UK will have the worst public debt in the developed world by 2017

Yet again, the Governor of the Bank of England has warned that unless public debt is reduced dramatically during the next parliament, the UK economy will face serious problems for the next decade.

In evidence to the Treasury Committee, Merfyn King called for greater ambition in reducing public borrowing and, most tellingly, that the Government’s plans needed to have greater ambition in cutting public borrowing.

Worst of all, the Governor made the astonishing statement that he was more uncertain than ever as to whether the UK economy would come out recession quickly.

This last statement seems to be backed by the Organisation for Economic Cooperation and Development (OECD), which revised down its forecast for the UK economy in 2009, warning that we are in a sharp recession, with a further shrinkage of 4.3 per cent in 2009 followed by no growth at all in 2010.

Worst of all, the OECD suggested that even if government borrowing is reduced by 1% of GDP per year for the next seven years, the UK will still have a gross debt-to-GDP ratio of 125% by 2017, one of the largest in the developed world.

It would seem that whether Gordon Brown likes it or not, cuts in public expenditure are inevitable.

The question is how he can do a political u-turn after yesterday's performance at the dispatch box where he denied that this would need to happen and that he would be increasing expenditure over the next few years.

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