Government puts every family in £94k of debt

Britain likes to imagine that it leads the civilised world. Well now it conclusively does, says the Organisation for Economic Co-operation and Development (OECD), who have discovered that we’re front runners at plunging the nation onto debt.

By the government’s own budget figures, the current national debt per family rests at an eye popping £65,000 but it’s set to rise to a bed wetting £94,000 by 2014. The OECD predicts things to be worse with the fiscal deficit expected to rise to 14% of economic output in 2010, the biggest of any of the OECD’s 30 member countries and almost two thirds higher than the average of 8.75%. This sharply contradicts the claim by Alistair Darling who forecast in the budget that the deficit would reach £175bn this year, or 12.4% of GDP this year, falling to 11.9% in 2010.

High public spending coupled with poor economic growth has helped make Britain the debt capital of the western world. With retail sales down, earnings low and unemployment on the rise, public finances have suffered as less money has come in the form of income and corporation tax and more has gone out in the form of jobless and low income benefits.
The OECD outlook for Britain is uniformly bleak, with unemployment expected to rise further:

“The economy is in a severe recession, with output projected to decline by 4.3% in 2009 and recover only mildly in 2010. The financial crisis has severely impaired the supply of credit and house prices have fallen sharply, thus restraining business and household spending. The depreciation of sterling is mitigating the downturn, but cannot overcome falling foreign demand. The unemployment rate is projected to rise towards 10% in 2010, with inflation well below the 2% target for an extended period.”

The OECD argues that while Government measures to prop up the economy have gone some way to cushioning the blow, the £125 billion so far injected into the economy is not enough to stop the economic freefall, warning that the Government have left Britain without the funds to pump in the extra £130bn that is needed into the banking system:

“Measures to support the financial sector, dramatic monetary easing and fiscal stimulus, have cushioned the downturn. Given a policy rate close to zero and quantitative easing well underway, monetary policy is highly expansionary. At the same time, public finances have deteriorated sharply — with the fiscal deficit expected to rise to 14% of GDP in 2010 — curtailing the possibilities for additional fiscal stimulus.”