For years, we have fed a simple story we must believe: the government needs money, so it borrows from financial markets, then spends decades repaying the debt with interest. Just like a responsible adult with a mortgage. Get it? The government is like a household you see. That’s how you should understand it or you’re a conspiracy theorist.

But hold on a moment and get your head around this. Why does the UK government, which literally owns the Bank of England, need to borrow money at all? Why not just… you know… take the money? Wouldn’t that be easier than racking up interest payments to the very same financial institutions that got bailed out with public money not too long ago?

How Government Borrowing “Works” (Or Doesn’t)

Currently, the UK government funds its spending by issuing bonds (gilts) to investors, banks, and, sometimes, the Bank of England itself. These bonds pay interest, which taxpayers ultimately have to cover.

Now, let’s pause again for a second: if you owned a bank, would you take out a loan from that bank and agree to pay interest? You might but only if you have lost the plot. Then why does the UK government do exactly that? Instead of using its very own central bank to create money and fund services directly, it chooses to borrow from private institutions—who then charge interest for the privilege. That’s a bit bizarre isn’t it?

“But Printing Money Causes Hyperinflation!” (Except When It Doesn’t)

We are all used to the age-old warning: printing money turns your country into Zimbabwe or Venezuela overnight. The moment the government stops borrowing from financial markets and starts transferring cash from the Bank of England, we’re all fucked. It’s over, we’ll lose our houses and pay 10 grand for a loaf of bread.

Except… that is not what happened the last two times the government did print money. Remember the 2008 financial crisis? For me, as a small business it’s hard to forget. If you can’t remember, The Bank of England magicked up hundreds of billions of pounds to bail out the banks. Hyperinflation? Nope.

Or how about during COVID-19, when the government spent £400 billion on furlough schemes, business support, and emergency spending? Surely, that should have turned the UK into a dystopian economic wasteland. Again, nope. Inflation eventually ticked up, but that was mostly due to Brexit, supply chain issues and energy prices—not because the government created money.

So, if the government can create money when it is saving the banks or handling a pandemic, why can’t it do the same to fund hospitals, infrastructure, or—heaven forbid—make people’s lives better?

Could the Government Just Fund Itself with the Bank of England?

In short: yes, it could. The Bank of England could transfer money directly to the government to fund public services, create jobs, and build infrastructure—without borrowing a single penny from private investors.

But, we are told, this would be reckless. Instead, it’s apparently far more “responsible” to:

                  •               Borrow from banks, so they can charge interest and make a tidy profit.

                  •               Pay back debt using taxpayer money that could have been spent elsewhere.

                  •               Keep up the illusion that the government is just like a household with a credit card, rather than the actual entity that controls the currency.

Meanwhile, when banks or corporations need money, it turns out we have an infinite supply. Funny how that works.

Is Government Borrowing Just a Scam?

Well, “scam” might be a strong word—but let us just say the system is very convenient for banks and investors. Governments around the world have been proving for years that they can create money without triggering financial Armageddon, so why not more often?

The real reason the government insists on borrowing from financial markets instead of funding itself? Power and profit. Keeping things the way they are means financial institutions stay rich, while politicians get to lecture us about “living within our means.”

So, next time someone tells you we can’t afford to fund the NHS, build new homes, or invest in green energy—ask them why we could afford to hand out billions to the banks with no issue. Maybe, just maybe, the whole debt repayment narrative is more about maintaining a financial status quo than actual economics.

It’s hard to believe but I am beginning to.