What’s the £16bn government spend in August all about?

What’s the size of the government debt all about?

I like to put very big numbers in perspective. So the news says that the government borrowed £16bn in August, and £65bn year to date. What does that mean?

Well, apparently, there are still 29 million people working in the UK, so in August, the government borrowed £555 for every working person. At £65 bn year to date, the yearly run rate is £3,448 for every working person.

Total government debt is just over £800 bn, or £27,500 for every working person in the UK.

That is probably the size of a student debt after four years at university.

Is this a problem, and should we be worried? Debt now stands at 57.5% of GDP. it's the highest level since the 1970s, but before the 1970s, it was higher than this between 1915 and 1970,. peaking at over 200% after the second world war.

UK National Debt As Percent Of GDP for United Kingdom 1900-2010 - Central Government Local Authorities

And how does this compare to other countries?

https://www.cia.gov/library/publicat.../2186rank.html

Japan 178%
Italy 105%
France 64%
Germany 64%
USA 61%
UK 57%
Norway 44%
Syria 26%
Iran 20%
Australia 13%
Russia 7%
Libya 4%

I guess it doesn't seem so ridiculous as a measure of debt when you look at the world stage, does it? Would you rather live in the UK @ 57% or in Libya with 4%?

So if the government intends to spend it , that doesn't bother me. That's their job - to spend when they need to spend.

Back to the beginning. £3,448 per working person this year? Not an enormous amount considering the current financial crisis is, as they say, the worst since 1930.

Much of this supports why the bank base rate has not increased for six months, and is less likely to increase dramatically the longer it stays at this record low. You only have to look to Japan to believe that base rates COULD stay low for an awfully long time.

For property landlords fortunate enough to have reverted to SVRs based on pre-2007 mortgages, they are fortunate temporary recipients of unexpected cash flows.

Personally, I wouldn't care if the government continues to overspend to reach 100% debt as a % of GDP if that means we keep very low interest rates for a decade.

At these low rates, property prices would not have to rise at all to make a successful business out of property investment. Compared with one year ago, most investors are making 4% per year additional net income on the value of their portfolio stock because they are paying 4% per annum less interest than a year ago.

And if that is additional guaranteed income instead of perceived capital growth, I'm happier to take the income NOW instead of the capital growth LATER.