Friday, September 18, 2009
Still Heading Down
Today's public finance stats revealed by far the highest August borrowing ever - £16bn. It takes the total for the financial year so far to £65bn, nearly £40bn above the corresponding figure last year. And public sector net debt is now at 57.5% of GDP.
It's sobering to look at the longer-term perspective.
The chart above shows annual borrowing on a rolling 12 month basis from December 1993 up to August 2009. And as we can see, we are way beyond the historic range, apparently in freefall. Annual borrowing is already running at £127bn, and by the end of the financial year HMT forecasts it will reach £175bn (with many other forecasts even higher).
The damage is being done both by lower tax revenues (down £23bn financial year-to-date), and higher spending (up £12bn - although interestingly, only £6bn of that is extra spending on social benefits).
As we've blogged before, this rate of borrowing means we are currently at the very top of the OECD's borrowing league. Which means we can ignore that false comfort about how France, Japan, and Italy are all worse than us in terms of debt outstanding - we are closing the gap with frightening speed.
And on that very subject, BOM reader Chris H urges us to check out the Economist's interactive global debt map.
It's well worth spending a few minutes exploring it, especially the way that our relative debt position deteriorates between 1999 (the first year they show) and 2011 (the last).
Because in terms of public debt as a percentage of GDP, we go from being one of the least indebted major nations (lime green on the map) to being one of the most indebted (black). A truly shocking testimony to Labour's economic mismanagement.