Starmer's vision quest

[monkers]

I don't know where you get your info from about UK government debt but it is definitely interest bearing.

I didn't say that government debt is not interest bearing. I even said it is required to pay the sums to service those debts - ie interest payments.

Who exactly will lend money at a zero rate of interest? See OBR report where the interest cost on UK govt debt is around 111bn.
https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/debt-interest-central-government-net/

Yes. Again I haven't said otherwise, and in a very recent post replied to you while you were laughing because a new black hole in the accounts appeared because the cost of servicing the debt, ie interest payment have increased.

These debt instuments are repayable as gilts have a finite life, although typically more they issue more on maturity of the expiring ones.

A finite life? When they expire, they just created new ones.

Your statements about the secondary account need more evidence to be credible.

So you will always tend to say. On the other hand, I would expect you to be on top of these numbers if you are to have an opinion on them.

The minimum working balance required to be held for 2023 to 2024 was estimated at £21.8 billion, being 16.7% of estimated benefit expenditure, as stated in the report on the Social Security Benefits Up-rating Order published by GAD in January 2024. HM Treasury Ministers made provision for a Treasury Grant for 2023 to 2024 of up to 5% estimated benefit payments, which can be requested if required. The balance of the Fund at 31 March 2024 was £86.4 billion and was above the estimated minimum requirement throughout the year. No Treasury Grant was therefore required in 2023 to 2024.

 

[BoldonLad]

I didn't look this up, so no link. I used what I happen to know.

When a government borrows money as sovereign debt, there are no conditions set to repayment - no schedule, no agreed interest rate. The UK is under no obligation to ever repay sovereign debt, only to pay the charges related to servicing that debt.

The UK has no hypothecated taxes by use of strict definitions. The government runs two accounts, the general account, and a secondary account which although not hypothecated is nonetheless ring-fenced in law. The secondary account is used to pay state pension, welfare payments. It has one permitted exception and that is to 'top up' the NHS. From memory that is about 18% or so of NHS budget - (easily checkable) - for our purposes the exact figure is not really required.

While the government is not required to pay down sovereign debt, it is legally required to repay money borrowed from the secondary account, which it would need to do by transferring money back to it from the general account.

Addendum. I just asked Copilot pro for you ...

What is the current balance of the government's secondary account?


As of the end of the 2024–25 financial year, the UK National Insurance Fund (NIF)—the government's secondary account—had a projected balance of £76 billion.

📊 Key Details from the 2025 Up-Rating Report​

• The NIF is legally ring-fenced for contributory benefits like the State Pension, Maternity Allowance, and certain sickness benefits.
• The employer NIC hike announced in the Autumn Budget 2024 significantly boosted contribution income.
• Contribution income is now expected to exceed benefit expenditure in every year through 2029–30.
• No additional Treasury financing is anticipated during this period under current assumptions.

🧠 Strategic Implication​

This surplus means the government has ample funds available in the NIF to support NHS spending under the permitted exception, including pay settlements for doctors and other staff. The general account may be in deficit, but the secondary account is financially healthy and growing.

The IFS does not agree on the "ring-fence" statement:

The National Insurance Fund
NICs are often thought of as being ring-fenced to pay for the contributory benefits described above or to pay for the National Health Service. The reality is different.
Some NICs revenue (about a fifth in recent years) is allocated directly to the NHS. That is topped up from general taxation to whatever the government wishes to spend on the NHS in total: how much of that total notionally comes from NICs revenue is irrelevant. The remaining NICs revenue is paid into the National Insurance Fund. Notionally, the NI Fund is financially separate from other parts of government and is used to fund contributory benefits. In reality, however, this separation is illusory. In years when the fund is not sufficient to finance benefits, it is topped up from general taxation revenues; and in years when the fund builds up a surplus, it is used to reduce the national debt: essentially, the government lending money to itself. This makes the separation of the NI Fund from the main government account more or less meaningless. The government decides how much to raise in NICs, and how much to spend on the NHS and on contributory benefits; the amounts need not be related to each other, and generally are not.

