O/T The Good morning thread. | Page 242 | Vital Football

O/T The Good morning thread.

I'll do my best to explain and reply to Greavsies questions in this post - but bear with me, my brain is still foggy and putting anything in a logical order seems an impossible task at the moment.

Essentially when you have a budget deficit (the difference between what income the government receives each year and what it spends) it has to borrow, when there is a surplus (income greater than outgoings, it can put it into the reserves).

The Furlough scheme has cost hundreds of Billions, but without it we'd be knackered. Our economy contracted because of the covid pandemic and unemployment could easily have been three-fold what it is now, or even higher without it. Many families/people would have been unable to support themselves at all.

So the government borrowed and kept them technically still employed.

But as we borrow more, so our national Debt has ballooned to levels we haven't seen since the Second World war - which from start to finish took almost 50 years to pay that debt off - this one will be of a similar duration I suspect, and attempts to increase income (higher taxes mostly) and lower spending could well mean we never come out of this economic contraction - so I don't expect to see any huge tax rises anytime soon.

leaving people with less money to spend now would be disastrous, it would also of course decrease vat income and consumption taxes.

The latest data shows that the UK government borrowed £8.8bn in January, which was the the highest January figure since monthly records began in 1993, it has been estimated that government borrowing during this financial year (end in March will be around £400 billion - an unheard-of sum in modern/peacetime history.

This borrowing is done by the government issuing bonds/gilts (same thing different terms).
These are really promissory notes i.e. the Government tells the market how much interest a bond/gilt will attract and the buyers scoop them up for the income. Income paid by governments is about as 100% guaranteed as you can get. Fund managers have to keep a certain amount in 'cash' (liquidity reasons) and so this is as good as it gets for parking cash! The government sets a maturity date (the date it will repay them and you get your cashback - but of course you can sell them to other institutions whenever you like - these bonds are the paper equivalent of gold.

British bonds are sought after as our political/civil rules of commercial law make us a solid proposition to investors.

The buyers of these bonds, or "gilts", are mainly financial institutions, like pension funds, investment funds, banks and insurance companies, but also some foreign governments also buy into them to use them for reserves.

Even the Bank of England as part of its remit to boost spending and investment in the economy buy them. This policy is known as "quantitative easing" the BOE has so far bought £875bn of government bonds. QE is like issuing 'new' money - but there is a limit to it and go too far and you risk financial implosion and rampant inflation.

I still hold a Bond that my grandfather bought back in the second World war, it was a non-maturing bond of £10,000 and eventually written off as worthless, so bonds issued by the government can in times of distress be written off and rendered worthless.

In January 2020, our UK debt was £2.11 trillion, up £316.4bn since the start of the Pandemic.

This figure almost exceeds the size of the UK economy, with debt having reached 97.9% of the UK's gross domestic product (GDP). GDP is the sum (measured in pounds) of the value of goods and services produced in the economy.

Debt levels as high as this haven't been seen since the early 1960s when the UK was paying off the debts of World War Two.

The bottom line is we cannot carry on like this for much longer, if we do foreign investors, institutional investors will demand higher rates for what they will see as an economy out of control and thus higher risk.

The chancellor has a very difficult tightrope to walk now, borrow too much and end up with interest payments that the government can't afford so has to cut public spending - thus risking a huge political push back as real pension payments shrink, pubic sector jobs disappear and no new spending on the NHS, defence, capital projects etc or (as he will have to at some point) hope the economy expands and collects more taxes as it does to meet the repayments and pay down the debt. The problem with what we've done now is that we've created a new state dependency the likes of we haven't seen even in wartime.

Sooner or later we're going to have to let businesses go bust and people be made redundant - what we've seen happen to the big retail chains may well happen in other sectors.

Are we in danger of our bonds becoming very expensive as confidence in our economic prospects wane? - almost certainly, at which point the government will be forced into a new austerity program and all that this entails. Mass unemployment is just around the corner which will be of a magnitude none of us has seen in our lifetime.

Our children will be paying this back for most of their lifetimes unless something I can't predict changes.

British Sovereign Fund. Also, not so sure you'll have interest rate problems for a while. The BoE will over-ride the market a la the Fed.
 

Walthamstow wanderer

Vital Football Hero
Staff member
I'll do my best to explain and reply to Greavsies questions in this post - but bear with me, my brain is still foggy and putting anything in a logical order seems an impossible task at the moment.

Essentially when you have a budget deficit (the difference between what income the government receives each year and what it spends) it has to borrow, when there is a surplus (income greater than outgoings, it can put it into the reserves).

The Furlough scheme has cost hundreds of Billions, but without it we'd be knackered. Our economy contracted because of the covid pandemic and unemployment could easily have been three-fold what it is now, or even higher without it. Many families/people would have been unable to support themselves at all.

So the government borrowed and kept them technically still employed.

