As inflation falls to 6.8%, Lib Dem Leader Ed Davey appeared on Sky News this morning to give our party’s reaction:
While it was positive news that prices aren’t using quite so fast, he said, but they are rising fast, faster than they are in many other countries and faster than they have for many, many years.
Families and pensioners when they go and do their shopping, when they get their energy bill, when they pay their mortgage, their rents, they are still seeing them go up by huge amounts. And what is worrying Liberal Democrats today is that this month’s inflation figures will be used to calculate rail fares for next year and we are calling for a freeze as some way of helping people who are really really struggling.
Challenged that the Government has to balance the books, Ed said that we always do balance the books and go to the country with a fully costed manifesto, compared to the Conservatives who have been reckless with Government money and that’s why the country is in such a mess.
I listen to Conservative ministers and they seem so out of touch with the realities that most families and pensioners are facing. When we talk about these sorts of figures they seem quite complacent and give themselves a pat on the back when families are really struggling out there. I just want a Government that seems to care a bit more and this lot just don’t.
Let’s just pause a minute there. This “families and pensioners” phrase irks me a bit. It isn’t quite as bad as the awful “hard working families”, but it completely ignores a huge swathe of people who are struggling just as much as the soft Tory voters in the blue wall seats we are going after. They like the “families and pensioners” language because it has a comforting ring of deserving poor about it but that’s no excuse.
We need to make sure that the young people struggling to get by on low incomes, earning less and getting less in benefits despite living costs being just as high feel included, or the growing number of single person households with only themselves to rely on.
What’s wrong with just using people? Our mission as Liberal Democrats is to build a fair, free and open society where NO-ONE is enslaved by poverty, ignorance and conformity and our language should reflect that universality. We have so many good ideas that would help all people who are struggling so it seems a shame to limit our language.
Rant over and back to the interview. Ed was challenged that our plans to help people were not realistic. He said:
The real world is that the economy is struggling and we need to get people back to work. If you took up Liberal Democrat ideas to boost the economy, you would get more people using public transport which is more important for our economy, for the environment and so you have many benefits.
I just think the Government is so out of touch. They don’t seem to get how the combination of price rises, mortgages, rents, energy bells railway fares, is hitting people. We’ve calculated that a commuter family is going to be clobbered by an extra bill of £300 every month due to the combination of mortgage, food and rail fares. This is a huge amount and when I hear government ministers saying they can’t do anything. They could do something but they don’t. The fact that they don’t backs up my argument that they are out of touch and don’t care.
He was asked whether the energy price cap should be rethought as it harmed competition:
Well I am worried about energy prices going in to this Winter. There’s a real concern that rather than going down they are going to go up again and we think there should be more competition but we think there should be targeted help for all those struggling through what’s called the Warm Homes Discount or Winter Fuel Allowance. We need to make sure that people are not going to be hit this Winter and end up being cold as well as not being able to afford their bills.
And our help would get to them in advance and we have ideas to fund it:
Liberal Democrats have led the argument on things like the windfall tax on oil and gas companies to provide the money so that we can help people and businesses. Liberal Democrats have led the argument on things like an energy cap freeze to help people. Ideas like that resonate with people and they look at the Government and just can’t believe that they aren’t taking action.
He was then asked about our plan to help people with rising mortgages. Isn’t the mortgage market starting to correct itself?
Well after the Liz Truss budget which sent mortgage rates sky high and caused a lot of the turmoil we’ve seen ever since for mortgage holders and pensioners.
What Liberal Democrats are saying is that for those whose homes are likely to be repossessed and who are likely to be homeless, that is the moment to provide help with our mortgage support fund. Our fund is built on ideas which used to happen. It’s built on good practice from the past. The fact that the Conservatives don’t want to act just shows that they are out of touch and don’t want to help people.
Overall, it was a good interview, on one hand portraying the Government as out of touch and uncaring while showing how we would help people with various living costs.
* Caron Lindsay is Editor of Liberal Democrat Voice and blogs at Caron's Musings
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There is good reason to be worried about energy prices going in to this Winter. Charities and non-profit organisations wrote to the government in January urging them to move quickly to legislate for a change in energy bills for “those in greatest need to ensure they are able to live in their homes comfortably” Social Tariff
The social tariff for the energy market is a discounted, targeted tariff aimed at those in greatest need to ensure they are able to live in their homes comfortably. It involves a progressive funding mechanism which ensures those missing out on the social tariff do not have to bear its costs. It would be automatically made available to those who need it including: people on means tested benefits, disability benefits, and Carer’s Allowance alongside those still struggling with their bills but missing out on support from the welfare system. It also gives the opportunity to remove unfair differentials between different geographies and payment types that currently exist in the market for low income and vulnerable households.
