Bank bailouts push national debt up by £1.5tn
Figures released by the Office for National Statistics today have revealed that national debt could be pushed up by as much as £1.5 trillion, following the bailouts of Royal Bank of Scotland (RBS) and Lloyds TSB.
Billions of pounds were injected into the two banks last autumn to prevent them from collapse. Furthermore, both Northern Rock and Bradford & Bingley were taken into public ownership last year.
The ONS said public net debt has already reached a high of 47.8% of GDP and the organisation also revealed that the Government finances deteriorated significantly in January – a bumper month for tax income.
January tax receipts usually boost public finances, however, these have declined due to a rise in employment and falling company profits.
Tax receipts have fallen by 11%, while corporation tax receipts are down 21%.
Meanwhile, the assessment also suggest Alistair Darling’s borrowing forecasts are far too optimistic and the ONS believes that RBS and Lloyds should be treated as public companies, since they are now partly owned by the taxpayer.
Andrew Goodwin, senior economic advisor to the Ernst & Young Item Club, believes “public finances continue to deteriorate at an alarming rate.”
Over the tax year to date, Government borrowing has hit £67.2 billion – nearly three times higher than the same month last year.
Many analysts have warned that Mr Darling will exceed his £78 billion borrowing forecast for the current tax year, with many forecasting a deficit of £100 billion.
The debt burden would “slow down” the rate of recovery of the UK economy, according to the Conservatives.