| Winter 2003 |
The distribution
of unsecured debt in the United Kingdom: survey evidence 
(116k)
(by Merxe Tudela and Garry Young of the Bank's Domestic Finance
Division). The Bank recently commissioned a survey asking
people about their unsecured borrowing and whether it is a
burden to them. This article summarises the main results.
As of October, 34% of respondents had some form of unsecured
debt, over and above that which they expected to pay off at
the end of the month, and the average amount owed was around
£3,500. Some people owed much more than the average:
26% of those with some debt owed more than £5,000. Around
10% of borrowers said that their unsecured debt was a heavy
burden to their households, similar to earlier surveys. For
purposes of comparison over time, the questions were based
on those used in earlier surveys. The evidence suggests that
the proportion of people with some debt has not changed since
at least the late 1980s. While the average amount borrowed
by debtors has increased, since 2000 the extra borrowing has
been concentrated among those with household incomes above
£17,500. Despite the rise in average debt levels in
recent years, the proportion of people who consider their
debt not to be a burden has increased. But, the amount borrowed
and the share of unsecured debt accounted for by those who
consider it a heavy burden have both increased. |
| Summer 2001 |
Explaining
the difference between the growth of M4 deposits and M4
lending: implications of recent developments in public finances
(74k)
(By John Power and Peter Andrews of the Bank's Monetary
Assessment and Strategy Division). The growth of sterling
lending by UK monetary financial institutions to the UK
private sector has substantially exceeded the growth of
UK private sector sterling deposits over the past two years.
This article considers the possible influence on this growth
differential of two events in the past financial year: the
unexpected extent of the Government's cash surplus; and
the assumption by the Debt Management Office of responsibility
for government cash management. The article also describes
how the gap between sterling lending and deposits was financed
over the past two years.
Although monetary aggregates are no longer officially
targeted for monetary policy purposes, analysis of these quantities plays an
important role in the Bank's regular assessment of the outlook for inflation.
In its regular monetary policy analysis, the Bank
primarily examines the banking sector's sterling liabilities and assets with
the UK private sector. These quantities, known as M4 deposits (M4) and M4
lending (M4L) respectively, constitute a sub-section of the banking sector's
overall balance sheet. The Bank focuses on M4 and M4L in particular (rather
than the overall levels of banking sector deposits and lending) because, given
that these quantities are country and currency-specific, they would be expected
to relate closely to UK economic activity.
The first section of this article sets out the formal
definition of M4 and its accounting relationship with the banking sector's
balance sheet counterparts. The second section outlines how the new government
cash management arrangements could affect the monetary statistics. The third
section details the Government's cash surplus in 2000/01 and its monetary
implications. The fourth section accounts for the difference between M4 and M4L
growth in 2000/01. |
| November 1999 |
Public
sector debt: end March 1999
(116k)
This article continues the annual series in the Quarterly
Bulletin analysing the debt position of the UK public
sector. It looks at market and statistical developments
in the financial year to end March 1999, and examines some
of the domestic and European issues that have influenced
these measures. It also analyses the composition and distribution
of the national debt.
- Public sector net debt fell by £3.7 billion
to £349 billion, at nominal value, during the financial year to end March
1999. This was the first annual reduction since 1989/90 At end March 1999
public sector net debt stood at 40.6% of GDP, the lowest end-March figure since
1994, and 2 percentage points lower than at end March 1998.
- General government gross debt—the 'Maastricht'
measure—also fell during the year, to £399 billion at end March. At
47.4% of GDP, this is comfortably below the 60% reference value in the
Maastricht Treaty. The general government had a financial surplus of 0.9% of
GDP in 1998/99, well within the Maastricht reference value, which allows a
deficit of up to 3% of GDP.
- All data presented in this article reflect the
transition to the latest international statistical standards, the European
System of Accounts (ESA95). This is consistent with the UK National Accounts,
published by the Office for National Statistics. However, as before, government
debt figures are still presented on a nominal, rather than a market, valuation.
The box on pages 35657 gives details of the changes and shows the impact
on the measurement of the public sector debt position.
Government debt structure
and monetary conditions
(33k)
(by Alec Chrystal of the Bank's Monetary Assessment and
Strategy Division, Andrew Haldane of the Bank's International
Finance Division, and James Proudman of the Bank's Monetary
Instruments and Markets Division). In June 1998 the Bank
of England organised a conference on 'Government debt structure
and monetary conditions'. The aim of the conference was
to discuss the interactions between the size and structure
of government debt and the concerns of monetary policy.
The proceedings of the conference will be published shortly.
This article summarises the issues discussed.
The article identifies three main channels through
which government debt structure might influence monetary conditions. These are
the potential effects of:
- the quantity of debt;
- the composition of debt (eg short versus
long-maturity, index-linked versus conventional); and
- the ownership of debt (eg by banks or non-banks).
Taking each of these in turn, the following
conclusions about the effects of government debt structure on monetary
conditions are drawn:
- Effects of the quantity of debt. The consensus at
the conference was that the insights of Michael Woodford were interesting but
controversial and, as pointed out by Ben Friedman, were not of great current
relevance to the UK conjuncture. Rather, as Charles Goodhart argued, new
financial instruments, new issuing techniques and new capital market structures
since the 1980s have all helped to reduce concerns about how the quantity of
debt impinges on monetary control, to the point where the two issues could now
be seen as almost distinct.
- Effects of the composition of the debt. Changes in
the composition of debt might affect expected asset returns and the incentives
facing the central bank. But the consensus at the conference appeared to be
that the size of these effects was small, at least in response to marginal
shifts in government portfolios. There was nevertheless a need for monetary
policy makers to monitor changes in the composition in the debt portfolio
carefully, to be alert to possible effects on the monetary aggregates.
- Effects from the ownership of debt. Most of the
work on this topic has been done on the United States, where there were
suggestions (for instance in the work of Kuttner and Lown) that government debt
taken up by banks was a substitute for loans to the private sector. For the
United Kingdom, the available evidence was consistent with the view that debt
sales to banks had only a small impact on either money supply growth or bank
lending. But little detailed empirical work has been done to support this
result. So that view can, at most, be tentative.
Overall, the economic research discussed at the
conference suggested that changes in debt management policy at the margin were
unlikely to have first-order effects upon monetary conditions in normal
circumstances. But two important caveats are needed. First, many aspects of the
transmission mechanism and optimal debt management are not well understood, and
policy should aim to be robust to a variety of different assumptions and
models. Second, there are few, if any, examples of extreme changes by
governments in debt management policy. So it is less clear that large changes
in the quantity or composition of the debt will not have implications for
monetary conditions. For these reasons, the effects of changes in debt
management policy on monetary aggregates need to be monitored and interpreted
with care. |