 

[BoldonLad]

I don't disagree with that, I'm finding it hard to believe a bat tunnel cost anything like £100 million as HS2s own cost estimates for a km of single rail tunnel is £33 million but I'm also pretty sure that no consultant (even ecologists that tend to like spending developer's money) would propose that as a solution if it wasn't necessary to satisfy NE's requirements.

Does anyone take HS2 cost estimates seriously, given the over-runs so far?

 

[monkers]

The IFS does not agree on the "ring-fence" statement:

The National Insurance Fund
NICs are often thought of as being ring-fenced to pay for the contributory benefits described above or to pay for the National Health Service. The reality is different.
Some NICs revenue (about a fifth in recent years) is allocated directly to the NHS. That is topped up from general taxation to whatever the government wishes to spend on the NHS in total: how much of that total notionally comes from NICs revenue is irrelevant. The remaining NICs revenue is paid into the National Insurance Fund. Notionally, the NI Fund is financially separate from other parts of government and is used to fund contributory benefits. In reality, however, this separation is illusory. In years when the fund is not sufficient to finance benefits, it is topped up from general taxation revenues; and in years when the fund builds up a surplus, it is used to reduce the national debt: essentially, the government lending money to itself. This makes the separation of the NI Fund from the main government account more or less meaningless. The government decides how much to raise in NICs, and how much to spend on the NHS and on contributory benefits; the amounts need not be related to each other, and generally are not.

Yes it is a kind of a hybrid. I tried to explain, NICS isn't a hypothecated tax. This is what a ring-fenced account is defined to mean. In the case of the government's secondary account, it is reserved in law for certain purposes, but the government are not constrained from borrowing from it, it's just that they must pay it back. And when I say they must pay it back, I mean as the law stands, but as we all know, parliament can change the law.

So yes the IFS is correct, it is not ring-fenced as in the definition of a hypothecated tax. It is not even ring-fenced as a structural entity, only as a legal understanding.

When you read this reply and then the original post again please, you'll understand my choice of wording.

The National Insurance Fund (NIF) is legally ring-fenced, as established by:

• Section 161–163 of the Social Security Administration Act 1992
  • Section 161: Establishes the NIF as a separate fund.
  • Section 162: Requires NICs to be paid into the Fund (after NHS allocation).
  • Section 163: Specifies that contributory benefits are payable from the Fund.

Increasingly the government is ignoring parliament and doing what the hell it likes, which has been another opinion of mine that I've expressed here.

 

[Stevo 666]

I didn't say that government debt is not interest bearing. I even said it is required to pay the sums to service those debts - ie interest payments.



Yes. Again I haven't said otherwise, and in a very recent post replied to you while you were laughing because a new black hole in the accounts appeared because the cost of servicing the debt, ie interest payment have increased.


A finite life? When they expire, they just created new ones.



So you will always tend to say. On the other hand, I would expect you to be on top of these numbers if you are to have an opinion on them.





View attachment 9434

Except that they're not ring fenced as has already been mentioned by Boldon Lad. Also £20bn in the scheme of the overall tax take and state expenditure is not huge - certainly less than Reeves likely shortfall.

 

[monkers]

Except that they're not ring fenced as has already been mentioned by Boldon Lad. Also £20bn in the scheme of the overall tax take and state expenditure is not huge - certainly less than Reeves likely shortfall.

The UK has no hypothecated taxes by use of strict definitions. The government runs two accounts, the general account, and a secondary account which although not hypothecated is nonetheless ring-fenced in law. The secondary account is used to pay state pension, welfare payments. It has one permitted exception and that is to 'top up' the NHS. From memory that is about 18% or so of NHS budget - (easily checkable) - for our purposes the exact figure is not really required.

Here I very clearly say NICS is not a hypothecated tax. I then explain that the structure of it is not ring-fenced, it is porous. Nonetheless it is ring-fenced in law. In answer to BoldenLad the source of that law is quoted.

It really isn't that hard Stevo. I don't know if you are not paying sufficient attention, are being deliberately disagreeable, or just dimwitted by the events of your day. Whatever the case, the answer is given and correct, and the explanation plain enough.

