Watch the debt auctions
New information is coming to me by the minute.
First, it has emerged that the is basing its predictions of the public finances -- and hence its debt reduction forecasts -- on a growth rate of 3.25% for 2011 and thereafter. The Treasury used to base public finance projections on the trend rate of growth (now 2.75%) even if it thought the economy might grow faster, which was prudent.
Now it is assuming growth to calculate public finances only a natch below what it is forecasting growth to be, which is not so prudent and underlines how debt is likely to soar even further if the Chancellor's robust bounce back in 2011 fails to materialise.
And secondly, further signs that the government is worried about its ability to finance the debt comes to me in news that the Financial Services Authority has discreetly told the banks to put more government gilts ( ie Treasury bonds which the government issues to finance debt) on their balance sheets.
Now all banks should have because they are a safe and secure asset ("gilt-edged") but it seems that the FSA is telling them to buy more than they want or need.
This suits the government which has shed-loads to sell and it needs British banks to buy it more than ever now that foreigners don't seem very keen. Indeed in recent months foreigners have been net sellers of British debt, hence the government's new emphasis on potential domestic buyers.
We'll need to watch how well or badly the government's debt auctions go in the weeks ahead to ascertain if it's running into trouble getting people to buy it.
Read my earlier budget blog.
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