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Why are we preserving foreign aid when we're so in debt? Watch

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    Our economy is expected to grow 0.6% this year, cast iron dave wants to spend 0.7% of our GDP on other countries so surely we're not really getting any growth this year. Personally, I thin we should drastically cut the aid budget to around £1.5/£2 billion as opposed to the £13/14 billion we're spending now.
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    (Original post by NW86)
    It may sound a bit ridiculous but in econmic terms 10bn actually is a fairly small amount of money, it is a very small percentage of NHS and Benefit spend. In Q4 2012 the national debt amounted to about £1,400. billion, again roughly that equates to national debt increasing about 121 bn per annum, which comes down to about 2bn per week.... That's national debt increasing by roughly 2bn a week... So 10bn just isn't that much.

    So why spend on foreign aid.... A common misconception is that aid equates to food for the poor... It isn't just about bags of rice and flour.... It's about supporting the development of infrastructure in foreign countires. (I'm keeping this at a very high level but can always go into more detail, this is a starting point) A vast majority of the natural resources in the world are found in less economically developed countries throughout Africa, India etc (and actually China has vast naturual reserves that the west doesn't have access to).

    The supply of foreign aid can be to increase local ability to produce these products and therefore be more willing to sell to the west. China itself pumps a vast amount of money to develop infrastructure in Western Africa to allow access to their resources.
    Very concisely explained. Thank you. I understand now. I must confess I didn't actually have any idea how much the debt was. I don't keep up with these things. I'm busy testing for horse meat. :P

    Obviously I knew it was more than £10bn though...


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    (Original post by doggyfizzel)
    We aren't going to get out of debt. We might reduce the debt, but we aren't going to get out of it. Have a look around the world, pretty much every nation is in debt, most by more than us. £10bn is a drop in the ocean of our overall spending, the only reason its being looked at is because its easy, it doesn't require any effort of reform. The spending issues that cause us to run a deficit will still go on.
    This is another thing I've been wondering. If everyone is in debt, who isn't? The money must be owed to someone.


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    Foreign Aid accounts for about 1% of government spending. It was £8.5bn last year. With a deficit of over £1tn, it's nothing to the deficit.

    It's also not about "getting something back". We do have poverty in this country, we do need to re-evaluate how we tax multinationals, and we do need to look at the welfare system, but there are far more people in the world living in such extreme poverty that it kills them. Lives are lost due to not being able to afford food, clean drinking water, medication and treatment for life-threatening illnesses. I would be horrified if a country with such values as the UK decided we didn't have a social responsibility to citizens outside of our country and cut off such desperately-needed life-saving support for those people.

    Of course we will also get things back. We maintain strong national security and defence through maintaining diplomatic relationships both with countries who may have intelligence we'd like to share, and also who might otherwise favour state-sponsored attacks on the UK. You won't see the direct results of this day-to-day, but it's a small price to pay to keep other states on board.
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    (Original post by Beckyweck)
    This is a serious question! Politics and economics are not my field.

    I keep reading in the paper that all these cuts are being made, which makes sense given how much debt we're in. But foreign aid, along with the NHS and education are being protected. Why are we still paying out foreign aid when we're in crisis? Is it an obligation?

    I'm aware that other countries are worse off than us but in the immortal words of Tesco, every little helps right?


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    As a liberal democracy that likes to think it remains a leading light in the world, it is good PR for us to be seen to aiding developing countries. Is it part of the UK's 'soft power' as, as I'm sure you're well aware, we lack 'hard power'.
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    (Original post by James A)
    I dunno, I heard it over the radio (LBC), maybe Nick Ferrari was talking nonsense as usual :lol:
    I would guess so. The numbers are different orders of magnitude.
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    (Original post by Beckyweck)
    That's ok, but please correct me if I'm wrong but if we had enough money we wouldn't have borrowed right?
    So the fact we're in debt means we haven't got any money. So how can we give money way if we don't have enough?

    I'm a biologist/chemist. I'm not big on finance so would genuinely like to be enlightened!


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    You sell government bonds (I guess in the UK they are called gilts). So for example you sell bonds worth £1 billion. Then suddenly you have £1 billion in cash, and £1 billion (actually more because you probably pay coupon payments unless the bonds are zero-coupon) in debt, but that is the basic idea of how you can have money and yet be in debt. It's rather simplified but I think it shows easily what at the basic level is going on.
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    (Original post by Beckyweck)
    This is another thing I've been wondering. If everyone is in debt, who isn't? The money must be owed to someone.


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    Government bonds, people buy them. Government debt doesn't work like personal debt.
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    If you want to be cynical about it, preserving the foreign aid budget (and the NHS for that matter) is the coalition's way of saying "actually we are caring people and we're not all about cuts".

    Personally, as a tax payer I'd rather my money was sent to people suffering absolute poverty abroad rather than those suffering relative poverty in this country.
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    (Original post by Beckyweck)
    Very concisely explained. Thank you. I understand now. I must confess I didn't actually have any idea how much the debt was. I don't keep up with these things. I'm busy testing for horse meat. :P

    Obviously I knew it was more than £10bn though...


