Posted on June 24, 2020  
by Noel Guilford

While most of us, quite rightly, have been focused on the easing of the lock-in and when we can get back to work we have also just witnessed one of the most extraordinary weeks in the political economy.

On Wednesday a young black lad brought up on the largest council estate in Europe persuaded the government to change its policy (made a u-turn in media speak) around providing food vouchers for disadvantaged kids during the summer. He didn’t believe that they ‘couldn’t afford it’ (he was right) and said so. Enough people heard and listened.

On Saturday we learned that the ‘national debt’ has exceeded output (measured as GDP) for the first time in most people’s lifetime (1963 was the last occasion, funnily enough just when Harold Macmillan was telling us we’d never had it so good (he was right too)).

The media reports of the ‘national debt’ exceeding output were framed as dire warnings of impending doom. As though debt is bad. But here are some facts:

  1. Most of the money borrowed by the government – the ‘national debt – has come from the Bank of England; that institution belongs to…..the UK government, so actually the government owes itself most of what we call the ‘national debt’.
  1. The rest of the ‘national debt’ comes from the private sector and overseas governments that want a safe haven for their surplus funds. (Safe because a sovereign government cannot go bust – it can always print more money. Bet the Greeks wish they’d stayed out of the Euro now.)
  1. The other big borrowers in the economy are the banks – they ‘borrow’ money from depositors. Do the media ever say that the level of bank borrowing is too high?
  1. And finally that old chestnut ‘How will we repay it?’ But we never have and we never will, because we don’t need to. My fellow-accountant Richard Murphy explains why.

It makes you wonder who to believe.

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Noel Guilford


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