Written by Jimbo123
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Topics: Economy, Money, Debt

Friday, 9 July 2010

image for Borrowing to invest - the £800,000,000,000 lie
"Miss can I sit at the back? - it looks like rain."

What does borrowing to invest mean? Essentially it is buying or building of an asset with the aim of returning a profit/benefit/value/service/income to the investor above and beyond the transaction and borrowing costs perhaps in perpetuity. A good example would be buying a house with a mortgage and renting it out.

So what could £800B have bought or built? Err quite a lot actually. £50B builds 100 fully loaded hospital - just add doctors and nurses, £400B gets a mind boggling 5,000 kitted out schools - just add teachers, £300B makes 4,000,000 houses ending the housing crisis at a stroke, leaving £50B for about 200 luxury prisons.

Having made these wise investments in the future, what might the benefits of been? Hard to know where to start but 1% of them might be - children not sitting in freezing portercabins waiting for their metal wig-wam school to get built, acres of free beds in hospitals, criminals behind bars, refugees not living in hotels.

So what has the government actually done with this money? It could, for example, of bought about a quarter of the UKs housing stock giving it a useful rental income of £10B a month and about a £trillion in equity - handy for the occasional recession or pension deficit.

What then is the net asset value appreciation of 'investments' made by our clever and prudent rulers? What did £800B 'put away' over 13yrs yield - 50%, 100%? Err no, the outcome was 'minus' 100% known in the city as a "Bernie Madoff".

Instead the government decided to invest the money in attracting labour voters meaning either giving them public sector non-jobs or nestling them into comfortable benefit obscurity. A sneeky plan but an awfully expensive one.

When the government does get round to building something, the private sector whoops for joy for it is a cash bonanza like no other with feng shui and sharia law consultants drafted in just to build a school play ground. Having soaked up vast amount of public money, when finished the keys to the asset are then passed into private enterprise probably owned by an MPs brother who then charges the tax payer £175 to change lightbulbs for the foreseeable future. Something known as a Private Finance Initiative.

13yrs too late, the outgoing labour government said it wished the public sector was 'more like' John Lewis. Quite so. John Lewis doesn't have a once in a generation 'building excellent shops' programme - it is always building, upgrading and maintaining otherwise things fall down and people won't shop in damp and cold Portercabins in the street.

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The story above is a satire or parody. It is entirely fictitious.

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