. ITS A SHAM. NOTHING BUT TAX DEDUCTABLE PR CRAP. Bottom line: The richest 1% will soon tank the largest economy in the world. It will be like nothing we’ve ever seen before. and thats just the beginning. Greed will eventually tank every major economy in the world. Causing millions to suffer and die. Oprah, Angelina, Brad, Bono, and Bill are not part of the solution. They are part of the problem. EXTREME WEALTH HAS MADE WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. WITHOUT WORLD PROSPERITY, THERE WILL NEVER BE WORLD PEACE OR ANYTHING EVEN CLOSE. GREED KILLS. IT WILL BE OUR DOWNFALL. Of course, the rich will throw a fit and call me a madman. Of course, their ignorant fans will do the same. You have to expect that. But I speak the truth. If you don't believe me, then copy this entry and run it by any professor of economics or socio-economics. Then tell a friend. Call the local radio station. Re-post this entry or put it in your own words. Be one of the first to predict the worst economic and cultural crisis of all time and explain its cause. WE ARE IN BIG TROUBLE.

Anonymous said...

take a deep breath