Bailing out banks can be very costly. Suddenly Britain has a public debt ratio comparable to Japan's, but without the trade surpluses and high savings rate.
The government's rescue of some of Britain's biggest banks will more than double the national debt at a stroke after government statisticians decided to classify Lloyds and Royal Bank of Scotland as public corporations. Their liabilities – up to £1.5tn – will be added to the taxpayer's balance sheet.
That could push the country's debt levels up to 150% of national income, from a three-decade high of 48% now. The public sector net debt has already been swollen by £90bn of Northern Rock liabilities and, as of yesterday, £50bn of Bradford & Bingley's liabilities. But the two latest additions, which the ONS estimates could total between £1tn and £1.5tn, would dwarf those.
Shadow chief secretary to the Treasury, Philip Hammond, said: "This is just the beginning of Gordon Brown's debt crisis. Even on his own figures our national debt is set to double to more than one trillion pounds. This is the true legacy of the government's economic failures, and our children will be paying it off for a generation."
"Once the liabilities of the bailed out banks are included, our true national debt is now significantly larger than our national income, adding to the risks facing the economy and the burden on future generations."