Payback on debt is historically low

Peter Hoskin on Coffee House draws attention to the Economist’s new Global Debt Comparison feature. Hoskin highlights that, “the Economist has [the UK] in the highest debt group.” As Left Foot Forward showed yesterday using figures favoured by the Conservative party, the UK is actually in the good standing – relative to other G7 countries – to absorb the projected deficits of the coming years.

But the important question is not the level of debt but the cost of paying it back. Despite the fears and scaremongering from the right, the yield from 10-year British Government Securities (gilts) remain low by recent historic standards.

At the average rate since the collapse of Lehman Brothers of 3.8 per cent, this implies annual interest payments of $97 billion (£59 billion) in 2011. Now that sounds like a lot of money but comes to a relatively low 4 per cent of GDP. It is critical, of course, that the deficit is brought down over time and that Britain retains its AAA credit rating but context is necessary on discussions of debt.

1. Shamik Das says:

   September 10, 2009 at 10:45 am

   RT @leftfootfwd: Payback on UK debt is historically low, reports @wdjstraw:- http://tinyurl.com/low-interest
2. Will Straw says:

   September 10, 2009 at 10:46 am

   Right wing fears on debt miss the low interest payments http://tinyurl.com/low-interest
3. Bearded Socialist says:

   September 10, 2009 at 12:49 pm

   context is important, as is bearing in mind any plans in place to pay the debt back
4. Osborne calls for "honest debate" while manipulating the facts | Left Foot Forward says:

   December 21, 2009 at 12:03 pm

   [...] this is well below the average of the last twenty years (6.5%) and in line with the average of the last ten years (4.7%). George Osborne needs to explain how a bond yield of 4.8% represents a disaster, [...]