There is one part that I haven't perhaps worded well, and you could have picked up on. Money to top up the NHS is less a permitted exception as I expressed, as it is more a parallel payment. The revenue first pay the NHS the due amount, and pay the balance to the secondary fund.

Additionally I have not said that Rachel Reeves should borrow from NICS to offset the blackhole. If you actually pay attention, I have drawn attention to the fact that the NICS increase has had the effect of boosting the secondary budget, while at the same time had a negative effect on the general account. In other words I have made a criticism of her strategy.

There are ways in which the blackhole can be offset without increasing tax on taxpayers paying PAYE - though this won't happen.

 

[Stevo 666]

Here I very clearly say NICS is not a hypothecated tax. I then explain that the structure of it is not ring-fenced, it is porous. Nonetheless it is ring-fenced in law. In answer to BoldenLad the source of that law is quoted.

It really isn't that hard Stevo. I don't know if you are not paying sufficient attention, are being deliberately disagreeable, or just dimwitted by the events of your day. Whatever the case, the answer is given and correct, and the explanation plain enough.

There is one part that I haven't perhaps worded well, and you could have picked up on. Money to top up the NHS is less a permitted exception as I expressed, as it is more a parallel payment. The revenue first pay the NHS the due amount, and pay the balance to the secondary fund.

Additionally I have not said that Rachel Reeves should borrow from NICS to offset the blackhole. If you actually pay attention, I have drawn attention to the fact that the NICS increase has had the effect of boosting the secondary budget, while at the same time had a negative effect on the general account. In other words I have made a criticism of her strategy.

There are ways in which the blackhole can be offset without increasing tax on taxpayers paying PAYE - though this won't happen.

You didn't explain it very well then. Try to be a bit clearer and more concise your communications.

 

[BoldonLad]

Yes it is a kind of a hybrid. I tried to explain, NICS isn't a hypothecated tax. This is what a ring-fenced account is defined to mean. In the case of the government's secondary account, it is reserved in law for certain purposes, but the government are not constrained from borrowing from it, it's just that they must pay it back. And when I say they must pay it back, I mean as the law stands, but as we all know, parliament can change the law.

So yes the IFS is correct, it is not ring-fenced as in the definition of a hypothecated tax. It is not even ring-fenced as a structural entity, only as a legal understanding.

When you read this reply and then the original post again please, you'll understand my choice of wording.

The National Insurance Fund (NIF) is legally ring-fenced, as established by:

• Section 161–163 of the Social Security Administration Act 1992
  • Section 161: Establishes the NIF as a separate fund.
  • Section 162: Requires NICs to be paid into the Fund (after NHS allocation).
  • Section 163: Specifies that contributory benefits are payable from the Fund.

Increasingly the government is ignoring parliament and doing what the hell it likes, which has been another opinion of mine that I've expressed here.

So it is lack of enforcement of the legal position, that is the problem? Sounds familiar.

 

[monkers]

You didn't explain it very well then. Try to be a bit clearer and more concise your communications.

There was nothing wrong with the explanation. It said:

*NICS is not a hypothecated tax by strict definition.
*NICS is not a narrow band structure.
*NICS is not a ring-fenced structure away from government.
*NICS is a legally defined and protected structure.
*NICS contributes about 18% of NHS allocation.
*NICS pays out for pensions and benefits.


None of this disagrees with the IFS, or says that Reeves should use this money to fill a blackhole in the economy. In other words the problem is that you don't understand the words - and not for the first time!

I could have given the more legal interpretation that the 1992 Act sets up a 'deeming provision' in law. A deeming provision is when the parliament makes a legal instruction on interpretation, sometimes known as a legal fiction. This is parliament saying, ''we know that this is not the case, but less us suppose for our purposes that it is, and we treat it as such.''

 

[monkers]

So it is lack of enforcement of the legal position, that is the problem? Sounds familiar.

I'm not aware of any breaches of the law regarding this. If I'm saying anything, it is that we have successive governments who show little interest in the sovereignty of the people or their elected representatives in parliament. That being the case, how can we now trust them not to help themselves to the NICS money to bail out their fiscal policies if and when they fail?