“Social tariffs are commonplace in the telecoms industry and there have been calls for all energy suppliers to offer them”.
“Some energy companies did offer social tariffs before the introduction in 2019 of Ofgem’s price cap, which set limits on how much all customers could be charged for usage. Suppliers have suggested a social tariff alongside a reformed price cap to address high bills spurred by the rise in wholesale gas prices”. ‘Change is needed’: Ofgem chief calls on ministers to rethink energy price caps
What does “Balancing the Books” mean in practice?
The Liz Truss/Kwasi Kwarteng budget fiasco will force all parties to go into the 2024 election with a fully costed manifesto. After the BofE had to intervene with QE last September when inflation was over 10%, no party can risk a recurrence of that chaos in financial markets. A situation of fiscal dominance occurs when a country has a large government debt and deficit such that monetary policy targets keeping sovereign bond markets from meltdown as opposed to economic targets such as inflation, growth and employment.
“2022/23’s deficit of 5.4% of GDP was the UK’s twelfth largest since 1948. At the end of 2022/23 public sector net debt was £2,530 billion (i.e. £2.5 trillion), which is equivalent to 100% of GDP”.
“A succession of economic shocks over the last 15 years or so, and the government’s response to them, has meant that public sector debt has risen to a level last seen in the early 1960s, relative to the size of the economy. In the 1960s, government debt was still falling after reaching over 250% of GDP during World War. The budget deficit
The WW2 debt was mostly inflated away i.e. a default in purchasing power terms. “In nominal terms, GDP grew by 8.8 per cent a year on average over {the three decades after the war) comprising 2.3 per cent average annual real GDP growth and a 6.5 per cent average annual rate of whole economy inflation.The growth rate of nominal GDP was higher than the 3.6 per cent average effective interest rate paid by the government on public debt. Post-World War II debt reduction
To whom is the government debt owed and under which terms and conditions?
How can our nation function (financially) without a government deficiit/spending in excess of tax gathered?
In other words, if the government fails to spend/put more money into the economy, than it gathers in taxation, and the like, from where does the money for households and private enterprise come?
Good intervention, Joe.
It’s also worth pointing out that, other things being equal, higher levels of government debt are associated with subsequent lower levels of growth in economies.
Increasing government debt is not a free lunch.
Oh dear, Steve, have you caught a nasty case of mmt-itis?
1.Government debt terms and conditions are dependent on each debt issue.
2. Of course governments can and do run/generate/ end up with surpluses!! And reduce national debt.
And in some circumstances, that’s positive.
You are confusing levels of discourse. MMT is an absolute ….-er for that.
@ Chris Moore,
Steve is asking the question of where money comes from in the first place before it is available to be collected in taxation or ‘borrowed back’ by issuing government bonds? And, if we consider money to be an IOU, who is accepting the liability for those IOUs so that we can have the credits to be able to use for our own needs?
This seems a fair question. No need to be so dismissive.
Thank you so much for this article Caron. I was beginning to think it was just me that was finding the “families and pensioners” bit irksome.
I totally get the need to kick the Tories out at the next GE, that to achieve that aim we need to appeal to the “soft” Tory voters in the so called “Blue Wall” seats mainly in the south. But, and it’s a big but, as you rightly pointed out, it does come across as if we aren’t bothered about the rest, which is far from the truth (at least I hope that’s the case). In fact, in the area where we are campaigning in the heart of The Black Country in the West Midlands, people are telling us it comes across as patronising and very southern.
Eight million young workers have never worked in an economy with sustained increasing average earnings, yet they are faced with punitive age related cost of living increases and are further away from home ownership than ever. We ignor them at our peril.
Lib Dems get few media opportunities to get our messages across, we really should be appealing to the widest possible audience.
Hi Peter,
I understand perfectly well where his question is coming from.
But the fact is MMT’s creation myth of the origins of money has no bearing on actual government decisions on taxing and spending.
That is to totally confuse levels of discourse. Yet we witness that confusion time and again on here.
Thanks to Peter Martin!
