Thursday, 9th October 2008

The debt we're in

James Forsyth 8:56am

Robert Chote, the director of the IFS, does the invaluable job of totting up in today’s Telegraph just how much debt the country has racked up recently.

“In September last year, public sector net debt stood at just under £515 billion or 36.8 per cent of national income. Since then, the nationalisation of Northern Rock has added a further £87 billion and the Government's day-to-day borrowing another £30 billion. By August this year, net debt had reached £632 billion or 43.3 per cent of national income, roughly the level that Labour inherited from the Conservatives in 1997.
To that total we will probably need to add another £40-50 billion for the nationalisation of Bradford & Bingley, up to £50 billion for yesterday's recapitalisation package, plus the more modest costs of compensating depositors who have lost money in Icelandic banks. The Government must hope that the statisticians do not add yesterday's £250 billion in commercial bank loan guarantees to the tally – or conclude that it has in effect taken control of the banks so that they should be regarded as nationalised industries in the public sector accounts.
Even the additions we can be pretty confident about will probably see net debt heading well beyond £700 billion in the next few months, equivalent to around £14,000 per adult in Britain or around 50 per cent of national income. This is well above the ceiling of 40 per cent of national income that Gordon Brown set himself on becoming Chancellor in 1997. Indeed, we have not seen a figure that big since the last Labour government was forced to borrow from the International Monetary Fund in 1977.”

The problem with Brown’s 40 percent debt target is that it was far too high for a period of prosperity. Britain is heading into an era where government receipts are going to be falling and the bills of social failure increasing with net debt already at 50 percent of national income. One dreads to think how high the debt percentage will be by the time we come out of the coming recession.

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oldtimer

October 9th, 2008 9:28am Report this comment

Add to the ledger the fact that personal debt is sky high, personal savings are about net zero, the stock market is just below the level when Labour came to power in 1997, millions of pension schemes have been destroyed (MPs and cabinet ministers excepted) and you have a picture of 11 failed years. I am unclear why Brown seemed so pleased with himself yesterday. Could it be a case of "I`m all right Jack"?

Peter Wilson

October 9th, 2008 9:36am Report this comment

...and you can add in £100 Billion of PFI to the Country's debt as well

Mike, Brighton

October 9th, 2008 9:41am Report this comment

A Labour government always leaves an economic mess to an incoming Conservative government. The only visible legacy of New Labour is massive debts

Simon Cawkwell

October 9th, 2008 9:57am Report this comment

And you can add in the rise in the unfunded requirement in relation to public sector pensions - perhaps another £800bn. Pretty soon, we'll be talking money.

alastair

October 9th, 2008 10:06am Report this comment

Sadly I suspect that Labour will get away with this. Even before the bank bailouts, the debt figure was pretty high, especially if you take into account off balance sheet items such as PFI and public sector pension liabilities.

If, as seems the case at the moment, the government escape censure for their part in this crisis, then the debts incurred by the bailouts may serve to mask the other debts previously incurred.

TrevorsDen

October 9th, 2008 10:20am Report this comment

Brown was even cracking jokes about 'another bank going bust' yesterday evening and some of the pillocks listening to him were so thick they even laughed.

Browns happy because the crisis has seen off the rebels in his own ranks. We have a cabinet of tossers.

Lets see whose laughing as unemployment and repossessions rise in 12 months time.

Brown may also be happy that the media (led by the BBC of course) are so unquestioning about his assertion that this crisis came from America - that its everyone's problem except his.