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Pandemic debt needs to be treated like the WW2 debt and paid back over multiple generations.

Purple Orange

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Moderator note: Split from https://www.railforums.co.uk/threads/has-the-hs2-eastern-leg-been-shelved.220612/


some contracts have already been let for Phase 2a to Crewe. That is happening. And the Manchester leg is a racing certainty.



Which is precisely what is happening! (And has been the position for a year or so)
Precisely. And the idea that the current government finances will be a reason to cancel is pure hogwash. The pandemic debt needs to be treated like the WW2 debt and paid back over multiple generations. People need to grasp what we have been through. We need to see investment. Anything less than that will ground the economy to a halt and if the government uses it as a reason to make cuts, then like post 2010, it will be purely ideological.
 
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Ken H

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Precisely. And the idea that the current government finances will be a reason to cancel is pure hogwash. The pandemic debt needs to be treated like the WW2 debt and paid back over multiple generations. People need to grasp what we have been through. We need to see investment. Anything less than that will ground the economy to a halt and if the government uses it as a reason to make cuts, then like post 2010, it will be purely ideological.
It wont be ideological if the people who lend to HMG get frit about repayments and interest rates rise. Some of us remember Denis Healey having to go to the IMF because of over-borrowing. That could easily happen to UK unless some effort is made to cut borrowing.
And why should the covid cost be paid back by generations unborn? they have done lockdown etc once now. they have a precedent. They can easily do it all again. And, depressingly, probably will.
 

JonathanH

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The pandemic debt needs to be treated like the WW2 debt and paid back over multiple generations.
Its all very well saying that but there will be other calls which require borrowing before then. The thing about HS2 is that it needs to go a long way towards self-financing in terms of ticket sales and other indirect economic benefits) to be justified.

The shame about the Eastern leg is that some aspects of it are transformational in terms of journey time - in particular from the Nottingham area and Leeds to Birmingham. The Sheffield compromise is unfortunate but a consequence of geography.
 

Purple Orange

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Its all very well saying that but there will be other calls which require borrowing before then. The thing about HS2 is that it needs to go a long way towards self-financing in terms of ticket sales and other indirect economic benefits) to be justified.

The shame about the Eastern leg is that some aspects of it are transformational in terms of journey time - in particular from the Nottingham area and Leeds to Birmingham. The Sheffield compromise is unfortunate but a consequence of geography.

Can you name another railway that is self financing and why, over many many decades, could HS2 not deliver the required economic benefits?

It wont be ideological if the people who lend to HMG get frit about repayments and interest rates rise. Some of us remember Denis Healey having to go to the IMF because of over-borrowing. That could easily happen to UK unless some effort is made to cut borrowing.
And why should the covid cost be paid back by generations unborn? they have done lockdown etc once now. they have a precedent. They can easily do it all again. And, depressingly, probably will.

The quick answer is that the economic recovery we can instigate now and the subsequent growth will benefit the future generations as well as ours. Has paying off the debt for WW2, WW2 and Slavery Abolition harmed us? No. Have we benefited from the economic growth that followed these events? Yes. In fact to concentrate the debt reduction on one generation is economic suicide, that will impact future generations.

Strangely enough, the ‘people’ who lend to HMG are institutions like pensions funds, insurance companies, banks (including the BoE for quantitative easing) and investment funds, who buy up government bonds, who more than anything else, want a stable environment in which to see economic growth. We are also not the only country in this situation, so if you want to screw up the global economy now and for future generations, go ahead and place the burden of debt on the current generation.
 

Nicholas Lewis

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Its all very well saying that but there will be other calls which require borrowing before then. The thing about HS2 is that it needs to go a long way towards self-financing in terms of ticket sales and other indirect economic benefits) to be justified.

The shame about the Eastern leg is that some aspects of it are transformational in terms of journey time - in particular from the Nottingham area and Leeds to Birmingham. The Sheffield compromise is unfortunate but a consequence of geography.
HS2 will never pay for itself even with the low interest rate environment. Indeed most national infrastructure projects never get the money back except fixed crossings like the Dartford Tunnel and Severn bridge where there was a captive audience but they provide wider societal benefits which are difficult to put a value on. The danger with HS2 is that it hoovers up a disproportionate amount of the budget and leaves other more needy schemes left on the shelf for potentially a decade though.

