Why will the debt get worse despite the cuts?

[hornetrider]

Firstly apologies for starting this thread - but this is a specific question about the numbers, rather than policies of the spending review.

I'm an educated bloke. There's mahoosive cuts a coming. However I must admit to being a tad confused - could someone enlighten me?

On Channel 4 News last night they showed that the debt would actually increase over the next 5 years from 800-odd billion to 1.3 trillion?

http://www.telegraph.co.uk/finance/comment/jeffran...

Telegraph said:

In terms of cash flowing out of the Treasury's coffers, there is no evidence of cutting back. Total government outlay is set to go up this year, next year and every year thereafter to 2014-15.

According to estimates from the Office for Budget Responsibility, the figures will be £696 billion in 2010-11 (up from £669 billion in 2009-10), then £699 billion, £711 billion, £722 billion and £737 billion.

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Worse still, there is the false notion that Mr Osborne's robust measures to narrow the gap between what we earn and what we spend will result in our total debt going down; they definitely will not.

The United Kingdom's public sector net debt is set to rise every year between now and 2014-15, from £932 billion to nearly £1.3 trillion. At that point, official debt (not including personal borrowings) will be almost twice the government's entire annual revenues. It seems like a paradox, but while the annual deficit is coming down – from £149 billion to £37 billion – total interest charges on accumulated debt will rise over the next five years from £44 billion to £63 billion.

Eeek! We're talking big bucks: £63 billion would cover half of our entire NHS bill and represents 50 per cent more than we currently spend on defence.

Now - if the interest charges are 'only' 40 odd billion a year, how come we're not paying down the debt if overall spending is going up, but big cuts are being made? I would have presumed the spending going up would be in part to pay down some of the 'capital'.

Yours,

Confused of Tunbridge Wells

[hornetrider]

Right - structural defecit - just wiki'd it. I had thought that was the total debt mountain (ie 800 billion) but its actually income v expenditure? Tax receipts v Govt spending?

So.. we're still spending more than we're earning, despite mahoosive cuts? Is this because it'll take a long time to lay off the 500k public sector jobs? Notice periods, redundancy payoffs etc?

[hornetrider]

oyster said:

Reminds of the lack of understanding of the difference between tax avoidance and tax evasion.

Oi, I know what that is.