And so it was that in January, the UK’s government borrowed £4.3 billion. Now these particular records go all the way back to 1993, and not once in that time have the January public finance figures been in deficit.
Jonathan Loynes, from Capital Economics, said: “Extrapolating the trend forward points to a full-year borrowing figure . . . equivalent of around 12.8 per cent of GDP, just in excess of Greece’s 2009 deficit . . . It is clear a more credible plan to restore the public finances to health will be required shortly after the general election to keep the markets and rating agencies at bay.”
Philip Hammond, who is the Shadow Chief Secretary to the Treasury said: “These appalling figures – showing the first January deficit on record – illustrate the scale of Labour’s debt crisis.
“The Prime Minister must now heed the advice of leading economists and business leaders and set out a credible plan to get the deficit under control, starting this year to put Britain back on her feet. The longer he delays, the more the recovery and our credit rating will be put at risk.”
Okay, so it’s bad, very bad. But don’t be too quick to write the UK off. There are three things that make the UK different from Greece.
First of all, the UK is not in the euro. Sure, our balance of payments is showing a current account deficit, but the trade deficit is improving and is much, much lower than the Greek trade deficit.
Secondly, the UK may be borrowing a similar amount as a percentage of GDP to Greece on an annual basis, but the UK is in a much stronger starting position. Net debt in the UK is much less than in Greece. Projected net debt for Greece is much greater than projected net debt for the UK. (NIESR forecast that Greek government net debt will hit 119 per cent of GDP next year, By contrast they forecast that UK net government debt will hit 85.8 per cent of GDP. It has UK net dept peaking at 95 per cent of GDP, which is high but much lower than the forecast for Greece)
Thirdly, it is much harder to think of an acronym featuring the UK.
You see, it can surely be no coincidence that Portugal, Ireland, Italy, Greece and Spain spells PIIGS. But put UK in there, and what do you get, PIIGUS. It doesn’t really work does it?
This does mean, of course, that the citizens of Spain, Holland, Italy and Turkey have serious reasons to worry.
© Investment & Business News 2013