In common with many nations, the UK is attempting to get its deficit under control. The UK public debt mountain is a challenge for the future, but if the deficit can be reined-in then the public debt at least won’t be getting worse. The deficit is simply the difference between government revenues and its expenditures. Consequently, the government has been implementing austerity measures and selective tax rises to reduce expenditure and push up the revenue side of the equation. Of course, in times of economic torpor, the revenue will decline since unemployment is high – reducing tax receipts and pushing up social security spending; and businesses are seeing their profitability being squeezed due to poor demand.
Figures just released for UK public sector borrowing for the month of August show that it has hit a record level for the month of £14.4 billion. The figure was marginally higher than last year’s record figure and puts in question the government’s pledge to wipe out the deficit by 2015. Revenue from corporations declined by 2.1% during the month, whilst expenditure on benefit payments rose by 4.9%.
The way that the data is computed can be open to different interpretations, allowing government ministers to claim that the nation is on track to meet its targets and the opposition to claim that the government’s policies are clearly failing. Data for the fiscal year 2011/12 revealed that borrowing was £6.7 billion lower than previously thought, coming in at £119.3 billion.
The UK public sector debt currently stands at £1.04 trillion (August 2012) which represents a shade over 60% of the nation’s GDP. It is a situation that did not develop overnight, but the nation is paying a staggering amount of interest for the privilege – just 1% of this sum is £10 billion, after all.