Confessions Of A Spendaholic

Articles From: Finimize
Website: Finimize

What’s going on?

The UK government’s debt hole hit an all-time high in November.

What does this mean?

If you think your overdraft is bad, check this out: the British government just racked up another £22 billion ($27 billion) in net debt – that’s the difference between what it spent and what it made from taxes. The government’s debt pile will be about 10% bigger in a year’s time if the big spenders keep that up, so they’re not exactly nailing the whole “shrink our debt” thing.

Let’s break that down. For starters, there’s the £7 billion ($8.5 billion) the government coughed up on interest payments. That’s £2 billion ($2.5 billion) more than last year, and still-rising interest rates will likely puff those bills up for a while. And for mains, there are budget-draining energy price cap schemes, which cost £5 billion more than last year. Those caps are sticking around till 2024, so if the government wants to appease the millions of public sector workers campaigning for pay increases, it’ll have to look elsewhere for spare change.

Why should I care?

Zooming out: Governments love spending.

The British government’s only been in surplus – meaning it made more from taxes than it spent – a handful of times over the last 50 years. Naturally, that expensive habit could come back to bite, but the UK’s in the green (metaphorically only, mind you) for now: the country’s debt is worth about 100% of its economy, which puts it in a better spot than the US, France, Spain, Italy, and Canada. That’s… reassuring.

The bigger picture: Perspective matters.

That 100% stat might sound like tons, but the UK makes the equivalent of 30% of the country’s total economy from taxes. Now get this: that income-to-debt ratio sits comfortably within the range that mortgage lenders would accept for everyday folks – roughly four to five times your gross salary. And despite the mounting IOUs, the UK government’s still a way safer bet for lenders than your average Joe.

Originally Posted December 21, 2022 – Confessions Of A Spendaholic

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