If/when a government creates a surplus or a profit for itself or breaks even/“balances the books”, from whom does the money come to achieve those situations?
Steve, I’ve always thought of the bank account at the treasury is a bit like the ether. Monies paid out to departments emerges from the dust and monies received from HMRC disappears into the dust. Any difference is added/ subtracted from the national debt as amounts the government owes itself.
@ Chris Moore,
“MMT’s creation myth of the origins of money has no bearing on actual government decisions on taxing and spending.” ? ? ?
What were you doing three years ago? You might have noticed the Govt was spending big time to support the economy during the Pandemic. Where do the think that money came from? It wasn’t really borrowed from the BoE. That would be Government borrowing from itself. It was the same story after the years following the 2008 GFC when Govt needed to prevent an economic collapse.
This is not to suggest that the Govt should just create new spending money at will whenever someone in government feels the need. There is certainly an inflation risk if government overdoes it. If you are saying that govt spending increases will need to be matched by increased tax revenue in the immediate future I would agree with you. At least for now. That could change if the credit squeeze becomes a credit crunch/crash and we have another similar meltdown.
Either way, the origin of money does need to be properly acknowledged. If you think the current theory is a “myth” you need to come up with a better one.
The growth of money in the economy has to keep up with nominal GDP growth which is itself a combination of monetary inflation and real growth in output of goods and services.
Money supply is increased in two ways – by government deficit spending (financed by banks buying bonds) and by banks issuing more new loans than are repaid.
Where and whether growth in money supply drives inflation depends on where the money goes. If the majority of bank lending is directed to the housing market and/or the stock market then inflation will appear in asset prices i.e. an asset bubble.
If growth in lending for personal consumption exceeds growth in the the supply of goods and services that can be produced domestically then inflation will appear in both domestic prices and via imported goods.
If new bank lending to SME firms is spent on productive investment it will generally aid in increasing productivity and job creation driving real economic growth without inflation.
After the 2008 financial crisis, continuing near zero interest rates and QE put the banks in a position to restore the asset price inflation that had occurred in the decade prior to 2008 (and hence their collateral), but had little impact on Consumer Price inflation from 2012 as government deficits were gradually reducing.
After the pandemic (from Q3 2021), consumer price inflation took off as deficit spending money growth had outstripped growth in the the supply of goods and services that could be produced domestically or imported as a consequence of supply chain and energy market disruptions.
The LibDem manifesto is likely to have a strong focus on green growth initiatives and deficit financing of infrastructure spending and council house building/insulation Britain’s energy crisis has been years in the making, thanks to the Conservatives
The government has three principal means by which it can influence economic activity in a mixed market economy such as the UK i.e. fiscal policy, monetary policy (via its central bank) and structural reforms.
The objective of these policies is to stabilise the economy over the course of the business cycle by keeping inflation and unemployment at low levels , while keeping real GDP growth moving in a positive direction.
The direction of fiscal policy (the proportion of government spending financed by taxes versus new bond issues in excess of repayments) is principally determined by how much new money can be safely injected into the economy by deficit spending financed by banks at any given time.
Monetary policy exercised by the Bank of England is focused on influencing the level of new money creation by commercial banks that is injected into the economy.
Structural reforms are focused on flexibility in labour markets and investment in training; boosting competition e.g. challenger banks; encouraging innovation through investment in research and development;improving the efficiency and equity of public taxation systems and addressing the challenges of population ageing on the welfare state.
When the government sets its budget plans the central bank needs to ensure the growth of money in the economy keeps up with nominal GDP growth. It can do that by targeting nominal GDP growth in place of an inflation target based on the governments fiscal stance (i.e. the level of deficit financing) fine tuning as circumstances dictate NOMINAL GDP TARGETING FOR DUMMIES
@ Joe Bourke I notice Joe highlights, ‘NOMINAL GDP TARGETING FOR DUMMIES’ produced by the right wing neo-liberal free market Adam Smith Institute.
Bearing in mind not just the electoral outcome for the party when it last associated itself with neo-liberal free market economics when in government (not to mention the social misery and political outcomes for the country), could Joe please clarify whether or not that is the case he argues for ?
I hope this isn’t the case, because otherwise one is reminded of Sir Humphrey quoting Boethius to Jim Hacker : “si tacuisses, philosophus mansisses’. Others may translate that from the Latin if they wish.
