Friday, 18 July 2008

The government borrowing binge continues

It is not hard to see why Brown and Darling want to revise there fiscal rules. The UK government is running up a massive fiscal deficit. So far this year, the government has borrowed ₤20 billion.

During the same period last year, the government borrowed around ₤12 billion. Last year's fiscal performance was terrible. By the end of the year, the government borrowed a shocking ₤35 billion.

The latest borrowing binge raises UK public sector net debt to £555.3 billion, equivalent to 38.3 per cent of GDP. Indebtedness is rising rapidly. In the last year, the government has added one full percentage point of GDP to public debt.

GDP is sliding; tax revenues are falling; and public expenditure is rising rapidly. The government is now in a corner and dumping the fiscal rules is the easy way out.


VADO said...

It is all coming together; slow growth, exploding fiscal deficit, rapid inflation, rising unemployment and a crashing housing market. In summary, a total mess.

aSteve said...

Erm... I don't understand the graph, and I don't understand the figures. Why do we magically start each year £10-20bn up?

Maastricht suggested that maximum government gross debt must be below 60% of GDP while net debt must be below 3%. I had understood that gross debt was about 40% GDP (fudged by initiatives such as PPP) and that we'd recently breeched the net debt 'safe limit' of 3% - but not by over 10 fold.

Anonymous said...

Thanks for these, Alice.

Despite the complication of the ERM fiasco, the comparison with what happened with public borrowing in the early 90's slump might be very informative on this one... and you know me, I always like long graphs, I think they show more - voracious and very demanding of me, I know.

B. in C.

dearieme said...

In a few years time, will we agree with Kipling?

"Let us admit it fairly, as a business people should,
We have had no end of a lesson: it will do us no end of good.

Not on a single issue, or in one direction or twain,
But conclusively, comprehensively, and several times and again,
Were all our most holy illusions knocked higher than Gilderoy’s kite.
We have had a jolly good lesson, and it serves us jolly well right!"

gattopardo said...


I think the monthly public finance figures always receive a boost at the beginning of the year because that's a bumper time for tax receipts, especially corporation tax. So if you start the annual count in January, it'll always begin in positive territory.

Illustrative press coverage:

electro-kevin said...

I can just tell by the moderate tone of the comments here that none of you have the faintest clue of what a BILLION ..


...takes three breaths ... *sighs* neurones crackle and then *pop !* ever so gently ...

RRRREEEEPRESENTS ! (Smiles ethereally)

Alice cook said...


gattopardo is pretty much right. The chart covers cumulative monthly data. January starts well and as we go through the year, the deficits accumulate. The chart compares 2007 performance with the first six months of this year.

Actually, the UK's fiscal year runs from April to April, I shifted it to January to December.