I heard another person telling bare faced lies about UK debt this morning on Radio 4. The claim made was we have the worst debt in the industrial nations of the world and we’ve never faced such debt in peacetime.
Both are brazen mis-statements of the truth.
Current and expected debt looks like this, and the UK figure is inflated by our banks:
Now tell me how we have the highest debt? And don’t bother to mention unfunded pensions etc and PFI: the rules used here are consistent.
The history of UK debt looks like this:
Now please tell me how we now have the highest peacetime debt. We exceeded 100% from 1915 to about 1965. We weren’t at war for fifty years.
So to those who promote these ideas I have one simple message, stop lying.
And there’s a message for Cameron and Osborne as well, This is the Tory record:
When faced with recession the Tories let debt rise. Labour reversed that, although it should not have overspent after 2004, I agree.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
There are links to this blog's glossary in the above post that explain technical terms used in it. Follow them for more explanations.
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
Well I just know that a young man’s earnings of £50.000 is quite different from an old man’s earnings of £50.000 in terms of debt sustainability, so one of the problems is that the GDP’s are not really comparable either.
I think if you include private sector debt then the radio 4 statement is (broadly) correct. You don’t need to be so aggressive.
Aggresive and defnesive, so what is Cayman’s (the broken debt ridden countries) debt to GDP in comparison?
Isn’t the risk that the credit rating agencies will downgrade Britain’s AAA rating if cuts are not made?
There is waste in the public sector that needs to be dealt with – starting with the PFI rip off.
You omit to mention that the national debt between the 1940’s and the 1980’s included all of the borrowings taken on by the government to fund such capital intensive companies (and their precursors) as:
British Petroleum
British Gas
British Rail
British Steel
National Coal Board
British Leyland
British Telecom
British Airways
British Energy
so it is hardly surprising if the debt figures are higher. Strip those out and you will probably find the Radio 4 speaker has a point.
Also bear in mind the point, not yet reuted that I made yesterday, namely:
The 56.8% National Debt to GDP ratio is a joke. First of all the basis of the ratio is misleading as a measure of financial health at a time that a country is running a large deficit. If I go to a bank for a loan they measure the value of the loan against my income, not against the value of goods that I will purchase in the year after drawing the loan. Net Debt:GDP is a fair measure when net changes in borrowing are relatively small they distort the rankings. A better measure would be Net Debt:(GDP-budget deficit). the 56.8% figure implies £1409bn GDP on £800bn debt. The national debt 12 months previously was only £627 bn, so that implies a deficit of around £175bn, so a better ratio for the UK would be 800/(1409-175) which is about 65%.
But then there are quite a few liabilities that the Government leaves out of the national accounts. First amongst these are the PFI liabilities, which are on the books of the relevant departments but put off balance sheet by the treasury. There are about £45 bn of completed contracts, but another £15 bn or so of commitments (mostly MOD tankers and A400M military lift), so lets call that £60 bn. Then there is the mysterious £20 bn that the government manages to avoid putting on the books by the simple expedient of calling it a not-for-profit company, and having it borrow in it’s own name, albeit with a government guarantee. Why that is not on the books is a mystery known only to this government. Then we have an estimated present value of nuclear decommissioning costs of £70 bn and many more odds and sods that any public company would show as a liability or reserve against. But biggest of all is the public sector pension liabilities that are just ignored. In other countries these liabilities are usually funded, albeit often with Treasury stock. By making contributions to a Federal employees pension fund which then purchases Treasury stock, the US government still has the same amount of cash, but it records the pension liability as part of the US National Debt, whereas the UK government simply sticks its head in the sand.
Lets call the UK civil service pension liabilities £900 billion, although I have heard higher figures. That gives a more honest figure of (800+60+20+70+900)/(1409-175) which is about 148%.
Add in another three years borrowing at today’s level of £175 bn and the UK hits somewhere around 193%, which puts us into first place.
[…] UK Debt don’t lie Richard Murphy explodes myths about the national debt […]