#RethinkMoney — Part 2: Shining a torch on the National Debt

Duncan Poundcake
6 min readJul 3, 2020

Since writing Part One, the UK has increased what we owe to £2 trillion pounds as a nation. We call this the ‘National Debt’.

But who do we owe this money to? Is it really debt, or is it something else?

The Government sets its budget every year — £803 billion for 2017–18. Every Government department has its own budget. For a break down , scroll down to ‘2.17 Departmental Expenditure Limits’ The Government can only ever estimate how much tax revenue it will receive. £744 billion for 2017–18 but there are no guarantees. Treasury and economic predictions are often wrong. Tax receipts do not come in equal amounts, as predicted every month. Obviously, there are highs and lows. The Financial End of Year being an obvious spike in revenue. So if the Government doesn’t know, month by month, what its revenue will be against its budgeted spending, it has two logical choices:

  1. Don’t pay any bills until there is enough money in the The Consolidated Fund, to do so.
  2. Borrow or create the money, to smooth out cash-flow, enabling it to pay its bills and let tax revenues catch up when they can.

As we know from our own experience, the Government does not send you a letter every month saying ‘Sorry we cannot pay your pension, benefits, GPs, Doctors, Nurses, etc. this month, as we have not received enough tax. Could you a wait a few more weeks until we have enough money?’

The Government always pays its bills on a daily, weekly and monthly basis, so it MUST be option 2.

So we have established, for practical reasons, that the Government does not wait for taxes to be paid, before it spends. It MUST create or borrow the money first, to spend it.

In Part 1, I posed the question: ‘What does the National Debt consist of?

Being the National Debt, one would think, lots of debt. So surely 1.9 Trillion of Gilts, as that is how the Government raises cash? Wrong.

This is where we have to delve into the National Loan Fund accounts for 2016–17 What we discover is both interesting and confusing: