Misplaced Pages

#708291

45-716: The PSNCR is distinct from, but often confused with, the United Kingdom national debt , which is the total amount of money owed by the British Government to its creditors at any given time. The greater the PSNCR, the more the National Debt will tend to increase. The PSNCR is also distinct from the debt interest, which is the amount the UK government must pay annually to finance the existing national debt. The PSNCR

90-508: A PSNCR of approximately £5 billion per annum, but by sticking to the spending plans of the outgoing Conservative Government, this was gradually turned into a modest budget surplus. During the Spending Review of 2000, Labour began to pursue a looser fiscal policy, and by 2002 annual borrowing had reached £20 billion. The national debt continued to increase, together with sustained economic growth, increasing to 37% of GDP in 2007. This

135-625: A biannual Financial Stability Report. The bank provides wholesale banking services to the UK Government (and to over a hundred overseas central banks). It manages the UK's Exchange Equalisation Account on behalf of HM Treasury and it maintains the government's Consolidated Fund account. It also manages the country's foreign exchange reserves and is custodian of the UK's (and others') gold reserves . The bank also offers 'liquidity support and other services to banks and other financial institutions'. Commercial banks customarily keep

180-685: A net worth of £120,000 per head of the population. Based on such a method of calculation, UK national debt would be equivalent to, or potentially exceed, historic highs. Bank of England King Charles III [REDACTED] William, Prince of Wales [REDACTED] Charles III ( King-in-Council ) [REDACTED] Starmer ministry ( L ) Keir Starmer ( L ) Angela Rayner ( L ) ( King-in-Parliament ) [REDACTED] Charles III [REDACTED] [REDACTED] [REDACTED] The Lord Reed The Lord Hodge Andrew Bailey Monetary Policy Committee The Bank of England

225-586: A privilege for employees. Previously, the bank had maintained private and commercial accounts for all sorts of customers, including individuals, small businesses and public organisations; but a change of policy following the First World War saw the bank increasingly withdraw from this type of business to focus more clearly on its central banking role. During the Nine Years' War , the Royal Navy

270-518: A proportion of GDP. In 1976, the British Government led by James Callaghan faced a Sterling crisis during which the value of the pound tumbled and the government found it difficult to raise sufficient funds to maintain its spending commitments. The Prime Minister was forced to apply to the International Monetary Fund for a £2.3 billion rescue package; the largest-ever call on IMF resources up to that point. In November 1976,

315-469: A sizeable proportion of their cash reserves on deposit at the Bank of England. These central bank reserves are used by the banks to settle payments with one another; (for this reason the Bank of England is sometimes called 'the bankers' bank'). In exceptional circumstances, the Bank may act as the lender of last resort by extending credit when no other institution will. As a regulator and central bank,

360-510: A statutory regulator . The bank's headquarters have been in London's main financial district, the City of London , since 1694, and on Threadneedle Street since 1734. It is sometimes known as "The Old Lady of Threadneedle Street", a name taken from a satirical cartoon by James Gillray in 1797. The road junction outside is known as Bank Junction . The bank, among other things, is custodian to

405-462: A third of the cost of servicing the debt is paid by the government to itself. In 2018, this reduced the annual servicing cost to approximately £30 billion (approx 2% of GDP, approx 5% of UK government tax income). In 2017, due to the Government's budget deficit ( PSNCR ), the national debt increased by £46 billion. The Cameron–Clegg coalition government in 2010 planned that they would eliminate

450-413: Is empowered to act in the event of a bank failure 'to protect the UK's vital financial services and financial stability'. Between 1715 and 1998, the Bank of England managed Government Stocks (which formed the bulk of the national debt ): the bank was responsible for issuing stocks to stockholders, paying dividends and maintaining a register of transfers; however in 1998, following the decision to grant

495-528: Is financed by borrowing – principally by means of the sale of government gilt edged stocks, usually known as gilts . Since 2009 large quantities of gilts have been created and repurchased by the Bank of England under its policy of quantitative easing , with a view to stimulating economic growth. In 1997 the Labour government of Tony Blair inherited a PSNCR of approximately £5 billion per annum, but by sticking to

SECTION 10

#1732781095709

540-760: Is missed the Governor is required to write an open letter to the Chancellor of the Exchequer explaining the situation and proposing remedies. Other than setting the base interest rate, the main tool at the bank's disposal in this regard is quantitative easing . The bank has a monopoly on the issue of banknotes in England and Wales and regulates the issuance of banknotes by commercial banks in Scotland and Northern Ireland. (Scottish and Northern Irish banks retain

585-625: Is that the "consensus" regarding the problematic nature of the national debt is incorrect. The view proposed by economists such as Professor Stephanie Kelton of Stony Brook University in New York is that there is often too much emphasis in political discussions on 'balancing the books'. The origins of the British national debt can be found during the reign of William III , who engaged a syndicate of City traders and merchants to offer for sale an issue of government debt. This syndicate soon evolved into

630-608: Is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694 to act as the English Government 's banker and debt manager, and still one of the bankers for the Government of the United Kingdom , it is the world's eighth-oldest bank . The bank was privately owned by stockholders from its foundation in 1694 until it was nationalised in 1946 by

675-524: Is the cash difference between government receipts and spending. The British government debt is rising due to a gap between revenue and expenditure. Total government revenue in the fiscal year 2015/16 was projected to be £673 billion, whereas total expenditure was estimated at £742 billion. Therefore, the total deficit was £69 billion. This represented a rate of borrowing of a little over £1.3 billion per week. The British government finances its debt by issuing gilts , or Government securities. These securities are

720-635: Is the total quantity of money borrowed by the Government of the United Kingdom at any time through the issue of securities by the British Treasury and other government agencies. The UK national debt is often confused with the government budget deficit (officially known as the Public Sector Net Cash Requirement (PSNCR)). For example, the then Prime Minister David Cameron was reprimanded in February 2013 by

765-535: Is the total quantity of money borrowed by the Government of the United Kingdom at any time through the issue of securities by the British Treasury and other government agencies. At the end of March 2023, UK general government gross debt was £2,537.0 billion, or 100.5% gross domestic product . Approximately a third of the UK national debt is owned by the British government due to the Bank of England 's quantitative easing programme, so approximately

810-556: The Attlee ministry . In 1998 it became an independent public organisation, wholly owned by the Treasury Solicitor on behalf of the government, with a mandate to support the economic policies of the government of the day, but independence in maintaining price stability. In the 21st century the bank took on increased responsibility for maintaining and monitoring financial stability in the UK, and it increasingly functions as

855-700: The COVID-19 pandemic , national debt reached £2.004 trillion for the first time due to government spending on virus measures, such as the Coronavirus Job Retention Scheme ("furlough scheme"). The national debt stood at £1.786 trillion at the calendar year end 2018, or 85.2% of GDP; as published by the Office for National Statistics . However, the OECD claimed the national debt to be 118.3% of GDP as of 5 January 2021 The annual amount that

900-537: The UK Statistics Authority for creating confusion between the two, by stating in a political broadcast that his administration was "paying down Britain's debts". In fact, his administration had been attempting to reduce the deficit, not the overall debt; which continued to rise even as the deficit was reduced. The public debt increases or decreases as a result of the annual budget deficit or surplus. The British government budget deficit or surplus

945-414: The bank rate ), which is decided by the bank's Monetary Policy Committee (MPC). (The MPC has devolved responsibility for managing monetary policy ; HM Treasury has reserve powers to give orders to the committee "if they are required in the public interest and by extreme economic circumstances", but Parliament must endorse such orders within 28 days.) As of 2024 the inflation target is 2%; if this target

SECTION 20

#1732781095709

990-521: The 20-year period from 1986/87 to 2006/07 government spending in the United Kingdom averaged around 40% of GDP. As a result of the 2007–2008 financial crisis and the Great Recession , government spending increased to a historically high level of 48% of GDP in 2009/10, partly as a result of the cost of a series of bank bailouts . In July 2007, Britain had government debt at 35.5% of GDP. This figure rose to 56.8% of GDP by July 2009. During

1035-539: The Bank of England , eventually financing the wars of the Duke of Marlborough and later imperial conquests. The national debt increased dramatically during and after the Napoleonic Wars , rising to around 200% of GDP. Over the course of the 19th century the national debt gradually fell, only to see large increases again during World War I and World War II . After the war, the national debt once again slowly fell as

1080-538: The Bank of England has not offered consumer banking services for many years, but it still does manage some public-facing services (such as exchanging superseded bank notes). Until 2017, Bank staff were entitled to open current accounts directly with the Bank of England and were given the unique sort code of 10-00-00. Under the terms of the Banking Act 2009 the bank is the UK's Resolution Authority for any bank or building society judged ' too big to fail '; as such it

1125-567: The Debt Management Office and custodian of its securities . Ever since its foundation in 1694, the bank had provided a retail banking service for the Government; however in 2008 it decided to withdraw from offering these services, which are now provided by a range of other financial institutions and managed by the Government Banking Service . Until 2016, the bank provided personal banking services as

1170-621: The English government to borrow the £1.5m that it wanted to use to expand the Royal Navy. In 1691, William Paterson had proposed establishing a national bank as a means of bolstering public finances. As he later wrote in his pamphlet A Brief Account of the Intended Bank of England (1694): "...it was proposed some years ago that a publick transferrable Fund of Interest should be established by Parliament, and made convenient for

1215-535: The IMF announced its conditions for a loan, including deep cuts in public expenditure, in effect taking control of UK domestic policy. The crisis was seen as a national humiliation, with Callaghan being forced to go "cap in hand" to the IMF. In the late 1990s and early 2000s, the national debt dropped in relative terms, falling to 29% of GDP by 2002. In 1997, the Labour Government of Tony Blair had inherited

1260-585: The PSNCR then climbed through the Great Recession to peak at £206.116 bn in August 2009 and dropped to £71.135 bn in April 2014. Coalition government policy was to bring down the PSNCR to zero within the lifetime of the 2010–2015 parliament. In his budget speech in March 2011 Chancellor of the Exchequer , George Osborne stated that "Our fiscal mandate is to achieve a cyclically-adjusted current balance by

1305-407: The UK's savers, investors and borrowers against threats to the financial system as a whole. Threats are detected by the bank's surveillance and market intelligence functions, and dealt with through financial and other operations (both at home and abroad). The majority of these safeguards were put in place in after the 2007–2008 financial crisis : In 2011 the bank's Prudential Regulation Authority

1350-768: The UK's vote in the referendum of that month to leave the European Union . Standard & Poor's had hitherto maintained the UK's AAA status. All the main political parties in Britain agree that the national debt is too high, but disagree on the best policy to deal with it, with Conservative Party politicians advocating a larger role for cuts to public spending. By contrast, the Labour Party tends to advocate fewer cuts and more emphasis on economic stimulus , higher rates of taxation on wealthier individuals and corporations and new taxes for those. Another body of opinion

1395-448: The bank operational independence, responsibility for government debt management was transferred to a new Debt Management Office , which also took over Exchequer cash management and responsibility for issuing Treasury bills from the bank in 2000. Computershare took over as the registrar for UK Government bonds ( gilt-edged securities or 'gilts') from the bank at the end of 2004. The bank, however, continues to act as settlement agent for

Public Sector Net Cash Requirement - Misplaced Pages Continue

1440-558: The deficit by the 2015/16 financial year. However, by 2014 they admitted that the structural deficit would not be eliminated until the financial year 2017/18. This forecast was pushed back to 2018/19 in March 2015, and to 2019/20 in July 2015, before the target of a return to surplus at any particular time was finally abandoned by the then Chancellor of the Exchequer George Osborne in July 2016. The UK national debt

1485-1023: The end of the rolling five year forecast period – which is currently 2015–16" but having failed to do this by 2015 his revised aim was to balance the books by 2020. Following the departure of George Osborne, his replacement Philip Hammond dropped the goal of eliminating the budget deficit, giving himself leeway to help the economy cope with the slowdown expected as Britain prepares to leave the European Union . United Kingdom national debt King Charles III [REDACTED] William, Prince of Wales [REDACTED] Charles III ( King-in-Council ) [REDACTED] Starmer ministry ( L ) Keir Starmer ( L ) Angela Rayner ( L ) ( King-in-Parliament ) [REDACTED] Charles III [REDACTED] [REDACTED] [REDACTED] The Lord Reed The Lord Hodge Andrew Bailey Monetary Policy Committee The United Kingdom national debt

1530-819: The first time since 1978 that the country has not had an AAA credit rating. This was described as a "humiliating blow" by Shadow Chancellor Ed Balls . George Osborne, the Chancellor, said that it was "a stark reminder of the debt problems facing our country", adding that "we will go on delivering the plan that has cut the deficit by a quarter". France and the United States of America had each lost their AAA credit status in 2012. The agency Fitch also downgraded its credit rating for British government debt from AAA to AA+ in April 2013. Further downgrades were made by Fitch and Standard & Poor's in June 2016, following

1575-484: The government must borrow to plug the gap in its finances used to be known as the public sector borrowing requirement , but is now called the Public Sector Net Cash Requirement (PSNCR). The PSNCR figure for the financial year end 2017 was £46 billion, total British GDP in 2017 was £1.959 trillion. By historic peacetime standards, the national debt is large and growing. There is concern that official calculations of national debt omit many 'off-book' liabilities which mask

1620-439: The interest that the government must pay to service the existing national debt. In 2012, the annual cost of servicing the public debt amounted to around £43bn, or roughly 3% of GDP. By international standards, Britain enjoys very low borrowing costs. Like other sovereign debt, the British national debt is rated by various ratings agencies. On 23 February 2013, it was reported that Moody's had downgraded UK debt from Aaa to Aa1,

1665-408: The official gold reserves of the United Kingdom (and those of around 30 other countries). As of April 2016 , the bank held around 5,134 tonnes (5,659 tons) of gold, worth £141 billion. These estimates suggest that the vault could hold as much as 3% of the 171,300 tonnes of gold mined throughout human history. According to its strapline , the bank's core purpose is 'promoting the good of

1710-484: The parsimonious spending plans of the outgoing Conservative Government, this was gradually turned into a modest budget surplus. Labour began to pursue a looser fiscal policy following the 2000 Spending Review , and they started to run an annual deficit from January 2002. This cash requirement reached £43.935 bn in September 2005 before declining to £23.916 bn in September 2007. Even excluding bank interventions,

1755-412: The people of the United Kingdom by maintaining monetary and financial stability'. This is achieved in a variety of ways: Stable prices and secure forms of payment are the two main criteria for monetary stability. Stable prices are maintained by seeking to ensure that price increases meet the Government's inflation target. The bank aims to meet this target by adjusting the base interest rate (known as

1800-507: The right to issue their own banknotes, but they must be backed one-for-one with deposits at the bank, excepting a few million pounds representing the value of notes they had in circulation in 1845.) In addition the bank supervises other payment systems , acting as a settlement agent and operating Real-time gross settlement systems including CHAPS . In 2024 the bank was settling around £500 billion worth of payments between banks each day. Maintaining financial stability involves protecting

1845-399: The simplest form of government bond and make up the largest share of British government debt. A conventional gilt is a bond issued by the British government that pays the holder a fixed cash payment (or coupon ) every six months until maturity, at which point the holder receives the final coupon payment and the return of the principal. Distinct from both the national debt and the PSNCR is

Public Sector Net Cash Requirement - Misplaced Pages Continue

1890-500: The true nature of the debt: for example, Nick Silver of the Institute of Economic Affairs estimated the current British liabilities, including state and public pensions, as well as other commitments by the government, to be near £5 trillion, compared with the Government's estimate of £845 billion (as of 17 November 2010) These liabilities can be compared to total net assets (2010 figures) of £7.3 trillion, which equates to approximately

1935-542: Was defeated by the French Navy in the 1690 Battle of Beachy Head , causing consternation in the government of William III of England . The English government decided to rebuild the Royal Navy into a force that was capable of challenging the French on equal terms; however, their ability to do so was hampered both by a lack of available public funds and the government's low credit. This lack of credit made it impossible for

1980-437: Was due to extra government borrowing, largely caused by increased spending on health, education, and social security benefits. Between 2008 and 2013, when the British economy slowed sharply and fell into recession, the national debt rose dramatically, mainly caused by increased spending on social security benefits, financial bailouts for banks, and a significant drop in receipts from stamp duty, corporate tax, and income tax. In

2025-536: Was established to regulate and supervise all major banks, building societies, credit unions, insurers and investment firms in the UK (' microprudential regulation '). The bank also has a statutory supervisory role in relation to financial market infrastructures. At the same time, the bank's Financial Policy Committee (FPC) was set up to identify and monitor risks in the financial system , and to take appropriate action where necessary (' macroprudential regulation '). The FPC publishes its findings (and actions taken) in

#708291