Govt debt has largely never been paid back and the main criteria is that it is affordable and that depends on interest rates in the long run and there is currently little to suggest they will rise anytime soon and the debt management office are locking in very low rates fore decades ahead. In reality govt can print as much money as it wants but risks stoking inflation but again govt aided by BoE seem prepared to see inflation drift beyond 2% pa but the risk is they overcook it too much and have to slam on the brakes. Currently construction is very frothy in the UK so I suspect they will hold back on too much infrastructure spend and they will want GBR to get a grip of things and come up with solutions for cost effective delivery hence the MML market engagement approach whereby all options are on the table.
 

Yew

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HS2 will never pay for itself even with the low interest rate environment. Indeed most national infrastructure projects never get the money back except fixed crossings like the Dartford Tunnel and Severn bridge where there was a captive audience but they provide wider societal benefits which are difficult to put a value on. The danger with HS2 is that it hoovers up a disproportionate amount of the budget and leaves other more needy schemes left on the shelf for potentially a decade though.

Govt debt has largely never been paid back and the main criteria is that it is affordable and that depends on interest rates in the long run and there is currently little to suggest they will rise anytime soon and the debt management office are locking in very low rates fore decades ahead. In reality govt can print as much money as it wants but risks stoking inflation but again govt aided by BoE seem prepared to see inflation drift beyond 2% pa but the risk is they overcook it too much and have to slam on the brakes. Currently construction is very frothy in the UK so I suspect they will hold back on too much infrastructure spend and they will want GBR to get a grip of things and come up with solutions for cost effective delivery hence the MML market engagement approach whereby all options are on the table.
If we limit ourselves to the easy to the simplistic things like ticket sales, maybe not. But with large infrastructure projects, we must consider the wider economic stimulus and fiscal multiplication. And that's before we consider the environmental benefits of a modal shift from Cars and Planse, to Rail.
 

simonw

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Precisely. And the idea that the current government finances will be a reason to cancel is pure hogwash. The pandemic debt needs to be treated like the WW2 debt and paid back over multiple generations. People need to grasp what we have been through. We need to see investment. Anything less than that will ground the economy to a halt and if the government uses it as a reason to make cuts, then like post 2010, it will be purely ideological.
The debt is never paid off, it's just refinanced. Ok a few years national debt has been reduced but it's the exception not the rule.
 

Purple Orange

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The debt is never paid off, it's just refinanced. Ok a few years national debt has been reduced but it's the exception not the rule.

We will always be carrying national debt, but component parts of it are paid off. We no longer pay anything towards WW2, WW1 and the Slavery Abolition bill, all of which had their final payments relatively recently.
 

simonw

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We will always be carrying national debt, but component parts of it are paid off. We no longer pay anything towards WW2, WW1 and the Slavery Abolition bill, all of which had their final payments relatively recently.
We may have repaid the loans taken out, but only by borrowing money to replace the existing loan. To me this is not the same as paying off the debt.
 

RuralRambler

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We may have repaid the loans taken out, but only by borrowing money to replace the existing loan. To me this is not the same as paying off the debt.
I agree. We paid them off whilst we were still in deficit, so we borrowed money to repay past debt. We'd only be "paying off debt" if we had a surplus and used some of it to repay old debt. All we've done is borrow from Peter to repay Paul.
 

Nicholas Lewis

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We may have repaid the loans taken out, but only by borrowing money to replace the existing loan. To me this is not the same as paying off the debt.
Thats exactly what happens Gilts (loans) have expiry dates and the owners get there money back so govt has to borrow more to replace them. Its been going on infinitum and as long as inflation doesn't runaway it can carry on for infinitum. What Treasury and Bank of England have to gauge is how much they can keep pouring fuel on the fire before its gets out of control. Currently i see Sunak is trying to take some of Boris's petrol cans away from him but we won't really know how many until the spending review is completed later this year.
 

Purple Orange

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We may have repaid the loans taken out, but only by borrowing money to replace the existing loan. To me this is not the same as paying off the debt.
I agree. We paid them off whilst we were still in deficit, so we borrowed money to repay past debt. We'd only be "paying off debt" if we had a surplus and used some of it to repay old debt. All we've done is borrow from Peter to repay Paul.

