The government – no more profligate than your average family

‘Household economics’ is a term I’ve heard used a few times recently in the debate over government debt and public spending. It’s usually used by those who argue that government debt isn’t as big a deal as some are making it out to beand that the rules that apply to governments are different from those that apply to households. Household economics might focus on paying off debt as early as possible but governments don’t need to do that – or so the argument goes.

In this context, the use of the word ‘household’ is, presumably, meant to imply prudence and sound money management.

Looking at the UK figures, though, I’m not sure that our households stack up that well. The government’s debt of  £796.9 billion is around 160% of its £496 billion annual revenue. That doesn’t look too bad when compared to the 170% debt to income ratio of the average British household.

It might be fun to have a go at the government for its wild spending but it’s really no worse than the rest of us.

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4 Responses to The government – no more profligate than your average family

  1. TheHRD says:

    It’s a well made point. I guess the thing that people worry about is the element of choice involved. We can choose to get a bigger mortgage, to borrow more, but we can’t choose our tax rate.

    It harps back to the Thatcherite concepts of choice and lack of society blah, blah, blah….

    Personally, I think if people don’t like it they can enter politics and try and change things themselves…..or alternatively sit on the sofa and moan.

  2. Jim says:

    Don’t forget though that the private debt figures mask huges disparities. I assume that a significant proportion of the population have no debt – they have paid off their mortgages and have savings. So the position for those actually in debt will be much worse than 170% of income.

    Plus most of private debt would be mortages and thus backed by some sort of asset. I read recently that the sum total of govt assets is £335bn, whereas the debt is £800bn and rising rapidly.

  3. jameshigham says:

    This is true – the average family needs to accept responsibility for much of the trouble but that still doesn’t excuse either the bankers or Nu-Lab. Their wastage is on the record.

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