Hey big debtor - now Britain borrows more than Argentina

Britain is the fourth-most indebted country in the world, with higher aggregate borrowings than Argentina, which had to undergo a debt refinancing, and the US, where the budget deficit has been dragging the dollar down to historic lows.

Britain is the fourth-most indebted country in the world, with higher aggregate borrowings than Argentina, which had to undergo a debt refinancing, and the US, where the budget deficit has been dragging the dollar down to historic lows.

According to a study by economists at ING, the Dutch bank, if you take into account borrowing by companies and individuals as well as government debt, the UK is borrowing nearly twice its annual GDP. They are warning that this indebtedness could be a drag on future growth.

Only Japan, the Netherlands and Israel are more deeply in debt. The US, by comparison, has total borrowings of around 125 per cent of GDP while Argentina, which caused a world crisis when it said it could not pay its debts in 2002, has only borrowed 70 per cent of its annual GDP.

This is also in sharp contrast to the positive picture painted by Gordon Brown in the Budget on Wednesday. Then he said that he expected total government net borrowing for the current financial year to be just £34.4bn - though figures released on Friday indicated that this may be an underestimate and that total net borrowing may actually be about £36bn.

However, in the UK it is not government debt that is the problem - it is household borrowing, which soared above the £1,000bn mark last year. Figures last week showed that British households are still borrowing heavily - with total net lending by members of the Council of Mortgage Lenders standing at £17.2bn in February.

Charles Robertson, the principal author of the report at ING, said that the performance of highly indebted countries such as the Netherlands, Germany and Italy was a bad indicator for the UK. "Much of this private sector debt is not going into productive assets; it is funding spending on consumer goods," he said. "It is hard to expect that the UK will be taking on debt at the same rate going into the future."

Mr Robertson also pointed to what happened in Japan as a worrying signal for the UK economy. He noted that in the early 1990s, when the Japanese economy was still performing well, government debt was low but leading to the private sector was extremely high. When Japan ran into trouble - with a massive property crash - the government was forced to bail out many of the troubled banks, and ended up taking on a lot of the problem debts.

While this is not a scenario that is likely in the UK, many experts are worried about the level of debt here. Mervyn King, the Governor of the Bank of England, has repeatedly warned about the level of consumer lending.