Mr. Osbourne vowed that the Government would “put fuel in the tank of the British economy” in last week’s Budget announcement and duly earned the headlines, but public finances continue to be the biggest contributor to overall government debt. The current Government has always said that one of its most important tasks is to cut Britain’s public debt and deficit, which will encourage renewed confidence in the strength of the UK economy. It has even helped to establish the Office of Budget Responsibility (OBR) in May 2010, which is tasked with providing an independent assessment of UK public finances.
The Institute for Fiscal Studies (IFS), an independent think-tank, has compiled a wealth of data on UK public finances that, in some cases, dates back to the mid-19th century, and is available here on Timetric.
Data on government debt, which dates back all the way to 1855, demonstrates that this is far from the first time that the British economy has been saddled with debt – although the current level is the largest peace-time incurred deficit for at least a century. The chart below shows the ‘national debt’ measurement, which was discontinued in 2002, as well as the current measures of public sector debt.
It is the OBR’s position that the Government’s austerity plan should begin now, but that it’ll still be a few years before we’re likely to see the debt numbers start to slide out of the danger zone.
So, what does this mean? Well, we’ll pretty much have to wait and see. Economic growth, the higher rates of inflation (which may helpfully reduce debt levels in relation to GDP) and the current political climate all remain uncertain. Expect to see these charts again at regular intervals!