Public debt forecast to rise to 50% of GDP

Monday, 17 November 2008 08:01

Public debt is set to rise to levels not seen since the 1970s, according to a thinktank.

In a report for the Centre for Policy Studies, author Charlie Elphicke claims debt will climb to 50 per cent of GDP and if off-sheet liabilities are included, the debt would total 127 per cent of GDP.

This figure is significantly higher than at the beginning of the last economic downturn in the early 1990s, when government debt hit 26 per cent of GDP.

The last time the public finances were in quite such a desperate state was in 1977-78 when it stood at 49 per cent, the report claims.

Personal debt (mortgages, loans and credit cards) is also now at an alarming level, Mr Elphicke said.

This now stands at £1,408 billion - the equivalent of £58,000 per household - equal to the entire GDP of the UK.

"The combined effect of high levels of government and personal debt will exacerbate the depth of the recession," Mr Elphicke said in the report.

"With interest rates already being cut to new lows, the government's ability to stimulate the economy further will be severely restricted.

"For individuals, a 'triple whammy' of rising unemployment, high personal debt and stagnating incomes will also restrict their ability to weather the impending downturn.

"With the bursting of Brown's bubble, in the words of the pop group Shampoo, we're in trouble."

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