New research: Brown's borrowing will be double the debt needed to win World War One

Shocking new figures from the TaxPayers' Alliance reveal that the borrowing plans announced in yesterday's Pre-Budget Report will run up double the debt that Britain incurred winning the First World War.

Total Debt increase 1914 - 1919 (2007 value): £255,106,544,018
Total Debt planned 2008/09 - 2013/14 (PBR): £512,000,000,000

(For full methodology, see Sources & Methodology)
 
William Norton, a Research Fellow at the TaxPayers' Alliance, said:

"British taxpayers enter this downturn like lions led by donkeys.  Not only will full recovery take twice as long as the First World War lasted, but we are going to take on twice as much debt.  Alistair Darling is sending the taxpayer over the top to face a financial Battle of the Somme."

Matthew Elliott, Chief Executive of the TaxPayers' Alliance, said:

"It is staggering that the Government plans to take on more than double the debt we needed to win the First World War. This avalanche of debt will place a massive burden on the shoulders of ordinary families for years to come. Alistair Darling's refusal to make the public sector share the pain of recession by cutting out wasteful spending will cost all of us dearly."

Sources & Methodology

1. The TaxPayers' Alliance is Britain's independent, grassroots campaign for lower taxes and better government.

2. The increase in debt during the First World War is from Earnest L. Bogart ‘Direct and Indirect Costs of the Great World War’, Oxford University Press, 1920, pg. 35 and 41 respectively.  The increase in debt in 1919 values was $34.3 billion.
3. Figures in Earnest L. Bogart’s book are given in dollars.  Dollar-pound exchange rates are taken from Lawrence H. Officer ‘Dollar-Pound Exchange Rate from 1791”, Measuring Worth, 2008, available from: http://www.measuringworth.org/exchangepound/.  The dollar totals were translated into pounds at the 1919 exchange rate of £1: $4.43.  This gives an increase in debt of £7.7 billion.

4. Adjusting for inflation was done using Lawrence H. Officer ‘Purchasing Power of British Pounds from 1264 to 2007’, Measuring Worth, 2008, available from: http://www.measuringworth.com/ppoweruk/.  This gave an increase in debt, in 2007 prices, of £255.1 billion.  Subsequent inflation, after 2007, to the years in which the Chancellor is expected to borrow will make a marginal difference to the overall comparison.
 
5. World War One was largely financed by borrowing. The £255bn borrowed made up 78% of the £327.4 billion cost of the war.

Comments

[Benedict White]

Any idea what is was in terms of GDP though?

(Good work BTW)

[Christopher Squire]

Here is the answer:

Mean GDP 14 - 18 = 3.3 £bn current
Mean GDP 2008 est. = 1365 £bn current

from: http://www.ukpublicspending.co.uk/downchart_ukgs.php

WW1 increase/GDP = 7.7/3.3 = 2.3 years GDP over 4 years = 7 months' GDP/year.
2008-14 inccrease/GDP = 512/1365 = 0.375 years = 4.5 months GDP over 5 years = 4 weeks' GDP/year.

The trend rate of increase of GDP is 2.5 % p.a. = 1.3 weeks' GDP/year.

So this story is nonsense, as one would expect. Collapse of stout foolish Taxpayers!

[Matthew Sinclair]

Christopher,

That doesn't remotely mean the story is rubbish. Our headline is absolutely correct and highlights how big Darling's borrowing is compared to WW1 borrowing.

% of GDP is a different measure, not necessarily a more meaningful one. It might offer a little more information about how long it will take to pay back but it does not provide the absolute comparison we were looking for between the two spending commitments - the denominator has moved too much.

Your % of GDP per year of borrowing is rather odd. The fact that Darling is borrowing for longer hardly makes things better.

[PGT]

So presumably the 08/09 figure doesn't include assets bought by the government? Because the WWI figure certainly didn't.
Oh, it does include assests?
So it's all nonsense then?
No worries.

[donpaskini]

Matthew,

The Measuring Worth website gives five different relative values for the 2007 worth of the borrowing during the First World War. These range from £255bn (the one that you used), to £1,939bn (using the measure which the Measuring Worth website recommends).

Could you explain why your "research" chose the RPI measure for calculating relative worth, rather than any of the other indicators? Was it just because it was the lowest figure and therefore the most flattering for your argument, or was there some rationale based in your understanding of economic theory?

[Call me Dave]

Guys, I think PGT makes a good point. I'm very uneasy about the current level of borrowing and in no way wish to defend it. However the total cost as a percentage of GDP does put the current levels of borrowing in perspective against WW1.
This is perhaps not the best way to attack the current inept handling of the economy. They will no doubt revert with the % of GDP comparison which I have to say looks a reasonable response to me.
I would like to see more robust comparisons of our proposed borrowings with the rest of the G9. Perhaps someone can point the way?
Whilst on the subject of GDP I would also like to look at up to date figures of our total tax take as a percentage of GDP - factoring in local taxation would be most useful as this is usually excluded from calculations. Local taxation now represents a significant proportion of disposable income so it's exclusion is rather misleading. Again any advice appreciated.
Thanks.

[Call me Dave]

Sorry, I was referring to Christophers' point ref GDP.

[Matthew Sinclair]

Donpaskini,

Several of the measures aren't really value of money indicators but, instead, get at how affordable something is. That doesn't seem the best measure for the kind of absolute comparison we were making.

RPI is better understood - as people have more experience of it - than the GDP deflators and more historically reliable, I believe. Regardless, the GDP deflators don't produce an answer that is much different.

Call me Dave,

It seems a pretty weak argument, to me, to say that its alright that we're borrowing more than we did to fight WW1 because we've got a bigger GDP. The Government doesn't spend %s of GDP, they spend pounds. The fact that they might be able to get away with this huge borrowing - and our comparison is of the scale, not affordability - thanks to a century of economic growth is less than inspiring.

[Matthew Sinclair]

Donpaskini,

Also, the Measuring Worth website doesn't "recommend" any measure. There isn't a right measure. They answer different questions and tell you different things. Using RPI is perfectly legitimate.

[Matthew Sinclair]

PGT,

Assets? What on Earth are you talking about?

These are two figures for the increase in government net debt. In one era, most of the spending was on war material, in another it was mostly spent on public services. That difference doesn't seem particularly critical.

[Call me Dave]

Guys, the average mortgage today would have bought a whole street in 1914. Debt has to be considered relative to income. The governments income is directly linked to GDP. The point being made is that whilst the current level of debt is huge, in relative terms it is less than that incurred in WW1 based on our ability to pay.

Just to be clear I am in no way defending the current levels of debt which I too believe are spiralling out of control. For most wars there is an end in sight - for the largesse of the public sector there is no end in sight which means the debt will continue to escalate (relative to GDP!!) until DC steps in to scale back public spending.