Payback on debt is historically low

Peter Hoskin on Coffee House draws attention to the Economist's new Global Debt Comparison feature. But the important question is not the level of debt but the cost of paying it back. Despite the fears and scaremongering from the right, the yield from 10-year British Government Securities (gilts) remain low by recent historic standards.

Peter Hoskin on Coffee House draws attention to the Economist’s new Global Debt Comparison feature. Hoskin highlights that, “the Economist has [the UK] in the highest debt group.” As Left Foot Forward showed yesterday using figures favoured by the Conservative party, the UK is actually in the good standing – relative to other G7 countries – to absorb the projected deficits of the coming years.

But the important question is not the level of debt but the cost of paying it back. Despite the fears and scaremongering from the right, the yield from 10-year British Government Securities (gilts) remain low by recent historic standards.

At the average rate since the collapse of Lehman Brothers of 3.8 per cent, this implies annual interest payments of $97 billion (£59 billion) in 2011. Now that sounds like a lot of money but comes to a relatively low 4 per cent of GDP. It is critical, of course, that the deficit is brought down over time and that Britain retains its AAA credit rating but context is necessary on discussions of debt.

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