The Public Sector Net Debt (with interventions) and Gordon Brown

Sarah Brown, the wife of the former Prime Minister, has said in her memoirs of life at 10 downing Street that her husband was misunderstood. Whilst I agree with her regarding the public perception of her husband, there is something that is far more misunderstood by the public than him: the debt created during his term as premier.

The coalition government has, since it took office, continually referred to the financial situation left by the Labour government as Mr. Brown’s debt mountain. What they studiously avoid to explain is that, until the banks messed up and needed shoring up by the taxpayer, Mr. Brown was responsible for keeping Public Sector net debt well below the level left by the previous Conservative administration. The level of debt when John Major’s government was voted out of office represented 42.5% of GDP (May 1997) and it was only on 14 September 2007, when the Northern Rock Bank needed bailing out that the borrowing requirement rose dramatically from 36.2% of GDP to 44.7%. In the last quarter of 2008, when dealing with the problems created by the Royal Bank of Scotland (RBS), Lloyds TSB and HBOS that the seismic change in borrowing from 46.3% of GDP to 145.7% took place.

Here is what the Office for National Statistics had to say about this: “For the first time data for Royal Bank of Scotland and Lloyds Banking Group have been fully incorporated into the public sector finances. This has impacted considerably on the measure of public sector net debt that includes the effects of the financial interventions.”

Let’s have no more misunderstanding here. This level of debt was created by the banks and their mismanagement of their businesses. Had it not been for Gordon Brown and the action he took we would have been living in complete financial meltdown by now, with at least four of our High Street banks consigned to history.

Figures: Office of National Statistics:
Public sector net debt as a percentage of GDP, 1975/76 to 2012/13

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