Measuring the national debt

The precise term 'National Debt' refers to an older definition of public debt that excludes too many liabilities to be meaningful nowadays. The official government measure of what is commonly known as the national debt is Public Sector Net Debt. In this context, public sector refers to central government, local government and publicly-owned corporations.

Measuring Public Sector Net Debt (PSND) is the joint responsibility of the Office of National Statistics and HM Treasury. In their words, PSND "records most financial liabilities issued by the public sector less its holdings of liquid financial assets, such as bank deposits." The debt is financed by the sale of government bonds, or more recently, printing money via the Bank of England's Quantitative Easing programme.

Bank bailouts

The Treasury have made some provision in their forecasts for the losses we're likely to make on the bank bailouts. As of April 2009, unrealised losses from financial sector interventions account for £134.5 billion of the national debt. Northern Rock and Bradford & Bingley account for £123 billion, with a further £9 billion going to compensate depositors with the Dunfermline Building Society.

If this wasn't bad enough, the picture is going to get considerably worse. The Office of National Statistics has classified the Royal Bank of Scotland and Lloyds as public corporations but hasn't yet included their liabilities in the national debt. When they finally crunch the numbers, expect the results to be ugly. According to EU figures, Britain has pledged £781.2 billion in capital injections, liability guarantees and liquidity support to the banking system. As taxpayers, we're on the hook for any losses.


The Private Finance Initiative (PFI) is a form of commercial partnership between government and private companies to build and maintain public projects. Since taking office in 1997, Labour have made extensive use of PFI to fund infrastructure programmes. PFI currently accounts for some £5 billion of net debt, although it is argued the true liabilities amount to significantly more.

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