Tuesday, April 24, 2012

British Government Debt Surpassed £1 Trillion 2 Years Ago

The Telegraph reports that British government debt rose above £1 trillion for the first time. And that is indeed what the latest government report says.

Actually, though, British government debt rose above £1 trillion  2 years ago, and was as Eurostat reported yesterday £1,293 billion in the beginning of the year (now likely well above £1.3 trillion).

The reason why the numbers differ is that the British government's official releases relies on "net" debt while Eurostat publishes gross debt. It might seem better to look at net debt, but that overlooks that the intragovernmental holding of debt and other financial assets are mostly part of pension funds and similar funds that have commitments to pay for example pensions to retirees in the future. Which is to say, these assets are in fact associated with debts to for example future retirees, making it misleading to exclude them from government debt.