Source – Office for Budget Responsibility: [https://obr.uk/forecasts-in-depth/brief-guides-and-explainers/public-finances/](https://obr.uk/forecasts-in-depth/brief-guides-and-explainers/public-finances/)
“We expect public sector net debt to reach 95.5 per cent of national income in 2022-23 which is equivalent to around £2.5 trillion or **£87,000 per household**”
This is an increase from £84,000 per household at the moment, given the extra £3,000 the government will spend in 22-23 than it will receive.
Something that I find frustrating with politicians and the media is they will always report on “x billions spent on this” or “our national debt is now £y” but they never put this into context, probably because it is so horrifying.
So I wanted to try to understand this myself, using the OBR’s most recent report. So here goes:
\- In 2022/23 the government expects **to spend £38,000 per household**.
The breakdown for this, per household, is:
\- £5,900 – Health & Social Care
\- £2,700 – Education
\- £1,100 – Defence
\- £4,500 – Other public services
\- £2,000 – Investment (roads, buildings)
\- £3,900 – State pension
\- £2,500 – Universal credit
\- £2,400 – Other welfare (from what I understand, this is for those people yet to move to Universal credit and disability benefit)
\- £2,900 – Debt interest
\- £10,100 – Other spending (can’t quickly find info on this)
Total = £38,000
In 2022/23 the government expects **to receive £35,000 per household**.
The breakdown for this, per household, is:
\- £14,800 – Income and National Insurance
\- £5,400 – VAT
\- £2,300 – Corporation tax
\- £1,500 – Council tax
\- £1,000 – Business rates
\- £900 – Fuel duty
\- £1,500 – Capital taxes
\- £3,800 – Other taxes
OBR Notes: “Spending just above the international average, but raising less in revenue, leaves the UK running a budget deficit that’s far above the industrial world average”
**Overall**
Per household, the deficit this year will be around £3,000, increase total debt per household from £84,000 to £87,000.
Interestingly, if we didn’t have to pay the debt interest of £2,900, we would at least be almost balanced. However, this isn’t the reality we are in.
Given we are in one of the biggest cost of living squeezes we are facing, where do we go from here?
I had a dream that as the years go on, we may all move to a shorter working week, focusing on productive, mutually beneficial work, and using science & technology to lower cost of living for each other.
I wonder though if the only way out will be to keep inflation high to try to lower the national debt relative to income, continuing to hamper those with cash savings and those where pay rises are lower than inflation, and try to keep the wheels turning for another decade or two.
8 comments
surely it would be less if people like the Sunak’s paid their fair share, nevertheless you’ll still vote for his mob won’t you.
Tax the mega-corporations to drive down the per household debt
Perhaps tackle the Covid fraud, claw back gradually furlough payments against profits, windfall tax for oil companies, end non-dom status. To name four ideas.
Inflation will reduce it, plus much of it is owed to those same households so it is not really a sensible figure per household. The BoE subsidiary also owns debt and they can just write it off as they have been doing since the global financial crash in 2008.
Don’t worry about it, worry about people in this country struggling to eat and heat their homes and pay their rent.
Reduce current borrowing. Let inflation and GDP growth reduce the debt to GDP ratio.
Success.
Why would you be trying that? That’s nonsensical policy talk.
What’s the rates on government borrowing? We are a large and relative rich country known for paying our debts and our bonds we pay out are 1.8% per year.
What we should do is make a wide range of long term investments that are predicted to return above 1.018 pounds for every pound spent.
The night tube was calculated to be 2.7 pounds returned per pound spent. Some government projects can get to 20 X return on pounds spent. Although I don’t fully trust the maths behind them, even if they are government backed.
My general idea would be to grow faster than the increase in interest.
how much of the health & social care or eugenics credit bill is just obfuscated landlord and bank subsidy due to cost of housing?
The idea that government expenditure and revenue need to balance is really misleading, and the constant discussion in the media about public sector debt and ‘balancing the books’ is basically propaganda to convince the electorate that cutting benefits to the worst off is an act of unavoidable fiscal prudence rather than cynical politics.
Another way to think of it is that the money we spend servicing the debt is just a tax rebate for bond holders (generally, wealthier households). We could create a tax worth a similar amount and hey presto the net impact of public sector debt is zero.
Also you are correct, inflation but also economic growth both reduce the debt to gdp ratio, but there’s no need to impact the living standards of the worst off either way.