Sunday, 3 February 2013

UK Debt Deficit Budget Explained in Real Money

How does the UK Budget and Deficit Compare to an Household's Income and Spending?

The numbers for the UK economy and budget deficit are huge but do we really understand what a billion pounds is? How does a £10 billion compare to anything else? Maybe equating the numbers to a household budget would make them more understandable.

The 2012 UK Government Budget

  • UK Income (Taxes)  Total:  £589 billion 
  • UK Spending Total :            £710 billion (2011 = £691bn, 2010=£669bn)
  • Outstanding Debt:                £1040 billion

Key number Spending minus income is £99 billion - so we are spending £99 billion more than we get in

Lets try that with more manageable numbers that are more comparable to a family income:

If the UK Government was a family their income and spending would be:

Income £30,000

Spending £36,000

So this year the government "family" would be running up an overdraft or credit card debt by spending £6000 more than they earnt every year. Yet that isn't the end of the story. The family also has outstanding debt of £52,000 on their overdraft and credit cards, nearly double their annual salary and rather than paying down their outstanding debts it is increasing by 10% a year.

Even back in Victorian days Charles Dickens remarked on managing budgets:

Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.

Spending more than you earn is not sustainable and has to be dealt with sooner or later!

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