The “growth in money supply” is really the wrong way to look at the problem. Firstly there’s no agreed definition of what “money supply” actually means or how to measure it. Secondly, even if we could agree on something like a definition, there’s no evidence that an increase in any of the possible ways we could measure it would be in itself inflationary -or a decrease deflationary.
In various locations up and down the the country there will be substantial amounts of cash locked away in safes and bank vaults. Or there will be National savings certificates that have been forgotten about. They will contribute to the money supply but how does the rest of the economy know they are there? It can’t. Therefore they may as well not exist and so cannot matter at all.
This will change the moment someone tries to spend the cash/money. It’s spending that matters rather than the total amount of cash in the system. Bank lending has important short term consequences insofar as borrowers are invariably spenders. But they don’t make themselves any richer by borrowing. They are just bring forward future spending power. They’ll actually make themselves poorer if interest rates and other fees are taken into account but we’ll leave this aside for now.
/cont
After the initial spending power has been exhausted the spending power of the borrower is less than it would have been had they not borrowed in the first place due to the loan having to be repaid. If everyone is borrowing and repaying at random times the lending/borrowing is macroeconomically neutral. However if interest rates are lowered we see a surge in borrowing which gives a *temporary* stimulus to the economy. Consequently when rates are increased we see a *temporary* depressant effect.
If we want a permanent effect, as any rational person should, then an adjustment of everyone’s spending power by the tightening or loosening of fiscal policy is the only option.
David Raw,
here is the New Statesman on Nominal GDP targeting Is anybody running the Bank of England?
“The main issue, though, is the Bank’s remit. It is supposed to keep inflation at 2 per cent. When one considers the last 25 years in total, it has been remarkably successful. But having such a strict target while only having blunt tools at its disposal causes all sorts of problems. For example, the Bank is deemed to have been successful if it keeps inflation to 2 per cent even if it has been forced to engineer a recession and all the job losses and other misery that goes with to achieve the goal. The remit of the Bank needs to change: economic growth, employment and equality all need to be given greater consideration. Inflation targeting should be replaced with nominal GDP targeting, allowing the Bank to tackle high inflation without hindering economic growth.
Bank of England and government policies have entrenched income and generational inequality while delivering low economic growth. While it is the government that is largely at fault, we need a shake-up at the Bank – in both personnel and its remit – to stop the rot.”
Mark Pack writes in his piece today “There’s a consistent message from what voters tell our canvassers, from what our own research tells us and from what the opinion polls say. The public is most concerned about the NHS, the cost of living and the state of the economy”. These are the issues we need answers for.
Peter Martin,
the flows of new net lending by banks (i.e. money creation) in any period is easily measured. It is this flow of new money creation for consumption and productive investment that needs to increase in line with and to provide for nominal gdp growth. The stock of cash locked away in safes and bank vaults. or National savings certificates that have been forgotten about is unimportant for these purposes.
Deficit spending generally can increase overall spending in the economy. However, when that deficit is financed by borrowing existing deposits of households or non-bank entities it does not increase the money supply.
Government financing of deficit spending only increases the money supply when government bonds are bought by the private banks or Bank of England.
The government can safely increase deficits without inflationary consequences if it is borrowing existing money from the public and there are spare resources in the economy for sale. If it creates new money to finance spending via banks when resources are constrained or in competition with accelerating private debt creation it creates inflation, as we have seen develop since the summer of 2021.
Overall spending in the economy is how we measure gdp and spending is itself constrained by the available supply of real goods and services that can be produced domestically or purchased overseas based on the exchange rate of the domestic currency.
Deficit spending is required for long-term capital investment and fiscal stimulus to counter recessions or supply shocks like a pandemic or war and rising unemployment. Monetary policy is a more effective and flexible tool in addressing inflation or deflation of the money supply and/or nominal gdp targeting by expanding or contracting the flow of lending.
“the flows of new net lending by banks (i.e. money creation) in any period is easily measured.”
Maybe but this isn’t the same thing as “money supply”
“when that deficit is financed by borrowing existing deposits of households or non-bank entities it does not increase the money supply.” ???
A big inconsistency here. If I have a £1000 in cash it can be swapped for a Govt bond which means I still have a £1000. I’m no worse off. I can swap them back for cash any time I like. So there’s no justification for not counting some forms of Govt IOU as “money supply” but not others. What matters is whether we want spend those IOUs on real things in the economy.
