UKC

When George Osborne finally tells us he has brought down the deficit to zero, and is running a surplus, we will still have 'X' trillion of debt, and 'X ' billions of debt interest to pay each year.

How much longer will have to continue to make further cuts to public spending, will depend on how much we pay off the debt ( more than just the interest., and assuming we also stop borrowing, thus adding to the debt)

Let's say that we have 1.8 trillion of debt when we reach surplus, and then have to service say 60 Billion of annual debt interest. We are in surplus , so (if we don't borrow at all) and start to pay off the debt at say 10 billion a year (which costs 70 billion when debt interest is added- decreasing slightly each year as we pay off the debt)
Will we ever be able to make a realistic dent in the debt , and what date would we be debt free?

Edit added link
http://www.telegraph.co.uk/finance/budget/11481681/Budget-2015-UK-debt-to-f...

In reply to Jim C:
You are forgetting about all the QE: the Bank of England bought about 1/3 of the national debt with printed money and the government gets back all the interest it pays on that debt since it owns the Bank of England. In theory it is supposed to repay the bonds and let the printed money disappear but will it?

Also if government paid off the entire national debt there would be no government bonds for the financial system to use as a safe interest bearing investments behind annuities and as core assets.

I think it is getting close to the time where the whole game needs to change from government funding itself from debt and income and consumption taxes to government printing money and charging rent on the use of land.

In reply to tom_in_edinburgh:


That's technically the Banks call not the governments - a far as I know at the minute when bonds come up for maturity they reinvest the redemption proceeds in new ones such that the amount of QE stays constant.

I'm reply to Jim C:

The usual way of thinking in these matters is to assume that the economy would be growing so the debt as a percent of gdp would fall away naturally and the nominal amount would be less relevant.

In reply to AJM:


I would agree, I can't ever see it going down to zero in the next 50 years, the cuts required to actually clear the debt in even a 10 or 20 year span would kill the country.

In reply to summo:


Agreed - I'd like to extend this further: the cuts required to create a surplus by 2020 will "kill" (change as we know it, I'm sure life will go on) the country.

In reply to ianstevens:


Maybe something needs to change, I think any of the tax cuts/threshold changes were a mistake, people need to learn that good or better services need paying for. Sadly too many people believe politicians who tell them you can have the best of everything and keep paying less tax for it.

There won't be a surplus by 2020, I think it's just a goal based around election terms, no politician thinks in time units longer than 5 years. It could be 2023/25, but at least it is a goal to aim for, even if you near miss it.