The Govenor's speech

According to the FT the government has borrowed £74.2bn for the financial year to date. With the population of the UK circa 64 million that’s over £1,150 per person. In Q1 2015 UK government debt was £1.56 trillion or about £24,300 per person. The annual servicing cost of this debt was £43bn or 3% of GDP. These figures ignore off balance sheet items like public sector pensions, private finance schemes, guarantees and contingent obligations. We know off-balance sheet items need to be added back in order to paint a more accurate view of what’s going on. The trouble is the accounts are so fudged that there is no consensus. Estimates of total UK debt including these items range from £1.8 trillion to £4 trillion. A mid-range figure gives you £45,000 per person or about 1.75 times average earnings. When the rate of growth in debt appears to be slowing but the absolute level of debt continues to rise there comes a point when lenders say “no more”. This is where the Bank of England has a dilemma. Keeping rates low is not entirely within its control. Instead of listening to the Governor you have to get into the mind of Mr. Market that well known manic depressive. Does he think Gilts are a safe place to be?