Fraser Nelson

Responding to LabourList

Responding to LabourList
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Although it hasn't been going long, LabourList is already brightening up the blogosphere. They seem up for a genuine scrap, as opposed to the hysteria and name calling that the left often succumb to. It has challenged me to explain Alan Duncan's claim that Obama is in a better position to launch a debt-fuelled stimulus than Britain - suggesting I would be as rude to the Tories' new Shadow Leader of the House as I would be to Mr Brown. I'm not going to be. Duncan was right: America as a country owes about a quarter of what Britain does. And why do I say so? Here's the maths.

1) Labour List quotes the IMF to the effect that US net debt is 50.7% of GDP and Britain only 38.5% of GDP.

Why, you might wonder, does LabourList use an annual IMF report for UK debt? Because it's the only source on earth that puts it at 38.5% of GDP. Each month, the Office of National Statistics reports UK net debt - the December 2008 figure was 47.5% and this was before the effects of the second bank bailout were felt.

2) Even the above excludes some £100bn of PFI debt, Network Rail - and all these off-balance-sheet accounting fiddles that Brown pretends to be so angry about when he thinks banks use them.  It is literally illegal in America to try and deceive the taxpayers in the way that Brown routinely does the British ones. The Centre for Policy Studies (where yours truly is a board member) recently calculated that the true UK governmebt debt figure would be closer to 127% of GDP (full report here). This reflects calculations by the Institute of Fiscal Studies, which put it at over 100%  back in April (Table 3.3). So debt at 38%? In our dreams.

3) It is a grave error to only consider government debt. Why Brown has uniquely screwed Britain is by letting personal and corporate debt soar too. UK personal debt is 178% of average income - the highest ratio any G7 country has ever seen. And corporate debt? The banks were so ineptly regulated by Brown (who was hungry for his tax take in their profits and bonuses) that their debt soared three times the UK economic output. As I blogged last month, put these three pieces together and the gross external UK debt is 413% of GDP. And LabourList, if you're reading, the US figure - government, personal, corporate - is 100% of GDP. So Britain as a country owes four times more than America, as a country.

4) America can do more because the dollar is the world's reserve currency. The pound is fast becoming the new basket case currency. If LabourList thinks America is in the same boat of economic instability, perhaps it can explain why the GBPeso is now worth $1.37 - crashing down from $2 only a few months ago.

Bottom line: if Brown hadn't wrecked British public finances then the pound wouldn't be tanking and our bankruptcy risk ratio wouldn't be twice as high as that of McDonald's.

Written byFraser Nelson

Fraser Nelson is the editor of The Spectator. He is also a columnist with The Daily Telegraph, a member of the advisory board of the Centre for Social Justice and the Centre for Policy Studies.

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