But Saunders has added the total of Britain's household, commercial and banking debt to Government liabilities and come up with a very different picture. This puts total foreign claims on Britain at 400 per cent of GDP, much worse than Germany (150 per cent), Japan (50 per cent), and even the US (100 per cent). This undermines Brown's position, according to Nelson.
Yet the reason for the discrepancy is the huge liabilities of Britain's retail banking sector. These debts are offset against assets. The UK's position seems so different from the rest of the G7 because of London's status as a global financial centre.
That is not to say there is no cause for concern. UK bank assets rose from twice UK GDP in 2001 to almost 4.5 times in 2008. As Martin Wolf says of the banks in the FT today: "These then are undercapitalised hedge funds with liabilities large enough to destroy the solvency of the British state". It's certainly terrifying. But it's not Government borrowing that is the primary cause of this; it's the behaviour of the banks.
Tuesday, 6 January 2009
Over on the Spectator's Coffee House blog, Fraser Nelson, uses some alarming statistics compiled by Michael Saunders, an economist from Citigroup, to castigate Gordon Brown. Britain's gross public debt as a proportion of GDP is low by international standards at the moment. Public debt levels in Germany, the US and Japan are all considerably larger proportionately. That, Brown argues, is the reason the Government has leeway to borrow more now in this crisis.
Posts