There will never be a situation where there is zero debt. Countries don’t operate that way.
 

simonw

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There will never be a situation where there is zero debt. Countries don’t operate that way.
hence the point that the debt you claim to have been repaid, hasnt.repaid

It makes a good headline when a debt from a certain time is "repaid" but all that happens is a new replacement debt is taken out.
 

RuralRambler

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There will never be a situation where there is zero debt. Countries don’t operate that way.
Indeed, but to say we're paying off debt, it needs to be paid from a surplus, i.e. to reduce the debt. We need to look at total debt. If total debt falls, then, yes, you can say some has been paid off, but if total debt is rising, you really can't say that we're paying any off.
 

Nicholas Lewis

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Indeed, but to say we're paying off debt, it needs to be paid from a surplus, i.e. to reduce the debt. We need to look at total debt. If total debt falls, then, yes, you can say some has been paid off, but if total debt is rising, you really can't say that we're paying any off.
we haven't paid any off for decades just replaced with even bigger loans
 

Purple Orange

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hence the point that the debt you claim to have been repaid, hasnt.repaid

It makes a good headline when a debt from a certain time is "repaid" but all that happens is a new replacement debt is taken out.

Indeed, but to say we're paying off debt, it needs to be paid from a surplus, i.e. to reduce the debt. We need to look at total debt. If total debt falls, then, yes, you can say some has been paid off, but if total debt is rising, you really can't say that we're paying any off.

You are both appearing to be looking at government debt like household debt. Take the pandemic debt in isolation for a moment. That is the issue and that sum must be structured over many decades and treated the same as war debt, otherwise we risk crippling the economy.

Structuring that debt over many decades still means total debt can be reduced year-on year from here on, but it means we are using government bonds (aka debt) to enable economic growth and increase tax receipts. To pay off the debt faster reduces our ability to invest in our economy and that will be far more detrimental to future generations. We also need to put this in the context of all other major economies facing the same problem. If others structure their debt like war debt and we don’t, we’re immediately at a competitive disadvantage for the next couple of decades.
 

simonw

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You are both appearing to be looking at government debt like household debt. Take the pandemic debt in isolation for a moment. That is the issue and that sum must be structured over many decades and treated the same as war debt, otherwise we risk crippling the economy.

Structuring that debt over many decades still means total debt can be reduced year-on year from here on, but it means we are using government bonds (aka debt) to enable economic growth and increase tax receipts. To pay off the debt faster reduces our ability to invest in our economy and that will be far more detrimental to future generations. We also need to put this in the context of all other major economies facing the same problem. If others structure their debt like war debt and we don’t, we’re immediately at a competitive disadvantage for the next couple of decades.
I have made no comment on how we should or should not pay off the current huge debt. I was merely pointing out the error in saying we had paid off previous debt, when all we have done is refinance it.


The above link will take you to an article which contains various graphs on UK national debt. You will see that we have run a deficit in virtually all years and have therefore been increasing national debt in virtually all years. In some years debt as a percentage of GDP has fallen, but this is not the same as total debt falling.

Whether debt and borrowings are a "good thing" is a separate discussion.
 

DustyBin

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Thats exactly what happens Gilts (loans) have expiry dates and the owners get there money back so govt has to borrow more to replace them. Its been going on infinitum and as long as inflation doesn't runaway it can carry on for infinitum. What Treasury and Bank of England have to gauge is how much they can keep pouring fuel on the fire before its gets out of control. Currently i see Sunak is trying to take some of Boris's petrol cans away from him but we won't really know how many until the spending review is completed later this year.

Nail on head! Inflation is the big worry here. We’ve been printing money (aka quantitative easing) at an alarming rate since the financial crash, and trying to meet existing spending commitments will require more. We’re rapidly heading towards an uncomfortable situation.

That said @Purple Orange isn’t wrong in pointing out that we risk crippling ourselves by going down the austerity route; we’ve seen the result of that. It’s a balancing act but the room for error is ever decreasing unfortunately.
 

Bishopstone

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The interest bill on the national debt is rising, and (unhelpfully) some of our debt stock is index linked, so the cost of servicing the debt will rise with inflation.

