The government monitors very closely the levels of debt in the economy. With regards to general government debt, we recognise that sustained action is needed to tackle the long-term debt challenge. Identifying a specific numerical level of debt above which there are sustainability risks is difficult, but both parties within the coalition agree that once the Government’s supplementary debt target has been met, any future government will need to ensure that debt continues to fall as a percentage of GDP. The government does not have an explicit target for private sector debt or financial corporation debt, but the levels should not threaten financial stability. We are adamant that we will not repeat the mistakes of the past, and that is why we have created the independent Financial Policy Committee (FPC) within the Bank of England to ensure that emerging risks and vulnerabilities across the financial system as a whole are identified, monitored and effectively addressed.

The latest data from the OECD is available from 2012 and is presented below:

*Private sector is non-financial corporations and households

**Financial corporations is securities (other than shares and derivatives), plus loans

Notes:

The UK and other nations moved to the new European System of Accounts 2010 standard in September 2014 which mean that the GDP debt levels are not comparable with previous PQ answered by Lord Deighton on 7 July 2014 (HL686).

A liability (debt) for one sector is often an asset for another.

The aggregate value of general government, non-financial corporations and household sector debt (as a proportion of GDP) for all G7 countries are shown below:

The Government’s measure of total public infrastructure investment is public sector gross investment (PSGI). The Office for Budget Responsibility (OBR) forecast at the March 2014 Budget that this will be 3.0 per cent of gross domestic product (GDP) in 2014-15. Forecasts of government expenditure are generally made on a financial rather than a calendar year basis and are presently only available out to 2018-19.The figures to the end of the forecast period are as set out below:

PSGI measures the direct spending on infrastructure projects by the whole public sector, unlike other measures such as net investment which are adjusted to exclude certain elements of spending. Internationally comparable figures for PSGI are not readily available. The UK’s fiscal framework is based around the entire public sector, many other countries only use a measure for general government that excludes public corporations so these are often the only comparative measures available. The OBR forecasts include some international comparisons of different investment measures. These can be found at the link below:

http://budgetresponsibility.org.uk/economic-fiscal-outlook-march-2014/

Neither PSGI nor the OBR figures include private investment in infrastructure which is an important element of overall infrastructure investment in the UK. The published infrastructure pipeline, which covers economic infrastructure only, provides an overview of planned public and private investment to 2020 and beyond, and can be found at the link below:

https://www.gov.uk/government/publications/national-infrastructure-plan-2013

UK GDP fell 7.2% between the first quarter of 2008 and the third quarter of 2009. Of the G7 economies Japan was the only one that had a deeper recession, and the depth of UK recession was almost twice that of the US.

Thanks to the government’s long term economic plan, since the trough of the recession the UK has grown faster than France, Italy, Spain and the euro area as a whole. In the year to the first quarter of 2014 the UK grew faster than any other G7 economy, the deficit has fallen by over a third as a share of GDP since 2009-10 and there are more people in work than ever before. But the job is not yet done and the biggest risk now to the recovery would be abandoning the plan that is delivering a brighter economic future.

As set out in Budget 2014, given the costs and risks of high levels of debt, once the supplementary debt target has been met, any future government will need to ensure that debt continues to fall as a percentage of GDP. Even in the absence of future shocks sustained action will be needed to bring down debt.

Historical data on Public Sector Net Debt (PSND) is set out in Appendix A, tab psf9 of the latest public sector finances statistical bulletin, available on the Office of National Statistics website at:

http://www.ons.gov.uk/ons/publications/re-reference-tables.html?edition=tcm%.3A77-318927 and also seen in the Annex below. The average PSND in the 30 years to 2007-08 is 37.9 percent of GDP.

The independent Office for Budget Responsibility (OBR) is responsible for producing the official economic and fiscal forecasts in the UK. In the latest March 2014 Economic and Fiscal outlook, PSND for each fiscal year in the forecast period can be found in Table 1.4 available at:

http://budgetresponsibility.org.uk/economic-fiscal-outlook-march-2014/ and also seen in the Annex below. The government has set a supplementary target for PSND as a percentage of GDP to be falling at a fix date of 2015-16. The OBR forecast that PSND as a percentage of GDP will be falling in 2016-17, a year later than set out in the target but one year earlier and 6.7 percentage points of GDP lower than in Budget 2013.

Annex PSND figures

PSND (% GDP)

1977-78

49.1

1978-79

47.2

1979-80

44.0

1980-81

46.1

1981-82

46.1

1982-83

44.8

1983-84

45.1

1984-85

45.1

1985-86

43.2

1986-87

40.9

1987-88

36.6

1988-89

30.4

1989-90

27.5

1990-91

26.0

1991-92

27.2

1992-93

31.4

1993-94

36.5

1994-95

40.1

Outturn

1995-96

41.9

1996-97

42.1

1997-98

40.9

1998-99

38.6

1999-00

35.7

2000-01

30.9

2001-02

30.4

2002-03

31.4

2003-04

32.9

2004-05

34.3

2005-06

35.4

2006-07

36.0

2007-08

36.8

2008-09

44.6

2009-10

56.4

2010-11

65.9

2011-12

70.9

2012-13

73.8

2013-14

74.5

2014-15

77.3

2015-16

78.7

Forecast

2016-17

78.3

2017-18

76.5

2018-19

74.2

The Government currently has no plans to change how savings income is taxed. However, all aspects of tax policy are kept under review.