There's a whole new debt bubble being born right now. At the moment it's just the tiniest little globule of a bubble. Birmingham City Council has got itself a credit rating, and, thanks to the implicit support of Her Majesty's Government, it's a magnificent triple-A. Yes, folks, BCC rates higher than Uncle Sam with AAA from Moody's and AA+ from Standard and Poors.
So like a kid accidentally locked in the sweet shop after hours, Birmingham now has access to the bond markets. They go can out into the world and borrow for Britain. There will be no limit to the dizzy heights the Chief Exec's salary can now rise to.
I wonder how this will pan out? Perhaps we should take a peek across the pond for a glimpse of the future. US municipal bonds, how are they working out? All hunky-dory? Er, no. There's a ten percent default rate.
But in fact, that's not the real problem. The real problem is when that AAA starts to slide. (Ask any Greek.) When bonds mature they have to be repaid. This usually involves issuing new bonds to finance the repayment of the old bonds. But, oh dear, we're not AAA anymore, we're only AA, or B, or merely "investment grade" so we'll need to offer more and more to the bond markets to get our cash. Thus the screw is turned on the captive taxpayers. They're on a treadmill and they can't get off.
There is another way of borrowing. Councils can go to HM Treasury and ask for a loan. It's a tad more expensive than a AAA bond would be, but it's a fixed rate. It doesn't rely on a credit rating. The taxpayers of Birmingham would be better advised to borrow from HMG; better the devil you know.
Frankly, we just don't need a whole new layer of debt in this country.