Osborne keeps piling up the debt

The House of Commons Library has just produced a briefing note, “Government borrowing, debt and debt interest: historical statistics and forecasts”. It shows historical statistics for

  • Public sector net borrowing (PSNB) – current account borrowing;

  • Public sector net debt (PSND) – government debt overall;

  • Debt interest payments – annual.

The Table (extracts of which are shown below) shows the amount in billions of pounds and as a percentage of Gross Domestic Product (GDP). Examine the figures and you can see the extent of Osborne’s big lie about the crash being the result of Labour’s profligacy in public spending. In fact Osborne announced in September 2007 that the Tories would match Labour’s public spending projections for the next three years. He said:

The result of adopting these spending totals is that under the Conservative government there will be real increases in spending on public services, year after year. The charge from our opponents that we will cut services becomes transparently false.” (Read on below or download a PDF here osbornesdebt)

He promised to increase funding by 2% annually over three years, in real terms (i.e. taking into account inflation). Under New Labour public spending was set to rise to £615 billion in 2008-9, £644 billion in 20090-10 and £674 billion in 2010-11. Why would he promise to match spending if it was profligate?

It was always nonsense to suggest that the crisis was produced by too high public spending. It was the phenomenal increase in private debt which precipitated the global crash. New Labour’s crimes and misdemeanour’s are many, but that’s not one of them. In the year when they won the election, in 1997, we see

  • PSNB of £277 billion, 3.3% of GDP

  • PSND of £349 billion, 39.9% of GDP

  • Debt interest payments of £27.6 billion, 3.3% of GDP

When New Labour entered government Gordon Brown had already committed to sticking to Tory spending limits for the first two years, a decision which elicited the response from ex-Tory Chancellor Clarke, that he would not have stuck to them. As you can see from the table below PSNB went down, with three years of surplus on the current account. It was only in 2004-5 that the PSNB, as a percentage of GDP, nudged ahead of the level in the last year of the Major government. But it then came down again to 2.7% in the last year before the global crash.

The PSND was £347 billion, 39.9% of GDP at the end of the final year of Tory government, 1996-7. Under New Labour it declined as a percentage of GDP, down as low as 29.3% in 2001/02. In monetary terms PSND rose to £558.2 billion, but as a percentage of GDP it was still only 36.7%. Debt interest payments declined to 2.1% of GDP in 2007-8. Under Thatcher PSNB was higher in 5 years than it was in 2007-8. PSND was higher in eight years of her government than in 2007-8. In all 18 years of Tory government debt interest payments were higher than in 2007-8, more than 4% in six straight years.

In 2008-9, as the global crisis deepened PSNB shot up to £100.8 billion, 6.7% of GDP. However, it should be noted that this was actually lower than 2 years under the Major government when it was 7%. It is in 2009-10, the worst point of the crash that PSNB grew to £153.5 billion, 10.2% of GDP. The cause of this big increase in the current account deficit was a collapse of revenues. Receipts were forecast to be £608 billion in 2009-10 but in fact were only £496 billion; £112 billion less.

Which debt?

Osborne has made great play of the need to ‘pay down the debt’. But he has been careful to concentrate attention on the annual account deficit, the difference between income and expenditure in a single year. The impact of his austerity programme has been to massively increase the overall government debt. When the coalition came into office the PSND was £956.4 billion, 62% of GDP. Yet Osborne’s economic policy has, according to the HCL Briefing Note, managed to increase it by £529.3 billion to 2014-15, or 80.7% of GDP. This is a strange ‘success’.

If everything goes according to Osborne’s plan, his ‘success’ will mean that PSND will continue rising numerically to £1.627 billion in 2020-21. As a percentage of GDP in 2020-21 it is forecast to still be 68.5%, higher than the 62% in the year in which the coalition took office, and after a decade of austerity. As for debt interest payments, as a percentage of GDP they will be 2.5%, the same as in 2014-15 and still above the 2.1% in 2009-10. Numerically they will still be above $58 billion in 2020-21. If his ‘plan’ doesn’t work out then, of course, the situation will be even worse.

Martin Wicks

August 28th 2015

Public Sector Net Borrowing

Public Sector Net Debt

Debt Interest Payments

Amount ? billion

% GDP

Amount ? billion

% GDP

Amount ? billion

% GDP

1979/80

8.5

3.9

98.2

45.0

7.6

3.5

1980/81

11.5

4.6

113.8

45.6

9.2

3.7

1981/82

6.0

2.2

125.2

45.3

11.2

4.1

1982/83

8.5

2.8

132.5

43.9

12.1

4.0

1983/84

11.8

3.6

143.6

43.6

13.2

4.0

1984/85

12.5

3.5

157.0

44.3

14.7

4.2

1985/86

9.0

2.3

162.5

41.7

16.6

4.3

1986/87

8.4

2.0

167.8

40.1

17.2

4.1

1987/88

4.7

1.0

167.4

35.6

18.4

3.9

1988/89

-6.0

-1.1

153.7

29.3

19.0

3.6

1989/90

-0.6

-0.1

151.9

26.2

19.8

3.4

1990/91

6.2

1.0

151.1

24.2

19.5

3.1

1991/92

23.0

3.5

165.8

25.2

17.5

2.7

1992/93

47.1

7.0

201.9

29.0

18.4

2.7

1993/94

51.6

7.2

249.8

33.9

20.1

2.8

1994/95

43.8

5.8

290.0

37.5

22.8

3.0

1995/96

35.3

4.4

322.1

39.2

26.1

3.3

1996/97

27.7

3.3

347.0

39.9

27.6

3.3

1997/98

5.9

0.7

358.6

39.3

29.3

3.3

1998/99

-4.4

-0.5

357.8

37.5

28.8

3.1

1999/2000

-14.6

-1.5

349.1

34.6

25.1

2.6

2000/01

-16.9

-1.6

316.4

30.1

26.0

2.5

2001/02

0.7

0.1

323.1

29.2

22.1

2.1

2002/03

26.9

2.4

354.9

30.3

20.7

1.8

2003/04

31.6

2.6

393.6

31.7

22.0

1.8

2004/05

43.5

3.4

448.1

34.3

24.6

1.9

2005/06

41.4

3.1

490.2

35.4

26.3

1.9

2006/07

36.9

2.6

526.7

36.0

28.6

2.0

2007/08

40.9

2.7

558.2

36.7

31.2

2.1

2008/09

100.8

6.7

724.4

49.0

31.5

2.1

2009/10

153.5

10.2

956.4

62.0

31.6

2.1

2010/11

134.9

8.6

1,101.1

68.7

46.6

3.0

2011/12

113.4

7.0

1,191.0

72.3

49.7

3.1

2012/13

119.7

7.2

1,299.1

76.7

48.9

2.9

2013/14

98.5

5.7

1,402.4

79.1

48.7

2.8

2014/15

88.2

4.9

1,485.7

80.7

45.4

2.5

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