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.

Will

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.

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.

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.