Britain’s net debt will stay in line with OECD

New data published today by the OECD show that Britain's gross financial liabilities are set to remain close to those of the OECD average over the next decade.

New data published today by the OECD show that Britain’s gross financial liabilities are likely to remain close to those of the OECD average over the next decade. The OECD credit the Government’s fiscal stimulus as “cushioning” the downturn while calling for an “announcement of concrete and comprehensive [fiscal] consolidation plans.”

As the ONS publish data showing that Net Debt as a percentage of GDP (including financial sector interventions) has risen this month to 58.9 per cent (p.11), the OECD predict that Britain’s gross financial liabilities (a similar measure) will rise no higher than the OECD average (p.70). Gross financial liabilites do not net the UK’s financial assets such as holdings in UK banks.

As the chart below shows, Britain’s lower level of liabilities before the financial crash have given the country greater capacity to absorb record deficits.

The OECD’s country summary for the United Kingdom says:

“The economy is set for recovery, supported by improving financial conditions, an expansionary monetary policy and stronger international growth. However, the pick-up will be slow with GDP projected to grow by slightly more than 1% in 2010 reflecting strong headwinds from balance sheet adjustments, a still weakening labour market and fiscal tightening. In 2011 the recovery will gain momentum, but resource utilisation will remain low and the unemployment rate is projected to reach 9.5%. Inflation is likely to remain below the 2% target for an extended period.

“Financial sector support, monetary easing and fiscal stimulus have cushioned the downturn. While monetary policy should remain expansionary over the projection period, normalisation of interest rates will probably need to start in 2011. The weak fiscal position makes further consolidation necessary; an announcement of concrete and comprehensive consolidation plans upfront would enhance macroeconomic stability. Strengthening financial regulation and supervision would also support stability and hinder a build-up of new imbalances at historically low interest rates.”

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11 Responses to “Britain’s net debt will stay in line with OECD”

  1. Shamik Das

    RT @leftfootfwd: Britain’s net debt will stay in line with OECD:-

  2. Dave Cole

    RT @shamikdas: RT @leftfootfwd: Britain’s net debt will stay in line with OECD:-

  3. Will Straw

    Buried in new OECD report RT @leftfootfwd Britain’s net debt will stay in line with rest of OECD for next decade

  4. Tom Callow

    RT @leftfootfwd Britain’s net debt will stay in line with rest of OECD for next decade

  5. Balham Bugle

    This is hardly reassuring. I wonder what that chart would look like without Japan skewing the scale. Aren’t you effectively saying: “Hey, we’re doing worse than every other major economy in the OECD, except that basket case Japan”. Even after what the OECD describes as “daunting” six year period of fiscal consolidation, the UK goes from having debt level 23% lower than France (as a percent of GDP) to 14% above. The OECD even predict that we overtake Italy as the major debtor of Europe.

  6. Richard Blogger


    Let’s see. Honda, Toyota, Mitsubishi, Sony, Canon, Nikon… I could go on and on. The country has some of the world’s most successful companies. Now tell me the equivalent British companies. While you are at it, *American* companies (Ford, Chrysler, GMC are basket cases compared to their Japanese equivalents).

    If you were talking about Zimbabwe, then I would agree. Japan is not a basket case.

    To answer your unasked question (but it lingers in the air). The UK has for most of its history had high debts. The low debt up until 2008 was the exception, an aberation. When Harold MacMillian said “you’ve never had it so good” the level of debt was higher than it is now.

  7. Politics Summary: Friday, November 20th | Left Foot Forward

    […] The Guardian show that the OECD’s growth projections are lower than the Governments, but Left Foot Forward showed that long-term projections show that Britain’s net debt would rise no higher than the […]

  8. willstraw

    Well said, Richard.

    Worth adding that these projections exclude Britain’s assets (like the holdings in banks) and predicts unemployment increasing by another 2 per cent (which may not materialise)

    The key point with debt is not the overall level but whether it is sustainable. The Tories and their proxies would love Britain to lose its AAA rating but long-term projections like this scotch that notion.

  9. Paul Nutten

    RT @tomcallow: RT @leftfootfwd Britain’s net debt will stay in line with rest of OECD for next decade

  10. Balham Bugle

    Realise this is late in reply; I was out of connection over the weekend.

    Will, you say that the point is whether the level of debt is sustainable. But that wasn’t the point you were making; your original point was that net debt was in line with the OECD. If you look at the data, its clear that the UK isn’t in line, and the only reason your chart possibly shows that is that Japan skews the scale massively.

    To answer whether debt is sustainable you need to consider both the stock of debt and the deficit. The UK had low debt, which was a advantage; one we’ve now blown but an advantage never the less. Against that, is the problem that we went into this recession with a long-term structural deficit of around 6 six per cent of GDP and now have the fastest growing level of debt in the developed world. We will need to see a painful period of fiscal tightening, just to stop debt continuing to climbing. There may be some disagreement amongst economists about when the tightening needs to start, though only of around 12 months, but what needs to be done is quite clear.

    Oh, Richard; just to let you know, when I’m making a serious comment, I tend not to put it in quotation marks. I must say that I am impressed by your somehow tangentual defence of Japan. While I have no particular insight on Japan, can I point out that a national economy is more than a number of successful international companies. Any suggestion however that the Japanese national economy has seen anything apart from an indifferent period of national economic growth of the last nearly two decades, and that policy-makers have not been explicitly asking themselves how to avoid the mistakes of the Japanese as they have tackled the global credit crunch seems difficult to maintain.

  11. willstraw

    Hi Balham,

    Thanks for the engaging comments.

    Agreed that sustainability is about both stock and deficit. My point is that we started sufficiently low that we had more scope to absorb deficits. This means that we can absorb record deficits (part structural, part automatic stabilisers, part stimulus) and still end up with debt that it is “in line with OECD” ie 120% GDP in Britain to 113% in the OECD. There are 30 countries in the OECD so Japan should weigh that heavily on the average.

    The risk now is that bringing down the deficit too quickly could imperil the recovery and send deficits spiralling. Of course there will have to be cuts (and tax rises) but sequencing is everything.

    All the best.


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