But as we borrow more, so our national Debt has ballooned to levels we haven't seen since the Second World war - which from start to finish took almost 50 years to pay that debt off - this one will be of a similar duration I suspect, and attempts to increase income (higher taxes mostly) and lower spending could well mean we never come out of this economic contraction - so I don't expect to see any huge tax rises anytime soon.

leaving people with less money to spend now would be disastrous, it would also of course decrease vat income and consumption taxes.

The latest data shows that the UK government borrowed £8.8bn in January, which was the the highest January figure since monthly records began in 1993, it has been estimated that government borrowing during this financial year (end in March will be around £400 billion - an unheard-of sum in modern/peacetime history.

This borrowing is done by the government issuing bonds/gilts (same thing different terms).
These are really promissory notes i.e. the Government tells the market how much interest a bond/gilt will attract and the buyers scoop them up for the income. Income paid by governments is about as 100% guaranteed as you can get. Fund managers have to keep a certain amount in 'cash' (liquidity reasons) and so this is as good as it gets for parking cash! The government sets a maturity date (the date it will repay them and you get your cashback - but of course you can sell them to other institutions whenever you like - these bonds are the paper equivalent of gold.

British bonds are sought after as our political/civil rules of commercial law make us a solid proposition to investors.

The buyers of these bonds, or "gilts", are mainly financial institutions, like pension funds, investment funds, banks and insurance companies, but also some foreign governments also buy into them to use them for reserves.

Even the Bank of England as part of its remit to boost spending and investment in the economy buy them. This policy is known as "quantitative easing" the BOE has so far bought £875bn of government bonds. QE is like issuing 'new' money - but there is a limit to it and go too far and you risk financial implosion and rampant inflation.

I still hold a Bond that my grandfather bought back in the second World war, it was a non-maturing bond of £10,000 and eventually written off as worthless, so bonds issued by the government can in times of distress be written off and rendered worthless.

In January 2020, our UK debt was £2.11 trillion, up £316.4bn since the start of the Pandemic.

This figure almost exceeds the size of the UK economy, with debt having reached 97.9% of the UK's gross domestic product (GDP). GDP is the sum (measured in pounds) of the value of goods and services produced in the economy.

Debt levels as high as this haven't been seen since the early 1960s when the UK was paying off the debts of World War Two.

The bottom line is we cannot carry on like this for much longer, if we do foreign investors, institutional investors will demand higher rates for what they will see as an economy out of control and thus higher risk.

The chancellor has a very difficult tightrope to walk now, borrow too much and end up with interest payments that the government can't afford so has to cut public spending - thus risking a huge political push back as real pension payments shrink, pubic sector jobs disappear and no new spending on the NHS, defence, capital projects etc or (as he will have to at some point) hope the economy expands and collects more taxes as it does to meet the repayments and pay down the debt. The problem with what we've done now is that we've created a new state dependency the likes of we haven't seen even in wartime.

Sooner or later we're going to have to let businesses go bust and people be made redundant - what we've seen happen to the big retail chains may well happen in other sectors.

Are we in danger of our bonds becoming very expensive as confidence in our economic prospects wane? - almost certainly, at which point the government will be forced into a new austerity program and all that this entails. Mass unemployment is just around the corner which will be of a magnitude none of us has seen in our lifetime.

Our children will be paying this back for most of their lifetimes unless something I can't predict changes.
Thanks Ex . Maybe when your brain fog has cleared , you can explain this in greater detail !!!!!!!!!!! :rofl::rofl::rofl:
At least I have an understanding of it all now . Brilliant , thanks .
 
British Sovereign Fund. Also, not so sure you'll have interest rate problems for a while. The BoE will over-ride the market a la the Fed.
I agree, it's far too soon to worry about interest rates and besides, I just checked and the way the government rolled over borrowings and re-financed actually means that with nearly twice the debt, our interest bill is currently actually lower - sorry all, I just couldn't think earlier if I was right about that or just making it up in my head!
 
Thanks for that Ex, esp as you are still not out of the woods yet, nearly though, for me it was a very well written explanation/answer, esp as I am an ex-military pleb! lol!
Had an x-ray this morning as part of the follow up care, I have some small scarring on my lungs that may or may not clear up in time, but it was a bit of a shock to be actually able to see it and then see a picture of a clear set of lungs just so the consultant could explain the key differences.

Beginning to think I was pretty lucky., I know that sounds weird, but that's how I'm seeing it now.
 
I agree, it's far too soon to worry about interest rates and besides, I just checked and the way the government rolled over borrowings and re-financed actually means that with nearly twice the debt, our interest bill is currently actually lower - sorry all, I just couldn't think earlier if I was right about that or just making it up in my head!
The piece of today's budget I would be worried about would be the message it sent to multi-national companies. 2 years to invest into their UK legal entities to get the super deduction benefit, then avoid paying the incremental 6% tax by exiting the UK by 2023 i.e. when the 25% corporation tax hits.

