Not really - it's a possibility, but very remote, and is subsidiary to the wider question "How Should the UK Default". The current situation is that central government will not allow any local government to default, the quid pro quo for which being that the Treasury controls rigidly what and how local governments can borrow. Like Newham, Lewisham receives a large discretionary grant from the central government each year; without this Lewisham would certainly default. PFIs and BSF may not be sensible ways of financing anything, but they are forced on Lewisham, so it is hard to blame Lewisham for using them. What pressure there is on Lewisham to spend its money wisely does not therefore come from market forces - the fear of default - but from instructions from on high; in this way Lewisham is just like an operating division of some large company.Eagle wrote:Tim
Are you suggesting Lewisham in future will default on its debts.
The issue is more the possible collateral damage which might be inflicted on Lewisham as the Treasury tries to control its debts in the decades to come. If we think of 'debts' loosely as payments people feel central government ought to make, in the way we might speak of someone's 'debt' to society, then 'debts' could include the discretionary grants boroughs like Lewisham have come to expect - and we are already seeing the collateral damage. This is because these are not strict legal debts, and so are not so hard to 'default' on. Other debts, e.g. borrowings on the financial markets, and the terms and conditions of agreements with PFI and BSF financing partners, are well defined contracts, and defaulting on these would be a serious legal matter. That is why the people who benefit from Lewisham's customary spending - the old, the sick, the vulnerable - will get shafted before these ever so helpful financial institutions who are helping rebuild Sydenham School. Precisely who suffers most will depend on incalculable politicking, in which more or less well informed groups fight for their own interest and those of the people they are responsible for.
So, seriously, we don't need to worry about Lewisham defaulting.