Interesting link to the BBC article and at a first glance it seems to make a lot of sense.
It suggests that stating that “National Debt has increased” and by measuring National Debt in Pounds Stirling is “rubbish” because inflation would increase National Debt anyway.
So let’s apply the Principle and see what we get;
At the end of 2001 National Debt was at £315B (source NSO)
If we use Gordon’s sums the national Debt end of August 2008 before buying out the bank was £637.4B
This means the debt has more than doubled in six and a half years, but we forgot to allow for inflation.
If we assume a 3% rate of inflation per year for those six and a half years (inflation has been below that amount several times but has risen sharply this year) we will find that the £315B at end 2001 should have become £383.6B- just based on inflation.
So if we adapt the inflation model sarcastically suggested in the BBC article I think it’s fair to say the National Debt is still out of control
2001 Actual Debt £315B
Aug 2008 allowing for inflation £383.6B
Aug 2008 Actual Debt £637.4
The BBC article then goes on to say
So how do we work out if the numbers are genuinely better or worse than in the past, and by how much?
First, we compare them with the size of the economy in pounds (or what's called "money GDP"). This takes account of the combination of inflation and how well off we are, and is the method used by statistical authorities worldwide.
So let’s try using this method suggested in the BBC article
Nearer the beginning of this decade, the Government could boast about the national debt being reduced to just 29% of GDP. This was partly aided by the windfall of mobile phone licenses. National Debt is now forecast to rise to 44% of GDP by 08/09. This is half as much again as it was
Again my conclusion is that Labour borrowing is out of control. It was after all Gordon Brown who introduced the “golden rule” that National Debt was never to exceed 40%
Originally Posted by Gerry
Excellent BBC piece shows that you can spin things how you like. Would be nice to hear a bit more reasoned and clear reporting like this.
I have applied both sorts of spin suggested in the “excellent” BBC article and I still find our Governments borrowing to be out of control.
And this is being pretty conservative (as in generous, not the party). The true scale of the problem is actually much bigger.
Public Sector Pensions are a liability that the government has to pay from current spending but have not been included in the National Debt figures.
The Government does not include private finance initiatives in its debt figure even although it has committed itself to this liability
The government has given £100B worth of guarantees to Northern Rock, hopefully they will not loose money here, but like any investment things can go up and down. This is a balance sheet liability, and will remain so until we see a return.
The UKs demographics will only worsen the problem. In about 8 year the baby boomer population will start to retire therefore reducing the amount of work force (and income tax) and increasing the number of pensions to be paid. The government is floating a bill to increase the retirement age to 68 to help solve this but as life expectancy is increasing it is unlikely to be enough (and not necessarily fair anyway.)
The most accurate statement in the BBC article reflected on the media itself
“In short, our media and politicians on both sides have been talking a good deal of rubbish”