Britain’s national debt exceeds £1 trillion

| January 24, 2012
Britain’s national debt exceeds £1 trillion

UK government debt rose to over £1 trillion for the first time in December, despite a fall in public sector borrowing.

Excluding bank bailouts and other financial interventions, public sector borrowing fell £2.2 billion to £13.7 billion in December according to the latest figures from the Office for National Statistics.

This was lower than City forecasts of £14.9 billion.

However, net debt increased from £883 billion in 2010 to £1,003.9 billion in 2011, representing 64.2 per cent of GDP.

The government has reduced borrowing by increasing taxes and cutting spending, with December representing the fourth consecutive month when borrowing has declined.

On average borrowing has fallen by around 5 per cent year on year over the past four months, compared with an average increase of nearly 7 per cent in the 10 years to the 2010-11 financial year, according to George Buckley, an economist at Deutsche Bank.

This has led to optimism among some economists than public sector finances may improve beyond the Office for Budget Responsibility expectations at the time of the Autumn Statement in November.

Earlier this week Adam Posen, a policymaker at the Bank of England also suggested that the UK’s economic outlook had improved, helped by the
second round of quantitative easing in October.

However, Mr Posen said that the improvement was not sufficient for the Bank’s forecasts to be upgraded.

After speaking at Nottingham Trent University, Mr Posen said: ‘Things are a little better … But that’s not enough good news in my world to suggest we have solved the problem, though I am going through the forecast round with my colleagues.’

The Bank of England expects the economy to grow by less than 1% for most of 2012, with inflation expected to fall below 2% at the end of the year.

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