The coalition will pile on more debt than any modern government


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From the end of the Second World War until the 1970s the UK’s debt burden as a share of GDP shrank from a high of almost 240% down to the 50% level. The stagflation of the 1970s meant that this remained the level until 1979.

Chart 1 shows the changes in debt burden as a proportion of GDP in the Parliaments since then.

Chart 1:

Change-in-UK-government-debt-as-a-share-of-GDP
Unless we forget, the coalition’s goal was to cut close the deficit. At the same time, they wouldn’t borrow more than Labour did in the previous parliament.

The Office for Budget Responsibility (OBR) expected the coalition would increase the debt burden as a share of GDP by 16.9 percentage points. Labour between 2005 and 2010 increased the debt burden by 18.4 points.

But last year’s growth shock changed all that, and the current expectation from the OBR published last week was that the coalition would increase the debt from 52.5% of GDP to 76.3% of GDP, an increase of 23.8 points.

GDP growth feeds into this ratio in two directions, first directly as the larger GDP is, the smaller debt is as a proportion; second indirectly through higher tax receipts reducing borrowing, and thus reducing growth in debt.

 


See also:

UK’s public debt is about to exceed that of the US for the first time 1 Feb 2012

What Labour needs to say about debt 16 Jan 2012

No-one borrows out of a borrowing crisis, except the Tories, Labour, Lib Dems, Denmark… 5 Dec 2011

Osborne set to borrow billions more than Darling was projected to 16 Nov 2011

Cameron’s central argument on debt is wrong; Labour needs to find a way to say so 6 Oct 2011

Sun and Mail debt scare story obscures the truth 31 Aug 2011

The Daily Mail are debt dunces 18 Jan 2011


 

So while the current OBR prediction was for a 23.8-point increase in the debt burden is predicated on there being low growth for the next year, there might have been a chance that we could have had a positive surprise.

With the OECD raising the risk of a double dip in the UK there is no chance of this happening.

That means we can now be confident this government will have borrowed more over a parliament than any modern government. So much for deficit cutting.

 


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  • Anonymous

    And since Labour’s plan is to cut the deficit slower, what does that say about borrowing?

    What about the other debts not included in your figures?

    Where’s the civil service pension? 1,150 bn on top

    What about my state pension? If its not a debt, that means you don’t intend paying it, doesn’t it?

  • Anonymous

    Why share of GDP?

    Lets see, I go to the bank manager, and apply for a loan. I include my neigbour’s incomes in the application form in addition to my own. After all, bumping up my income makes that mortgage more affordable.

    It’s government debt. Tax income is the correct divisor, and that makes the debt frightening. Particularly when all the past accrued debts are included.

    12-13 times income. Not even Tony Blair got that multiple when he was PM.

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  • Anonymous

    Labour would have cut more, by virtue of not having choked off growth. But no, better in your world a smaller pie as long as the rich get richer.

    And your campaign against pensions for the 99% continues.

  • Anonymous

    “They’re using the standard figure which shows MY party in a bad light. Wah! Wait, what else can I use”

  • Anonymous

    So lets see how that works and you can explain it.

    1. Government spends 700 bn
    2. Government taxes 550 bn

    End result, deficit is 150 bn.

    So what does labour do again? From what you’ve said, it doesn’t cut spending, so that stays at 700 bn, or does it spend more in real terms like the Tories?

    So how again does the deficit get reduced? Spend is, I presume going up at the rate of inflation, so perhaps you can tell us what happens to taxation?

  • Anonymous

    The good measure is total accrued debt, with things like civil service, PFI and other things such as pensions, divided by taxation. ie. debt / income.

  • Anonymous

    Goes up on the 99% in your world, while the 1% get to continue to evade tax, even as they get wealthier and wealthier.

    It’s typical cronynomics.

  • Anonymous

    “Good measure”

    Ah yes.

    “Shows what I want to be true”

    No, there’s a reason %GDP debt is a good measure, despite it’s flaws – it’s easily comparable and it’s a standard.

  • Mr. Sensible

    LordBlagger, what it says is that austerity doesn’t work. Under this so called deficit reductiion plan, the Coalition is borrowing more than Labour planned to borrow when Darling planned to halv the deficit over 4 years. And lets also remember that Darling out-performed his own forecasts when Labour left office.

    Newsbot9, the problem the right have is that they insist on these rather misleading comparisons between government and household debt. The problem is, if you cut off growth, then as we have seen, tax receipts down, welfare spending up because people aren’t working.

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