Tuesday, February 22, 2011

Disturbing view of UK finances

Financial interventions” have reduced Britain’s budget deficit by almost £2 billion, according to the Office for National Statistics (ONS).

Azad Zangana, a European economist at Schroder Investment Management, says this could reflect the fact that at present the improvement is only nominal and the shares would have to be sold for the value to be realised.  “It’s a political decision not to discuss these figures but it does show that the investments in the banks are making money. You can’t crystallise those gains until you sell those shares into the market and they don’t yet know what the impact of that sale would be.”

The coalition may have been cautious about advertising the figures because including the effects of financial interventions paints a more disturbing view about the state of government finances. This is the first year that the ONS has published data including the impact of the bail-outs alongside its headline figures. To illustrate the point, net debt excluding what the Treasury and the ONS call the temporary effects of financial interventions amounted to £889.1 billion, or 59.3% of GDP. The equivalent net debt figure including financial interventions was £2,322.7 billion, or some 154.9% of GDP.

IMO: In short the UK Government seems to be doing "creative accounting" for its own benefit and the benefit of its masters, the "civil servants".

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