Expert Comment: Government debt rises to £1tnWednesday 25 April 2012
Tony Bradley, Senior Consultant in Organisation Development, Liverpool Hope University Business School
The apparently shocking news that UK Government debt has risen above the one trillion (that’s a 1 followed by 12 noughts) mark has caught the nation’s imagination, but not in a good way. The apocalyptic spectre of Britain plunging into an inescapable morass of liabilities looks like some of the worst financial sector news yet. Until you begin to look at both historical and international comparisons of Britain’s credit worthiness.
Current debt levels stand at c64% of GDP (gross domestic product – the standard measure of annual net worth). This is an historically high level since the early 1970s. But, if you take the oft-made comparison with the Great Depression of 1931-34 our current debt is about one-third. It peaked during the 2WW at over 230% of GDP. But even that was far below the record levels of debt recorded in the aftermath of the Napoleonic Wars, at 260%.
Nor are we close to the most sinning nation in the international league table of debtors. According to the best estimates we lie c. 23rd, below Germany, France and the US. Top (or bottom) of the table, with debts close to our historic peak, is Japan. Their international credit rating (from Standard & Poor’s) is only AA compared to our AAA. But is anyone raising the same concerns about national debt in Japan as in the UK? No! For one good reason. The Japanese save whilst we Brits spend, like crazy. Of far greater significance is the personal savings/debt ratio, which is where we come out as international binge-consumers, second only to the United States. Fings aint what they used to be. But, if you want shocking news of the UK’s financial situation look behind the headlines at your neighbour’s credit card statement!