Quote ="Ovavoo"Assuming Dave does double the debt, why would interest payments on the amount of the extra borrowing rise when he would be borrowing at 0%. Taking inflation into account, he would actually be reducing the debt by borrowing more wouldn't he?'"
Government "borrowing" is done by selling government bonds, on which interest is paid over a specified period.
Let's say they were ten-year bonds ... if, at the end of that ten years, the government can't repay it will need to issue bonds for, say, another ten years (i.e. re-borrow the shortfall) ... but this time they could be at a higher rate of interest.
The bigger the risk for the investor (i.e. lender), the higher the interest rate.
[iMoneyWeek[/i are saying that interest rates WILL go up ... actually, that bit's a no-brainer, being as low as they are means that the only direction that rates can move is quite definitely up.
By [uhow much[/u they go up is the real issue and that depends on the market's view of how big a risk the UK is.
Where [iMoneyWeek[/i makes a big fib (or error) is by showing UK debt in £billions (how much we owe ... e.g. UK apparently worse off than Greece) rather than as a percentage of GDP (how able we are to pay it back ... e.g. UK much better off than Greece).
Also, [iMoneyweek[/i fails to take any account at all of the money we have in our share of the banks.
If/when we get that back, bingo, debt goes down ... and I really mean d-o-w-n ... bigtime.