I think, in a few years, it will become common to ask why we’re spending more on paying debt interest to ‘greedy bankers’ than we are on education or transport or climate change mitigation measures (etc), and at that point there will be a debt re-structure, with gilt holders losing money. Alternatively, for non index-linked debt, the real value of the gilts could be eroded by a bout of inflation that the Bank of England, under political pressure, choose to ‘look through’.

For this reason, I refuse to hold any Government debt (UK or otherwise) in my pension or ISA.
 

HSTEd

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HS2 will never pay for itself even with the low interest rate environment. Indeed most national infrastructure projects never get the money back except fixed crossings like the Dartford Tunnel and Severn bridge where there was a captive audience but they provide wider societal benefits which are difficult to put a value on. The danger with HS2 is that it hoovers up a disproportionate amount of the budget and leaves other more needy schemes left on the shelf for potentially a decade though.
In our current negative-real-return gilt environment the vast majority of the cost of the scheme in real terms simply vanishes into the aether.
 

BrianW

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Am I right in thinking that the current Chancellor of the Exchequer and his wife know a thing or two about finance?
Does the current PM know a thing or two about major projects?
Does the government have a stonking majority?
Are gilts anything to do with snouts in a trough?
What do trainspotters 'rail enthusiasts' know about Davos and Bezos?
Ive been dreaming (lamonting?) a long time for my cashback from Soros.
New Darlington Station, more trains at Northallerton/Thirsk, Blue wall generally, plans for more trains at Welwyn, the only 'certs'.
 

Busaholic

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It's all predicated on the apparent worldwide belief that there will be a Day of Judgment at which all debts must be repaid, or eternal damnation/whatever will follow. If you believe that, on the contrary, the only threat to the globe is if we ignore all the flashing lights in the form of rising temperatures, the torrents of water and raging fires destroying everything in their path until life gradually fizzles out, and the last person to leave the planet turns the lights off, then we need to make full use of people's bodies and minds to make the world a better place. The only certainty is that we each individually die, and if that should be of starvation or through the lack of basic medicines it is an indictment on the world order, or disorder as it appears to be. Forget the notion of world debt, it really is the never-never, and if that means some Saudi Arabian prince is denied a few trillion more to indulge in whatever his current foible is, like incarcerating their female offspring for daring to speak their mind, then we have a chance to spend more wisely on the necessary infrastructure to keep us all going for as long as possible.

You may perhaps gather from the above that not only am I not a fan of general austerity but do not believe it can be justified at any level.
 

Nicholas Lewis

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It's all predicated on the apparent worldwide belief that there will be a Day of Judgment at which all debts must be repaid, or eternal damnation/whatever will follow. If you believe that, on the contrary, the only threat to the globe is if we ignore all the flashing lights in the form of rising temperatures, the torrents of water and raging fires destroying everything in their path until life gradually fizzles out, and the last person to leave the planet turns the lights off, then we need to make full use of people's bodies and minds to make the world a better place. The only certainty is that we each individually die, and if that should be of starvation or through the lack of basic medicines it is an indictment on the world order, or disorder as it appears to be. Forget the notion of world debt, it really is the never-never, and if that means some Saudi Arabian prince is denied a few trillion more to indulge in whatever his current foible is, like incarcerating their female offspring for daring to speak their mind, then we have a chance to spend more wisely on the necessary infrastructure to keep us all going for as long as possible.

You may perhaps gather from the above that not only am I not a fan of general austerity but do not believe it can be justified at any level.
Certainly in the modern world with the human races ingenuity to mass produce almost without limits the threat of inflation is substantially dulled but not eliminated so its quite possible to continue to spend at these levels without too much inflation risk. However, to avoid inflation it needs to be done at a pace that's within the capability of the supply chain from mk1 eyeballs to steel beams to fulfil the demand without bumping up against constraints. Construction currently is overheating so not the best time to be fuelling the fire with too much infrastructure work at once. So for example in the rail industry a commitment to electrify 100's stkm pa would allow the supply chain to respond and invest in the necessary capital projects to support it.

Ultimately the only real constraint are the resources of the planet and the rate at which we seek to use them this being dependant on the populous and i would say by the end of the century we will be approaching a Malthusian moment.
 

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