More macroeconomic woe from the ONS today, after a week in which inflation and unemployment have both been on the rise. Annual public borrowing for the last year hit a record £152.8bn, the highest since records began in 1993. Total debt as a proportion of GDP now stands at a towering 62%, making the 2009 fiscal year probably the worst for the UK’s public finances since the end of WWII.
Sounds pretty bad, doesn’t it? But such is the crazy world we live in that the figures could actually be good news for Brown, Darling and their chums. For all the doom and gloom the numbers are actually rather better than expected. Borrowing is actually well within the chancellor’s forecast of £167bn, and that figure has already been revised down from £178bn.
So, rather like the relief felt when someone expecting to have a leg amputated at the thigh is told that they will now only be losing it from below the knee, the response to the figures may not be as bad as they might seem to deserve. Good luck, or good expectation management? You decide.
Not that any of this is really anything to shout about – the fact that the borrowing numbers aren’t as bad as everyone was expecting doesn’t mean they are good. The British taxpayer is probably still going to be paying for the spending spree of the last two years for the next 20.
And although we’ve all got used to living with personal debt as a result of the consumer credit boom, the consequences of excessive state borrowing are potentially grim - as the sorry tale of Greece demonstrates only too vividly. It’s now costing the Greek government so much to borrow the money it needs simply to keep the government solvent that it is selling 30-day gilts which it won’t be able to afford to honour when the interest falls due in a month’s time.
IMF and EU officials are thrashing out a rescue plan but already there are fears that the 45bn Euros (30m from other Eurozone countries and 15m from the IMF) slated for the deal might not be enough. What the country needs is growth, but the massive public sector spending cuts required to balance the books will likely have the opposite effect.
It’s all a grim reminder of what can happen when debts burgeon and spending isn’t controlled. And although things are not on anything like a Greek scale here yet, there aren’t all that far off either.
There’s no magic wand that makes the UK immune, and with the weak pound and our current level of debt we’re only a credit rating downgrade or two away from serious short-term grief. Whoever our leaders end up being after May 6, they must be very careful to avoid that outcome.
In today's bulletin:
Borrowing hits record high, but could boost Labour...
Ryanair first as O'Leary backs down
Punctual Deutsche Bahn punches Arriva's ticket for £1.6bn
No more bribes, say foreign firms in Russia
Pearl & Dean: the reel deal?