The point of all this is that some dreadful ideas have taken hold in economic thinking. The worst at the moment is that taking money from mortgagees and giving it to commercial banks is the best way to combat inflation when it clearly doesn’t even reduce the so-called “money supply”. The only way to do that is to tax it out of existence.
So naturally good hearted Lib Dems want to help by subsidising those at the sharp end, those “struggling with rising bills” but this new “taxpayer money” is just going to end up with the banks. It’s not a solution. A real solution is simply to not give the banks the money in the first place.
I find this situation cruel to say the least.
As the return to school looms new uniform is added.
My little granddaughter has had two one hour sessions at nursery and it worked. Still early days for a child with autism. She speaks a little more now. Also, eating more real food, less liquid.
As a disabled person and a contributing on several subjects for the Westminster Policy Forums.
Something needs to happen, from housing to heating, from grocery bills to health.
Ed, this is not acceptable.
Peter Martin,
Cash and bank deposits are what we refer to as money supply for these purposes. Cash is less than 3% of money supply. Government bonds are investments like shares.
When a household or non-bank entity buys a bond it swaps a bank deposit for a security. The government will very quickly spend that money back into the economy to cover any shortfall between its receipts an expenditures, reinstating it as bank deposits with suppliers and employees. Spending has taken place in this case, but aggregate money supply and bank reserves are unaffected.
It is only when the government sells bonds to banks who can create deposits that money supply flows are affected and spent into the economy increasing the deposits of the recipients of government spending.
The government belatedly took action on energy price support with wind fall taxes on the bumper profits being made by the oil and gas producers. We should go further with a social tariff as noted in the first comment to this article.
The big banks are now making the same kind of bumper profits as the energy companies while keeping interest paid on savings at low levels.
When the Thatcher administration hiked interest rates to combat inflation in 1981 they put a windfall tax on bank profits to clawback the excess profits. There is no good reason that the same kind of clawback could not be implemented now and used as a temporary support measure to mitigate the impact of these rapid interest rate increases on financially stressed mortgage holders.
Thanks to all who have contributed to the question about balancing books!
To this interested non-expert, it seems that « The Books » are complex and, possibly, not widely or fully understood and that bank-rate changes may or may not have an effect.
Socio-economic forecasting does not seem to be sufficiently accurate from the Treasury or from the B. o E. Besides which, the B o E lacks representatives from the non-banking community. Citizens from the Trussell Trust and a housing charity might make the BoE more realistic and efficient. (and Helen Dudden!).
As circumstances change, so balancing the books becomes less predictable and so promising book balancing becomes questionable.
What does seem to be acceptably secure is that unless the government spends more than it receives in taxes, it cannot sustain a reasonably equitable, sustainable, benign and efficient society. Consequently, if matching governmental expenditures to tax receipts is neither wise nor practically possible, it might help if those talking of « balancing the books » made what they meant in practice clear.
P. S. If getting the government’s books to « balance » results in millions of citizens not being able to balance their books, even with chronically hungry children and cold homes, what is the point of the book balancing activities of H. M.G?
P. P. S. Does government debt include money owed to itself and/or the money in what are, effectively, savings schemes?
@ Joe ,
It’s probably not that interesting to most people why one type of Govt IOU is somehow counted as money and not part of the total debt and another arbitrarily isn’t money but is part of the debt.
What is of interest is why interest rates have to rise to combat inflation when those interest rates feed through to higher costs in the housing sector. Why is taking away money from a mortgage payer and giving it to one of the big commercial banks considered to be reducing the money supply? If I have to pay a bank fine for going into the red inadvertently, is this reducing the money supply too? I’d say it was just the bank taking money from me and keeping it for themselves.
The same for renters too. Their increased payment either end up with wealthier landlords or wealthier banks.
Sure, you can apply a sticking plaster solution and apply a windfall tax but this only recovers a fraction of the financial transfers. If there is an inflation problem and aggregate demand needs to be reduced we should all have our spending ability reduced by having to pay more tax. It’s the only fair way.
It really should be a no brainer.
Steve, from what I’ve read it appears to be about one third of it.
Who the government owes money to is shown on Page 23of the Debt management report:
The majority of UK public debt used is held by UK insurance and pension funds and overseas investors own about 28% of UK gilts.
The Asset Purchase Facility is purchases by the Bank of England as part of quantitative easing. This accounts for 26% of gilt holdings.
Total debt (government and private) is almost always increasing from year to year as a proportion of GDP. That is what drives inequality. For every debtor there is a creditor to whom the debt is owed.
