Sunday, October 23, 2011

Historical National Debt

A look at levels of national debt in the UK.
  • National debt is the total amount the government owes to the private sector (though in recent years, government gilts have also been bought by Bank of England)
  • The most meaningful comparison of national debt is to see it expressed as a share of GDP (national income).
  • National debt is mostly financed by selling government bonds / gilts to the private sector (e.g. pension funds, banks, and investment trusts)
  • The UK government has never defaulted, despite having large levels of debt, e.g. after Napoleonic wars of 1800-10 and after 1918 and 1945.

UK debt since 1800
 

UK National Debt since 1900



uk-national-debt
Source: Reinhart, Camen M. and Kenneth S. Rogoff, “From Financial Crash to Debt Crisis,” NBER Working Paper 15795, March 2010. and OBR from 2010

Looking at the history of UK national debt, the current levels of government borrowing don't seem anything particularly worrying. At the end of the Second World War, UK national debt topped over 200% of GDP. In the twentieth century, national debt has rarely been below 40% of GDP.

People assume national debt must be a disaster for the long term performance of the economy. But, it is worth remembering that in the 1940s, huge levels of National debt didn't prevent the UK:
  • Starting a universal National Health Care Service
  • Starting universal welfare benefits
  • Providing three decades of strong economic growth
Relationship between debt and unemployment


 See historic unemployment

High rates of unemployment cause a rise in debt as a % of GDP.
The low unemployment of the 1940s and 50s was a major factor in enabling the steady reduction in debt as a % of GDP in the post-war period.

Current Levels of UK Government Borrowing





uk-national-debt-75-15

Annual borrowing

Net borrowing is different to national (total) debt. Net borrowing measures the total amount the government borrows in one year.

net-borrowing-55-14
  • This shows that the UK has rarely run a budget surplus in the period.
  • There is also a difference between the 1940s and the 2000s. In the 1940s, private sector borrowing was lower. Individuals were willing to do their patriotic duty and buy government war bonds. I doubt there would be the same patriotic fervour to buy 'bonds to save the greedy banks'. The problem today is not just government borrowing, but private sector debt and financial losses. There are reasons to suggest that we couldn't borrow similar amounts now as we did in the early 1950s. See: Biggest lie in UK politics for more on this issue.

UK Bond Yields

Bond yields reflect the cost of borrowing. Government bond yields increased in the 1970s because inflation reduced the value of savings such as bonds. Therefore, investors demanded a higher rate of return on investment.

bondyields

Government Bonds since 1900

Historic interest payments

Interest on UK national debt as a percentage of GDP. See also Debt interest payments


Inflating away our debt

A key issue with public sector debt is the rate of inflation. A high inflation rate reduces the real value of debt making it easier to pay off debt. However, high inflation will make people reluctant to buy bonds in the future.
Related
Public Sector Debt



1749 108.1
1750 106.9
1751 107.0
1752 105.3
1753 102.7
1754 97.6
1755 98.0
1756 100.8
1757 105.1
1758 109.5
1759 121.7
1760 132.1
1761 142.8
1762 154.4
1763 157.9
1764 154.3
1765 150.1
1766 144.9
1767 141.0
1768 135.3
1769 129.0
1770 125.6
1771 120.5
1772 117.0
1773 114.1
1774 110.1
1775 106.1
1776 106.7
1777 107.6
1778 109.2
1779 113.6
1780 120.3
1781 133.2
1782 145.8
1783 152.5
1784 155.7
1785 152.5
1786 148.3
1787 144.6
1788 139.3
1789 135.0
1790 131.2
1791 126.7
1792 122.6
1793 119.7
1794 119.4
1795 123.8
1796 139.8
1797 156.9
1798 166.5
1799 176.3
1800 176.5
1801 177.5
1802 188.9
1803 190.6
1804 188.4
1805 189.3
1806 192.6
1807 193.7
1808 191.4
1809 189.0
1810 186.9
1811 182.5
1812 188.0
1813 196.5
1814 219.9
1815 226.4
1816 237.3
1817 230.9
1818 258.7
1819 260.6
1820 260.1
1821 260.3
1822 246.6
1823 237.5
1824 224.6
1825 212.5
1826 201.2
1827 191.9
1828 182.9
1829 173.4
1830 165.3
1831 163.8
1832 170.9
1833 172.9
1834 162.4
1835 152.5
1836 145.8
1837 151.8
1838 142.7
1839 135.6
1840 144.5
1841 152.0
1842 158.8
1843 159.3
1844 146.3
1845 137.4
1846 128.2
1847 123.1
1848 129.1
1849 127.1
1850 138.7
1851 131.4
1852 129.4
1853 115.4
1854 107.9
1855 105.5
1856 104.9
1857 104.2
1858 107.6
1859 101.9
1860 99.3
1861 95.1
1862 93.6
1863 89.7
1864 84.1
1865 81.1
1866 76.7
1867 77.7
1868 74.9
1869 74.7
1870 70.3
1871 64.2
1872 60.4
1873 57.2
1874 57.2
1875 57.8
1876 59.0
1877 59.8
1878 61.8
1879 64.4
1880 60.6
1881 58.8
1882 56.7
1883 56.6
1884 52.6
1885 53.8
1886 53.6
1887 51.3
1888 47.0
1889 44.3
1890 42.9
1891 42.6
1892 43.7
1893 43.4
1894 41.0
1895 39.7
1896 38.2
1897 36.3
1898 34.8
1899 32.7
1900 30.2
1901 33.2
1902 35.9
1903 38.0
1904 37.8
1905 36.3
1906 34.4
1907 32.4
1908 33.3
1909 32.4
1910 31.7
1911 29.2
1912 27.3
1913 25.8
1914 25.3
1915 36.6
1916 61.4
1917 93.3
1918 114.5
1919 135.2
1920 130.7
1921 154.0
1922 171.3
1923 181.7
1924 174.7
1925 168.3
1926 173.5
1927 164.0
1928 163.4
1929 159.6
1930 161.6
1931 171.5
1932 175.8
1933 177.6
1934 172.9
1935 165.0
1936 156.1
1937 146.0
1938 145.7
1939 137.7
1940 110.0
1941 119.8
1942 137.5
1943 156.8
1944 182.3
1945 215.6
1946 237.1
1947 237.9
1948 213.7
1949 197.7
1950 194.2
1951 175.2
1952 161.6
1953 151.9
1954 146.5
1955 138.1
1956 129.0
1957 122.2
1958 118.1
1959 112.4
1960 106.8
1961 103.1
1962 99.9
1963 98.3
1964 91.2
1965 85.0
1966 82.3
1967 79.6
1968 78.6
1969 72.5
1970 64.2
1971 58.2
1972 55.7
1973 49.8
1974 48.3
1975 43.8
1976 45.2
1977 46.1
1978 47.2
1979 44.0
1980 41.3
1981 38.8
1982 41.1
1983 41.3
1984 40.8
1985 40.4
1986 41.1
1987 38.6
1988 35.7
1989 32.4
1990 27.4
1991 25.8
1992 24.6
1993 25.7
1994 40.7
1995 43.4
1996 44.6
1997 43.8
1998 40.9
1999 38.8
2000 33.3
2001 32.1
2002 33.1
2003 34.0
2004 35.6
2005 37.4
2006 38.4
2007 44.8
2008 43.2
2009 55.2
2010 72.0
2011 74.2
2012 76.1
2013 77.4
2014 78.7

1 comment:

Chris said...

You show graphs of the historical National Debt. Can you show - or link to - the year-by-year figures.