By Sean O’Grady, Economics Editor, and Nick Clark
Monday, 29 September 2008
The nationalisation of Bradford and Bingley is set to push the combined burden of public sector debt and exposure to the housing market resting on the shoulders of the UK taxpayer to almost £1 trillion. At around 65 per cent of GDP, it will make a mockery of the Government’s “sustainable investment rule”, which aims to keep net debt at below 40 per cent of GDP.
Even without the addition of the mortgage books of Northern Rock and Bradford and Bingley, and the bank of England’s extensive loans to the financial sector, public sector borrowing was set to reach “crisis” levels not seen since the previous peaks during the last recession, in 1993, and in the mid-1970s. The impact of lower or non-existent growth on tax revenues as well as various government “concessions” on the 10p tax band and fuel duty promises to be considerable.