Readers Question: The Government says that they have inherited the biggest National Debt of all the G20 countries. Like most people I am sick of hearing the statistics about the National Debt thrown about by different people with totally different figures and I hope that you can clarify this.
The UK doesn't have largest national debt (total government borrowing) of all G20 countries. According to this list of national debt (compiled by CIA) the UK is 23rd with public sector debt of 73% of GDP. (note this figure is based on old calculation which included financial sector intervention. The ONS figure now shows national debt of 58% of GDP (excluding financial sector intervention)
It is important to distinguish between
- Annual government borrowing (public sector net Borrowing PSNB)
- Total government borrowing (public sector net debt PSND) - often referred to as 'national debt'
- Annual government borrowing (PSNB) forecast to be £149bn 2010/11 - 12% of GDP
- Public sector net debt (PSBR) The ONS statistic is £870bn or 58% of GDP (this excludes financial sector)
In terms of Net Debt, several European countries have higher levels of total public sector debt.
Note on Debt Statistics
There are different ways to calculate levels of national debt / government borrowing. I once looked into it in detail - understanding government debt statistics - it is a bit of a mindfield.
Readers Question: The ONS for the end of March 2010 showed the UK with a debt of 1000 billion and 71% of GDP and the percentages for both Germany and France were higher. So does this not mean that our debt is going down and it is not the highest of the G20.
Debt has definitely been increasing since 2010. They must have changed what they included in the public sector debt. I think that figure (2010) may have included financial sector intervention. This is now excluded and put in a separate figure (which excludes financial sector intervention)
Readers Question: In addition the TUC is saying the debt is 40% where do they get that from?
I don't know. I've never heard that before. It is possible they come up with 40% by excluding cyclical factors (due to recession). Therefore 40% could refer to the structural deficit. However, it is really hard to know how much tax revenues will return when the economy returns to normal growth.
Readers Question: Also the cuts will mean more unemployment, less taxes and more welfare increasing the debt.
To an extent yes. Many countries who implemented significant spending cuts - Portugal, Ireland caused lower economic growth which led to higher unemployment and lower tax receipts. (see: economics of austerity) Also the fall in economic growth caused bond markets to become nervous. It shows that reducing the deficit is not as simple as slashing spending. Unfortunately, the level of spending cuts will cause lower growth in the UK and make it difficult to reduce debt to GDP.
However, the size of public borrowing is such that we cannot rely on economic growth alone to reduce the deficit. There definitely needs to be a long term debt reduction plan. But, this long term plan definitely didn't have to follow the speed, scale and time plan of the current government.