Where's the money?

[Dubious Dick]

Is there an economist on board please? I am trying to work out why we have a deficit of £150 billion or so, according to grinning George?

I mean, don't we own chunks of banks worth a few tens of billions? Are these assets being counted against the liabilities when the national debt and the cuts are being considered?

I understand that no precise valuation can be placed on our bank shares because it depends on when they are sold off, and that they cannot be sold in one go without reducing the value. It's just that as we would expect cyclical economics to see growth over the next five years or so (however patchy now), our shares are increasing in value, and we will presumably see them sold at some stage, surely enabling a massive pay back against debt, and making the current fiscal tighetning potentially far too heavy (e.g. 500 000 public sector jobs plus the knock on in the private sector!)

I just do not see this issue being discussed in terms of the public finances, and wonder if I have missed something glaring?

[Harryprice]

I've got some shares in Lloyds. They were once worth something - not any more!

[Matt]

Is there an economist on board please? I am trying to work out why we have a deficit of £150 billion or so, according to grinning George?

I mean, don't we own chunks of banks worth a few tens of billions? Are these assets being counted against the liabilities when the national debt and the cuts are being considered?

I understand that no precise valuation can be placed on our bank shares because it depends on when they are sold off, and that they cannot be sold in one go without reducing the value. It's just that as we would expect cyclical economics to see growth over the next five years or so (however patchy now), our shares are increasing in value, and we will presumably see them sold at some stage, surely enabling a massive pay back against debt, and making the current fiscal tighetning potentially far too heavy (e.g. 500 000 public sector jobs plus the knock on in the private sector!)

I just do not see this issue being discussed in terms of the public finances, and wonder if I have missed something glaring?

No economist here but I doi know the difference between the national debt, and the deficit.

Our National Debt is something like £900 billion. The deficit is the difference between our public income and our public expenditure, and thus the rate at which our deficit is increasing (or theoritically it could be the rate at which our assets were decreasing if we'd ever had any)

Think of the Micawber principle:
"Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery." In the later case Micawber's deficit is sixpence.

If I remember correctly we loaned the banks the money they needed rather than buy the banks. So our asset is here is a loan. The repayment income from these loans does offeset against the deficit however we owe far more then we've loaned out. The interest on the £900 billion we owe is a part of our annual expenditure however even that is dwarfed by our other expenses: Welfare, education, health and defence.

http://www.hm-treasury.gov.uk/d/psf.pdf

[panama]

Matt is, as ever, pretty well spot on. The problem arose because, at least a sustantial part of it, because we put all our financial eggs in one basket. From the eighties on we became, as a country, ever more reliant on the financial services industries. As the last lot of Tories in government closed down most of the manufacturing sector and hamstrung the research and development sector we have become increasingly reliant for tax income on the banks and other ancilliary companies.

If the finance sector is f***ed then the Chancellor of the Exchequer has no income to pay for the stuff that Tony and Gordon built (like the nice new school my kids went to).