Ask Andy: Improving your balance sheet

[Geezer]

Andy Brough
http://www.thisismoney.co.uk/investing/ ... topstories

Andy Brough:

Brown will scrape the barrel in Antiques Roadshow

When you look at your own accounts there are three things to look at:

First, your profit and loss account. How much income you have coming in and what is going out.


Second, your cash flow. Are you going to have to borrow from the bank?

Third, your own balance sheet. Do your assets exceed your liabilities?

You only have to watch the BBC's Antiques Roadshow to see that one way to improve your balance sheet is to sell assets whose value you had never fully realised.

The improvement in the balance sheet after you have sold an asset improves your short-term cash flow and then reduces interest payments. For a while, life appears to be a lot more rosy.

I spent an evening last week having a drink with a former member of Margaret Thatcher's Government. He explained to me that public spending under the Iron Lady had never been cut.

In fact, they had been lucky in that they had improved the profitability of the nationalised industries so that the losses that had been damaging the public finances had turned into profits.

This then meant that these industries were attractive to investors and Thatcher took advantage to raise £47bn selling us what we already owned.

This improved the balance sheet, reduced the interest payments and set the public finances on the way back to surplus.

So the question is, can Gordon Brown have as much success with his own version of the Antiques Roadshow?

The problem is that on looking, it is difficult to see what of any real value is left that hasn't been sold by previous governments in order to fill that hole in the balance sheet.

It is always easy to sell the best assets first and that is what has happened in the past.

Brown, looking at his own profit and loss deficit of £175bn and the need to raise £1 trillion by selling gilts over the next five years, is sizing up the assets of the UK that may be available to help him out.

He does have a little time on his side as assets exceed liabilities by 40% but that gap is narrowing as the country spends more than it earns.

So what assets are available to sell to get the debt down? Well I had a look down the list and found companies such as the Royal Mail (could it deliver its share certificates on time?), some nuclear activities, the odd bit of property here and there and some other miscellaneous items.

The problem is that all the best items have been sold. If Brown and his Cabinet think that they are going to bail themselves out by selling what is left then they have two hopes - Bob Hope and no hope.

[Post Off]

I just wish somebody, like the Queen (maybe?), would privatise the whole government -- bunch o' useless tossers!

...Of course, I wouldn't like the likes of Royal Mail running the country. Duh!

[TrueBlueTerrier]

I just wish somebody, like the Queen (maybe?), would privatise the whole government -- bunch o' useless tossers!

...Of course, I wouldn't like the likes of Royal Mail running the country. Duh!

|Yep agree - pity we cant we can't do a HYS survey on them and then pay them commensurate with the results - they get paid only on results and contentment of their constituents not on whether they toe the party line or not.