Conversely, I'm saying if there is a sizeable surplus in the NICS money, which is the case, why can they not use it to pay the WASPI women their dues, or to pay NHS staff when we know that much of that money will return to the general account due the effect of the virtuous circle. This is the method whereby they can utilise money in the NICS account to boost the general account, and keep the NHS staff working and serving the health needs of the country.

To be clear as I know Stevo will read this, this is a criticism of the current government's fiscal policies.

 

[BoldonLad]

I'm not aware of any breaches of the law regarding this. If I'm saying anything, it is that we have successive governments who show little interest in the sovereignty of the people or their elected representatives in parliament. That being the case, how can we now trust them not to help themselves to the NICS money to bail out their fiscal policies if and when they fail?

Conversely, I'm saying if there is a sizeable surplus in the NICS money, which is the case, why can they not use it to pay the WASPI women their dues, or to pay NHS staff when we know that much of that money will return to the general account due the effect of the virtuous circle. This is the method whereby they can utilise money in the NICS account to boost the general account, and keep the NHS staff working and serving the health needs of the country.

To be clear as I know Stevo will read this, this is a criticism of the current government's fiscal policies.

Let’s not try dancing on the head of a pin. The IFS tract I quoted says the separation of the NiCS account from other Government fund is illusory.

 

[monkers]

Let’s not try dancing on the head of a pin. The IFS tract I quoted says the separation of the NiCS account from other Government fund is illusory.

The IFS and I do not depart in our opinions. It is ''illusory''. That is my exact point.

The NICS account is separate only because of the deeming provision in the 1992 act. It is the very reason why I have said that I don't trust this government not to help themselves.

Do I have to remind what I said? I said that in the UK there are no hypothecated taxes - therefore I have said that NICS is not a hypothecated tax. I have said that government have the power to add or subtract to and from the account - so it is not structurally ring-fenced - but when they subtract the legal requirement is to pay it back. I have also said that the account is legally ring-fenced though that legal requirement can be changed by parliament. All of this is me saying clearly, that although legally ring-fenced at the present time, this is not sufficient to stop a government from getting their hands on it. I've also said that in my opinion the account is being used as a war chest.

This will be my last post on this because I tire of repeating the ''bleeding obvious''.

 

[BoldonLad]

The IFS and I do not depart in our opinions. It is ''illusory''. That is my exact point.

The NICS account is separate only because of the deeming provision in the 1992 act. It is the very reason why I have said that I don't trust this government not to help themselves.

Do I have to remind what I said? I said that in the UK there are no hypothecated taxes - therefore I have said that NICS is not a hypothecated tax. I have said that government have the power to add or subtract to and from the account - so it is not structurally ring-fenced - but when they subtract the legal requirement is to pay it back. I have also said that the account is legally ring-fenced though that legal requirement can be changed by parliament. All of this is me saying clearly, that although legally ring-fenced at the present time, this is not sufficient to stop a government from getting their hands on it. I've also said that in my opinion the account is being used as a war chest.

This will be my last post on this because I tire of repeating the ''bleeding obvious''.

Me too. 😊

Meanwhile, is this another potential black hole? https://www.bbc.co.uk/news/articles/crlzjx26p8yo, perhaps it can be filled with NICS?, how about extending NICS contributions to include those over state pension age?

 

[CXRAndy]

Gordon's alive, he's being brought back to offer those nuggets of advice for RFA


In other news homelessness minister resigns after raising rents on her property after evicting previous tenants

 

[Mr Celine]

The NICS account is separate only because of the deeming provision in the 1992 act. It is the very reason why I have said that I don't trust this government not to help themselves.

The 1992 Admin Act only re-enacts what was in the 1975 Social Security Act (s133). And that was also re-enacting earlier legislation.

Are you suggesting that this government are more devious than any other in the last 80 years?

NI conts going to a separate fund is not helpful, it has kept generations of pensioners in poverty because they refuse to claim means-tested top ups (charity) but have no issue with state pension (getting back what we paid in).