Future of National Debt
It is estimated National debt will could rise close to 100% of GDP by 2012. It is way above the government’s sustainable investment rule of 40% maximum.
However, the debt situation can be improved through:
- Economic Expansion which improves Tax Revenues and reduces spending on benefits like Job Seekers Allowance
- Improved performance of banks increases prospect of regaining financial sector intervention
- Government Spending cuts and tax rises (e.g. VAT) which improve public finances.
However, there is also a danger spending cuts could reduce economic growth and therefore hamper attempts to improve tax revenues.
The National Debt began the 20th century at about 30 percent of GDP. It jerked above 150 percent in World War I and stayed high. Debt breached 200 percent during World War II. Debt declined to 50 percent of GDP by the 1970s and dipped to 25 percent by 1990. The National Debt began a rapid increase in the aftermath of the worldwide financial crisis of 2008.
The National Debt began when William III engaged a syndicate of City merchants to market an issue of government debt. The syndicate became the Bank of England, and HM government debt began a century-long climb, financing Marlborough’s wars, wars against the French, against the North American colonial rebels, and peaking in 1815 at the end of the Napoleonic Wars at over 200 percent of GDP. Government debt exploded in World War I and World War II and then equalled the level of 1815 reaching over 200 percent of GDP. Debt declined below 50 percent of GDP by the 1970s.