Repaying the interest on our National debt could cost us at least twice as much as what we would save by leaving the EU.
This is something that has not been mentioned much….well not at the time of writing this which is 21/05/2016 publication will be in a few days time
As of Q1 2015 UK government debt amounted to £1.56 trillion, or 81.58% of totalGDP, at which time the annual cost of servicing (paying the interest) the public debt amounted to around £43bn (which is roughly 3% of GDP or 8% of UK government tax income). Approximately a third of this debt is owned by the British government due to the Bank of England’s quantitative easing programme, so approximately 1/3 of the cost of servicing the debt is paid by the government to itself, reducing the annual servicing cost to approx 30bn (approx 2% of GDP, approx 5% of UK government tax income).
The cost of servicing this debt is significant. In 2012 the debt amounted to a little over £15,000 for each individual Briton, or around £33,000 per person in employment. Each household in Britain payed an average of around £2,000 per year in taxes to finance the interest.
If we leave the EU and if as a result the value of the pound drops and interest rates increase, then this will affect our repayments.
Mark Carney said that in the event the UK left the EU, or looked as though it would leave, the interest rates we pay here in the UK – what he called in City jargon “the risk premium attached to UK assets – could rise.
OK lets get technical, info from a House of Commons briefing paper number 05745 issued on 21st April 2016 check it out.
It says that for 2015/16 we had a national debt of £1,594 billion and the interest repayments amounted to £45.1 billion. This represents an interest rate of 2.83%
Now if interest rates go up as Mark Carney suggests then a 1% increase to 3.83% would result in repayments of £61.1 billion or an additional burden of £16.0 billion per year.
Or by coming out of the EU we might end up paying twice as much as we would save in order to repay our National debt. Now that would either end up with us paying more tax or receiving increased cuts to services or a combination of both.
To see other posts about our EU membership ( there are obviously 51 others, this being number 52) click EU membership summary And if you think any of them particularly relevant then please feel free to reblog or share them.