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    I think one other slight thing to remember when people have these discussions is the difference between Debt and Deficit. It's a mistake that even MP's have made on camera.

    Again, keeping this really high level... The budget deficit is the difference between how much the government takes in taxes against how much they are spending (healthcare, defence, benefits, etc etc etc). If the government takes in more in taxes than it spends you have a budget surplus, if spending more than tax you have a budget deficit.

    Now.. The National Debt is slightly different, the debt is the accumulation of all the deficits and surpluses over time. So while we have a large-ish national debt our current budget deficit for the public sector is only about 1 bn (it was about 7bn this time last year).

    So, hopefully you can see the EVEN IF you have a small budget surplus for a number of years if the national debt is large enough (and you do pay interest on this) you can have a surplus but still increase in debt.

    Again... all very high level
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    (Original post by Beckyweck)
    This is another thing I've been wondering. If everyone is in debt, who isn't? The money must be owed to someone.


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    Governments could theoretically all be in debt, if private individuals and companies all hold that debt.

    So when you say "everyone is in debt" you mean every government right?

    Oh and there are countries like China who hold a massive amount of foreign debt (they hold around $1 trillion, out of 13 to 14 trillion total of US debt I think).

    Also government can owe debt to itself. E.g. The US owes about 1/3 of its total debt to itself in the way of trust funds for say Social Security.
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    (Original post by NW86)
    So while we have a large-ish national debt our current budget deficit for the public sector is only about 1 bn (it was about 7bn this time last year).
    Not sure about those figures.
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    (Original post by doggyfizzel)
    Not sure about those figures.
    National Office for Statistics figures which were released last thursday, and sorry let me rephrase my post, typed too quickly, the public sector deficit for february was down to 1bn


    EDIT: Because it isn't true without a source

    http://www.ons.gov.uk/ons/rel/psa/pu...uary-2013.html
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    (Original post by Beckyweck)
    This is another thing I've been wondering. If everyone is in debt, who isn't? The money must be owed to someone.


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    http://www.economicshelp.org/blog/14...vernment-debt/
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    http://www.youtube.com/watch?v=FPPUgykDc1g

    There is a nice simple guide to government debt here. There is a better one, where it discusses money not actually existing and all money just being debt... but I can find that one right now!
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    (Original post by NW86)
    National Office for Statistics figures which were released last thursday, and sorry let me rephrase my post, typed too quickly, the public sector deficit for february was down to 1bn


    EDIT: Because it isn't true without a source

    http://www.ons.gov.uk/ons/rel/psa/pu...uary-2013.html
    Okay but no one measures it by month, because the fluctuations over a financial year, means one month tells you little about the next. The overall budget deficit for the year 2012-2013 was ~£120bn, that is the figure I think most people would be looking at, in the same way £1.2tn figures is the one most people look at when talking about debt.
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    (Original post by 321zero)
    http://www.youtube.com/watch?v=FPPUgykDc1g

    There is a nice simple guide to government debt here. There is a better one, where it discusses money not actually existing and all money just being debt... but I can find that one right now!
    I have to disagree when it state the US is running out of people to borrow from. Even without the FED rates would be at record lows.
    And then its basically advocates protectionism.
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    (Original post by doggyfizzel)
    Okay but no one measures it by month, because the fluctuations over a financial year, means one month tells you little about the next. The overall budget deficit for the year 2012-2013 was ~£120bn, that is the figure I think most people would be looking at, in the same way £1.2tn figures is the one most people look at when talking about debt.
    Which is why I repeteadly stated this is at a very high level, because the person who asked the question was asking from point of little understanding. It was used as an example to indicate how surplus and deficit are different from debt.

    I spend my working life in this sector so I don't need to argue about it online or feel the need to go into the depths of detail, seeing as it's boring enough to do it 10 hours a day! I was merely trying to help someone who didn't have much understanding to begin with
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    (Original post by mucgoo)
    I have to disagree when it state the US is running out of people to borrow from. Even without the FED rates would be at record lows.
    And then its basically advocates protectionism.
    I can't really discuss economics with you as I only study politics and my economics knowledge is limited to say the least, however, Taiwan used protectionism and that has done wonders there? As I say though, the bankers themselves don't know what to do, never mind myself.
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    (Original post by NW86)
    Which is why I repeteadly stated this is at a very high level, because the person who asked the question was asking from point of little understanding. It was used as an example to indicate how surplus and deficit are different from debt.

    I spend my working life in this sector so I don't need to argue about it online or feel the need to go into the depths of detail, seeing as it's boring enough to do it 10 hours a day! I was merely trying to help someone who didn't have much understanding to begin with
    I'm just pointing out your example was poor. Had you given the same example last month (Jan publication), by your measurement we wouldn't be running a deficit at all. My point being, if you are going to do so, you should give any surplus or deficit over the period of a year.
 
 
 
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