Outlook At first sight, the data published yesterday by Eurostat, the European Union's statistics agency, tells you exactly why George Osborne is so determined to get Britain's borrowing under control. There, in third place in the league of shame, sits Britain, with a deficit of 10.4 per cent of GDP for 2010. Only in Ireland, at 32.4 per cent, and Greece, at 10.4 per cent, did spending relative to revenues get more out of hand last year. And we know what happened to them.
Indeed, the UK was a much worse performer than Portugal, which has already followed Ireland and Greece down the bail-out route. Its deficit was only 9.1 per cent. Even Spain, which could be next for a sovereign debt crisis, had a smaller deficit than us, at 9.2 per cent.
These are the statistics with which the Chancellor has pummelled critics who do not accept his Plan A for deficit reduction. If we go on borrowing at the same rate as countries such as Greece and Portugal, Mr Osborne argues, we must expect to suffer the same fate as them.
Well, yes, to a point. But Eurostat's budget deficit figures tell you only what happened last year. To get an accurate picture of Britain's indebtedness, one also needs to consider our total borrowing. Statistics on this were also helpfully provided by Eurostat yesterday, and they tell a rather different tale. On total Government debt as a proportion of GDP, the UK is only the ninth worst performer in Europe. Our debts totalled 80 per cent of GDP by the end of last year, compared to 143 per cent, 96 per cent and 93 per cent for Greece, Ireland and Portugal respectively. In Italy, the figure was 119 per cent, while France came in at 82 per cent. Even that model of fiscal rectitude, Germany, was worse than us, at 83 per cent.
Now, this second comparison will be much less easy on the eye for Britain in the years ahead unless the deficit begins to come down. But it is part of the explanation of why the UK continues to enjoy a AAA rating from the credit rating agencies – and why our borrowing costs are not much higher than the Germans'. Other factors are the fact the UK has emerged from recession, albeit modestly, and that our debts are due to be refinanced over a longer period than those of many neighbours.
None of which is to say that the Chancellor is wrong to tackle the deficit as a priority. But in defending the case for a more aggressive approach than almost any other country in the world, Mr Osborne does tend to be rather selective with the figures he uses.Reuse content