I've always felt that with Brexit that the multi-nationals would only keep a thin layer in the UK. This sort of encourages them to continue exiting the UK.
 

Pompey Yid

Vital Squad Member
Just a follow up here on my post this morning, for anyone that's interested that is lol!

"Monster" is back, MOT pass again!

Also spoke to my oppo regards the Diving test, medical he had, kept his license, that his lung capacity was slightly lower, but that was to be expected, but all in all has been given the green light and thumbs up, he is chuffed to bits.
 

Pompey Yid

Vital Squad Member
Had an x-ray this morning as part of the follow up care, I have some small scarring on my lungs that may or may not clear up in time, but it was a bit of a shock to be actually able to see it and then see a picture of a clear set of lungs just so the consultant could explain the key differences.

Beginning to think I was pretty lucky., I know that sounds weird, but that's how I'm seeing it now.
Ex I don't think that sounds weird that you feeling lucky, been there done it, though in a different situation, its only being natural mate, a massive phew!

Yes I bet there is some scarring on your lungs, look what they have been through.
Good on ya!, and I speak for us all, its really great to have you back, now no red face mate, its true.
 
The piece of today's budget I would be worried about would be the message it sent to multi-national companies. 2 years to invest into their UK legal entities to get the super deduction benefit, then avoid paying the incremental 6% tax by exiting the UK by 2023 i.e. when the 25% corporation tax hits.

I've always felt that with Brexit that the multi-nationals would only keep a thin layer in the UK. This sort of encourages them to continue exiting the UK.

I doubt the corporate incentives to remain in the UK will disappear. When it comes down to it a government has two mandates (a la Rutter), to provide jobs for its citizens and to keep them safe.

Look for the UK to become more of a corporate tax haven.
 
Would our debt be reduced quicker if the govt invested in industries producing for export ?
If these industries had a significant impact on our GDP, it would make a difference, however as the push to drive exports up has already started, what the government really wants to see is a reduction in our balance of trade deficit.
 

Nick Real Deal

Vital Football Legend
If these industries had a significant impact on our GDP, it would make a difference, however as the push to drive exports up has already started, what the government really wants to see is a reduction in our balance of trade deficit.
Long term repayment wise, what does our Country need to do to change the trade deficit and start building ?
 
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I doubt the corporate incentives to remain in the UK will disappear. When it comes down to it a government has two mandates (a la Rutter), to provide jobs for its citizens and to keep them safe.

Look for the UK to become more of a corporate tax haven.
That's the confusion though. If you have the ability to move your operations around your different legal trading entities (e.g. INC US, BV EU, Ltd UK etc) then what do you keep in the UK? Where do you pay your taxes?

As an example, when the USA lowered it's repatriation tax rates, every US owned tech company started to shift jobs back to the US. When Brexit was thrown on top of that you could literally watch as lay-offs happened in places like the UK to be replaced with new headcount back at the mother ship or in cheaper countries. I watched it with my own eyes.

Then we've seen the big car companies exit and even companies like Barclays moving operations over to Ireland. I hope you're right, but fear that corporate tax haven is a pipe dream. What is very real us that your UK legal entity will be paying 6% more tax within 2 years.
 
That's the confusion though. If you have the ability to move your operations around your different legal trading entities (e.g. INC US, BV EU, Ltd UK etc) then what do you keep in the UK? Where do you pay your taxes?

As an example, when the USA lowered it's repatriation tax rates, every US owned tech company started to shift jobs back to the US. When Brexit was thrown on top of that you could literally watch as lay-offs happened in places like the UK to be replaced with new headcount back at the mother ship or in cheaper countries. I watched it with my own eyes.

Then we've seen the big car companies exit and even companies like Barclays moving operations over to Ireland. I hope you're right, but fear that corporate tax haven is a pipe dream. What is very real us that your UK legal entity will be paying 6% more tax within 2 years.

Maybe....they will be paying more tax. Policy can change. ANd sometimes to change policy you need to prove the effect on the country of the current policy to build the consensus for change. Tax cuts for corporations aren't popular right now. People have forgotten what job shortages look like. Especially with the amount of money that has been handed out lately. (With good reason)
 
Long term repayment wise, what does our Coutry need to do to change the trade deficit and start building ?
Invest in the emerging technologies and invest more in the spin off's from our uni's. We outstrip new business start-ups for the whole of Europe put together and now we need to export more or die a long slow withering (financial) death. Despite what the propaganda will tell you our Ivy league Uni's are second to none, and we need to as a country invest even more in higher education and R&D. Much more.
 
Invest in the emerging technologies and invest more in the spin off's from our uni's. We outstrip new business start-ups for the whole of Europe put together and now we need to export more or die a long slow withering (financial) death. Despite what the propaganda will tell you our Ivy league Uni's are second to none, and we need to as a country invest even more in higher education and R&D. Much more.

R&D Incentives all the way. It drives everything,