Another thing that doesn't get mentioned very often in British politics is that the interest rate you are paying on your debt is almost as important in most cases as the deficit. As we see:
UK government debt is approximately £1.56 trillion. At the moment, the government is spending £43 billion a year on debt, which is an interest rate of 2.7% (note that these figures are pulled from Wikipedia and are ballpark. The point is to illustrate.)
Say that, because markets have faith in us, other options look risky, interest rates are low etc. the average interest rate we pay drops to 2%. Then we pay about £31 billion a year servicing the debt.
Say now instead that the rate we pay on average goes up to 4%. Then we are paying about £62 billion a year servicing the same debt.
Thus, a 2% swing in the rate of interest on debt means the government needs to find £30 billion more each year. I'm not saying that this is necessarily likely, but just pointing out that the rate of interest we pay is very important.
Incidentally, unserviceably high interest rates are one of the main reasons the Greeks are stuck in a black hole.
UK government debt is approximately £1.56 trillion. At the moment, the government is spending £43 billion a year on debt, which is an interest rate of 2.7% (note that these figures are pulled from Wikipedia and are ballpark. The point is to illustrate.)
Say that, because markets have faith in us, other options look risky, interest rates are low etc. the average interest rate we pay drops to 2%. Then we pay about £31 billion a year servicing the debt.
Say now instead that the rate we pay on average goes up to 4%. Then we are paying about £62 billion a year servicing the same debt.
Thus, a 2% swing in the rate of interest on debt means the government needs to find £30 billion more each year. I'm not saying that this is necessarily likely, but just pointing out that the rate of interest we pay is very important.
Incidentally, unserviceably high interest rates are one of the main reasons the Greeks are stuck in a black hole.