In addition to bank lending, money is created when the BofE engages in open market operations i.e. when the bank buys bonds from a non-bank seller. Those funds become new deposits in the sellers account. QE is large scale open market operations swapping one debt of government (a bond) for another (a bank deposit). These operations have little, if any, impact on spending in the economy and hence gdp growth. They are primarily directed at propping up financial markets for stocks and bonds and house prices by attempting to lower longer-term interest rates and hence increasing investment asset values when banks and other financial institutions are under pressure and reducing lending.
There is no free lunch for the taxpayer only for big banks that have exchanged their low yield government bonds for deposits with the Bank of England.
Some former BoE officers have called for a windfall tax on banks or changing the structure of reserves remuneration at the BOE to reduce the cost of servicing the national debt UK should impose a windfall tax on banks,
This tax payer does not seek a free lunch.
What he seeks is a government which communicates with him and his fellow citizens, in a clear and forthright manner, not least in matters of socio-economics/finance, and which does not hide behind a facade of unclear/restricted code alleged information to attack essential infrastructures, increase inequity and, possibly permanently harm thé some 25% of our children who are,
and have been, permanently underfed.
Statements to the effect that H. M. G has no money but tax paid money is a society damaging, manipulative myth.
He notices that the Debt management report seems to be unlike a citizen’s idea of debt and more like an account of financial transactions.
He also notices that most of the interest paid goes into our economy, which despite the likelihood that such inequitably favours the rich (Please see the Richard Murphy blog), seems to be reasonably justifiable, but he wonders why we set ourselves up to pay interest to non-members of our society.
It is much the same puzzlement over the selling of shares in essential water companies, and our country, to those who have no geographical, social, ecological or loyalty connections with these companies but only, apparently, personal financial benefit ones.
As Mark Pack has written “There’s a consistent message from what voters tell our canvassers, from what our own research tells us and from what the opinion polls say. The public is most concerned about the NHS, the cost of living and the state of the economy.
The NHS needs significant funding to address the concerns of the public. Funding for building new hospitals will typically come from borrowing. Progressive taxation is needed to finance increasing the pay of (in real terms) and training more nurses, ambulance drivers, junior doctors, GPs etc., and investing in new medical equipment.
Cost of living issues are primarily concerned with inflation. Particularly rising prices for energy, fuel, food, rents, mortgage payments. Wholesale oil and gas prices are back to pre-war level Gas prices back under levels seen before Russia’s invasion of Ukraine Balancing the books is ultimately about keeping inflation under control by a combination of using taxation as the source of funding for day to day government spending and constraining excess credit creation by banks for non-gdp spending or excess consumption. That can be done more effectively with nominal GDP targeting.
State of the economy is about jobs, wages and growth. Keeping unemployment low and providing for real wage growth can be delivered as it always has been in years past – by a combination of government investment in housing and infrastructure and enabling SME’s to get access to lending at reasonable rates of interest (as both the government and largest firms can) for investment in new technologies that provide for job creation, improved productivity and enhanced living standards.
“Progressive taxation is needed to finance increasing the pay of (in real terms) and training more nurses, ambulance drivers, junior doctors, GPs etc., and investing in new medical equipment.”
And training better management? Especially bearing in mind the apparent attitudes of some management at the Countess of Chester Hospital?
@ Steve,
“Does government debt include money owed to itself and/or the money in what are, effectively, savings schemes?”
Good question.
Especially as the BoE, which is essentially a part of Government (although the official fiction is one of independence), has ended up owning £billions in government bonds. It looks to many that this shouldn’t be counted. The mainstream do count it. However, in this instance the mainstream have right – but for the wrong reasons.
Consider the case of an individual,or organisation, in the private sector buying up £N in government bonds or gilts. The government debt has increased by £N as everyone will agree. The Central bank then buys up those bonds so the owner now has £N in cash. The government debt equals everyone else’s assets which haven’t changed. The BoE has come out all square and so has our individual. So the government’s debt must also be unchanged.
The confusion arises because the mainstream counts bonds as debt but not cash. So they fudge the issue by counting the £N as government debt which they shouldn’t because the Government owns the BoE, but they should count the £N which the BoE has created to buy them -but they don’t.
The two mistakes end up cancelling each other out!
See what you mean about the “deserving” terminology Caron. Having once used the term “decent tenants” in a target letter can’t really point the finger though. Not my finest hour.