Gilts Corporate Bonds City Bonds
Published / Last Updated on 12/10/2016
Gilts, Corporate Bonds Now City Bonds.
Would you lend money to your local council?
The government is floating the idea of allowing UK pension funds to invest in local infrastructure projects for example building a new railway line or constructing a new road.
We do not know the full details yet but these so-called infrastructure investments are known as "City Bonds". It may even be that local councils and authorities will be allowed to raise money this way to.
There are billions of pounds held in UK pension funds that are struggling for investment returns via bank and building society deposits or from government loan stock known as gilts. City Bonds would release money into the economy to fund projects locally and potentially receive higher returns.
Comment
This could potentially end in disaster. We are trying to move away from debt ridden society yet the government is potentially promoting more public sector debt. We cannot keep borrowing money to fund public services.
If we look overseas we have already seen town councils in southern Europe going bankrupt, particularly in Greece. If we look further afield to the united states of America, over 30 cities, towns, counties, utility authorities and other municipalities that have filed for Bankruptcy since 2010 (source governing.com).
The top five failures in the US being huge cities and counties in the last few years:
- Detroit, Michigan
- Jefferson County, Alabama
- Orange County, California
- Stockton, California
- San Bernardino County, California
We predict that within the next 20 years we will see a number of UK local authorities or boroughs go bankrupt if this path is followed. The biggest cost to public services is the ridiculously generous pensions that public sector workers receive without contributing anywhere near enough to what the real cost of these "gold plated" pensions are.
Is another ‘winter of discontent’ on its way with council workers striking, rubbish piling up on the streets and our transport system coming to a halt?