British Public Debt Levels Continue To Rise
Public Sector Net Borrowing in the UK is continuing at elevated levels, the reported debt increase for the month of May has just been announced at £11.477Bn, this is a further increase on April’s rise of £9.631Bn and is marginally better than the market’s prediction of a £12Bn addition to debt levels for the month.
Britain’s debt to GDP ratio was running in the mid 40’s prior to the economic crises, this has more than doubled over the past five years leaving public debt at just over 90% of GDP. As the UK’s recover continues to outperform the debt level continues to creep higher, the annual interest bill on this debt is now over £50Bn per annum or almost £1Bn per week.
There are some tentative signs that Britain is struggling to bring the public debt levels back in line with forecasts, at least if the last couple of monthly reports are anything to go by. A closer examination of the past quarters figures however does highlight a number of exceptional items that are not obvious from the headline numbers. There were some one offs such as the funding of the Royal Mail pension fund, there was also a significant fall in tax receipts on the month, this is partially related to the deferral of bonus payments into the new tax year in order to take advantage of the lower top level tax rates. Additionally, local authority finances tend to be more volatile earlier in the calendar year, these typically settle down as the year progresses.
This is not to excuse the gradual rising of the UK’s deficit, there is no doubt that the debt fuelled expansionary policies that brought Britain through the crises have worked, the UK is now the fastest recovering developed economy in the world. There is however a need to not only temper the deficit growth but at this point overall public debt in the Britain should really be falling, even if only nominally.
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