Britain’s pre credit-crunch borrowing

Update: Corrected the link to the ONS data.

A lot of commentary regarding Britain’s economy focuses on the huge debts that the government have built up and the effects of the “credit-crunch” and recent recession. When considering this issue, it is worth remembering that Gordon Brown, as chancellor, built up large debts prior to the credit crunch. Using figures taken from a recent bulletin from the Office for National Statistics (see page 15), Britain’s debt going back to 2001 was:

Year Debt (£ billions) Debt (% GDP)
2001 323 30.9
2002 348.1 31.5
2003 380.1 32.4
2004 424 34.5
2005 465.1 36.2
2006 500.9 36.7
2007 634.4 44.2
2008 733.9 51.7
2009 866.2 61.4

Thus we can see that by 2007, the year that Northern Rock ran into trouble, the government had increased the national debt from 30.9% of GDP in 2001, to 44.2% of GDP. This during a period when the economy and tax receipts were both growing.

The government was constantly spending more than it was receiving in taxes from 2002 onwards.

As a result of the credit-crunch and resulting recession, we’ve seen the debt shoot up to 61.4% of GDP since 2007. Had Brown balanced the budget in the years 2002 to 2007, the debt would have been over 13% of GDP lower when trouble hit, and the government would have had more room for maneouvre, probably resulting in a less severe recession as a result.

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  1. Britain's pre credit-crunch borrowing « James Hammerton's Blog | credit crunch Says:

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