How to boost the debt without borrowing: spend on houses

The Help to Buy program uses some nice accounting tweaks to get away with being deficit neutral.

One final, quick point on Help to Buy.

One of the two measures announced, in which the Government provides equity loans to people buying a new build house worth under £600,000, involves real cash outlays. The Treasury has budgeted £4.13bn for it:

But the spending counts towards the central government net cash requirement, and it counts towards public sector net debt (Table 2.1 footnote 3, page 65), but it doesn't count towards public sector net borrowing – also known as "the deficit".

The reason is that the government is spending cash, but getting back an asset of equivalent value – in this case, equity in £20bn worth of houses. And when those houses are sold, the loan gets paid back. So assuming house prices continue rising faster than inflation – a fair assumption, given it's basically government policy at this point – it's not really even borrowing, just converting a liquid asset into an illiquid one.

There's still some risk involved. If one of these houses burns down, the Government loses its stake. And if the house is never sold, the Government never gets paid back.

Except. That's basically what infrastructure spending is. You trade £3bn worth of money for £3bn worth of windmills. If you don't want the windmills, you can sell them. And if you get unlucky, you've lost your money.

The Chancellor is perfectly happy to borrow for a guaranteed payoff in the future when it plays well with his voters, but not when it works well with the economy. Shame, that.

Some new houses. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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What happened when a couple accidentally recorded two hours of their life

The cassette tape threw Dan and Fiona into a terrible panic.

If the Transformers series of movies (Transformers; Transformers: Revenge of the Fallen; Transformers: Dark of the Moon; Transformers: Age of Extinction; and Transformers: the Last Knight) teach us anything, it is that you think your life is going along just fine but in a moment, with a single mistake or incident, it can be derailed and you never know from what direction the threat will come. Shia LaBeouf, for example, thinks everything is completely OK in his world – then he discovers his car is a shape-shifting alien.

I once knew a couple called Dan and Fiona who, on an evening in the early 1980s, accidentally recorded two hours of their life. Fiona was an English teacher (in fact we’d met at teacher-training college) and she wished to make a recording of a play that was being broadcast on Radio 4 about an anorexic teenager living on a council estate in Belfast. A lot of the dramas at that time were about anorexic teenagers living on council estates in Belfast, or something very similar – sometimes they had cancer.

Fiona planned to get her class to listen to the play and then they would have a discussion about its themes. In that pre-internet age when there was no iPlayer, the only practical way to hear something after the time it had been transmitted was to record the programme onto a cassette tape.

So Fiona got out their boom box (a portable Sony stereo player), loaded in a C120 tape, switched on the radio part of the machine, tuned it to Radio 4, pushed the record button when the play began, and fastidiously turned the tape over after 60 minutes.

But instead of pushing the button that would have taped the play, she had actually pushed the button that activated the built-in microphone, and the machine captured, not the radio drama, but the sound of 120 minutes of her and Dan’s home life, which consisted solely of: “Want a cup of tea?” “No thanks.” And a muffled fart while she was out of the room. That was all. That was it.

The two of them had, until that moment, thought their life together was perfectly happy, but the tape proved them conclusively wrong. No couple who spent their evenings in such torpidity could possibly be happy. Theirs was clearly a life of grinding tedium.

The evidence of the cassette tape threw Dan and Fiona into a terrible panic: the idea of spending any more of their evenings in such bored silence was intolerable. They feared they might have to split up. Except they didn’t want to.

But what could they do to make their lives more exciting? Should they begin conducting sordid affairs in sleazy nightclubs? Maybe they could take up arcane hobbies such as musketry, baking terrible cakes and entering them in competitions, or building models of Victorian prisons out of balsa wood? Might they become active in some kind of extremist politics?

All that sounded like a tremendous amount of effort. In the end they got themselves a cat and talked about that instead. 

This article first appeared in the 20 July 2017 issue of the New Statesman, The new world disorder