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.

Photo: Getty
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The big problem for the NHS? Local government cuts

Even a U-Turn on planned cuts to the service itself will still leave the NHS under heavy pressure. 

38Degrees has uncovered a series of grisly plans for the NHS over the coming years. Among the highlights: severe cuts to frontline services at the Midland Metropolitan Hospital, including but limited to the closure of its Accident and Emergency department. Elsewhere, one of three hospitals in Leicester, Leicestershire and Rutland are to be shuttered, while there will be cuts to acute services in Suffolk and North East Essex.

These cuts come despite an additional £8bn annual cash injection into the NHS, characterised as the bare minimum needed by Simon Stevens, the head of NHS England.

The cuts are outlined in draft sustainability and transformation plans (STP) that will be approved in October before kicking off a period of wider consultation.

The problem for the NHS is twofold: although its funding remains ringfenced, healthcare inflation means that in reality, the health service requires above-inflation increases to stand still. But the second, bigger problem aren’t cuts to the NHS but to the rest of government spending, particularly local government cuts.

That has seen more pressure on hospital beds as outpatients who require further non-emergency care have nowhere to go, increasing lifestyle problems as cash-strapped councils either close or increase prices at subsidised local authority gyms, build on green space to make the best out of Britain’s booming property market, and cut other corners to manage the growing backlog of devolved cuts.

All of which means even a bigger supply of cash for the NHS than the £8bn promised at the last election – even the bonanza pledged by Vote Leave in the referendum, in fact – will still find itself disappearing down the cracks left by cuts elsewhere. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.