The Irrelevance of Northern Rock

The UK has added circa £111bn of assets and £110bn of debt to its balance sheet. A back of the envelope calculation would suggest that, even with a major housing recession, the British taxpayer will only have to cough up a small fraction of the amount the press suggest.

A 40% real-term drop in house prices and an exceptional default rate on mortgages of 10% would mean a loss of only £4.5bn, £75 per person.

The British taxpayer spends £4bn per annum on the World Bank, £10bn is given in net subsidy to the European Union, the proposed ID card scheme will cost £6bn just to set up and £20bn has been wasted on the NHS computer operations in the last few years. There is so much fat on the lumbering beast that is the British government that at this point a few more pounds is just a little more blubber.

By far the greatest economic worry for Britain is the public sector pension obligation. Amounting to £1,000bn these future payments have quadrupled over the past 10 years. While future social security and pension funding is at the forefront of all facets of the US government economic policy there is no talk in the UK of the, proportionally, far larger debt. It makes the targeting of Northern Rock for political wrath so puzzling.

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