Wednesday, 17 August 2016

Don’t Blame BREXIT on Any Economic and Financial Failure of the UK Economy, Blame the Blair Government for Their Mismanagement of the Nation’s Future and Where Debt Exploded and was Unprecedented in the History of the United Kingdom

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The main proponents for staying in the European Union (EU), the financial institutions and the vast majority of UK big business, blame the referendum vote to why our nation is supposingly staggering into the economic abyss. What they do not do is tell the people the truth and even those millions who voted to stay in the EU.  

The truth is that the UK would have been the same even if it had voted to stay in the EU. The real reason is that this country has amasses unprecedented debt that makes it near enough impossible to engineer a future dynamic economy. Indeed the chief economist of Price Waterhouse Coopers (PwC) analysed in 2009 that the nation’s total debt by 2015 was projected to be up to £11.5 trillion or nearly 6-times the total GDP of the UK (note not profit, but GDP which are totally different things).In this respect the chief economist stated that the UK’s debt had increased “most dramatically since 2000” – The Blair and Brown Years. Therefore you can blame Tony Blair for any economic woes and where PwC outlined that due to the mismanagement of Blair et al, the country would in reality be in a terrible economic and financial state for decades.

The following is what the chief economist of PwC stated in 2009 and reproduced verbatim, but  when our economic projections were then far better than they are today in terms of economic growth (GDP) – no nothing again to do with BREXIT.

  •  Total UK debt was around 540% of GDP at the end of 2009, up from around 200% of GDP in 1987.
  • This large and persistent rise in total UK debt has been driven by property-related borrowing by both households and non-financial companies and (most dramatically since 2000) by sharply rising lending between financial institutions.
  • By comparison, UK government debt was relatively low and stable as a share of GDP from 1987 to 2007 and, despite rising sharply due to the recession, was still less than a sixth of total private sector debt in 2009.
  • Total UK debt is projected to top £10 trillion by 2015 at a time when GDP will still be below £2 trillion, according to the main scenario outlined in PwC’s latest UK Economic Outlook report.

  • High debt levels are affordable at present due to exceptionally low interest rates, but this may not remain the case as rates gradually rise back to more normal levels over the next five years.
PwC analysis of official national accounts data (see Figure 1 and Table 1 below) shows that the total burden of debt on the UK economy rose from around twice national income in 1987 to just over three times national income in 2000, but then accelerated much more rapidly to around 5.4 times national income by 2009.  This total UK debt to GDP ratio continued to rise even during the recession of 2008-9 as GDP fell back and government debt rose markedly.

Table 1– Trends in gross UK debt by sector

% of GDP (except for last column)





Accumulated £ trillion in DEBT at end of 2009







Non-financial corporations






General government






Total debt of non-financial sectors






Financial corporations






Total UK gross debt






*In line with standard national accounting practice, this sector includes non-profit institutions serving households (NPISH). This definition applies to all data for the household sector included in this report.

 Source: PwC analysis of data from ONS Blue Book (July 2010). Gross debt is defined here to exclude financial derivatives since these largely net out across the financial corporations sector. Columns may not add up exactly due to rounding.
John Hawksworth, chief economist at PwC, said:

“The UK’s addiction to debt has reached alarming levels during the past decade. The rise in debt of the financial sector from 46% of GDP in 1987 to 245% in 2009 is particularly striking as banks lent large amounts to the shadow banking sector and most financial institutions geared up in search of higher returns on equity. 

Even excluding the financial sector, however, gross UK debt almost doubled relative to GDP from just over 1.5 times national income in 1987 to around 3 times in 2009, with most of this increase coming in private sector debt. For the household sector, this was focused on mortgage lending fuelled by pre-2007 rises in house prices, while for non-financial companies more than half of all debt is now related to commercial property. Other parts of corporate balance sheets remain healthier.

“On the face of it, such rapid increases in debt to income ratios may not seem sustainable, but both real and nominal interest rates (in the UK and globally) fell markedly after the early 1990s and then dropped even further during the recession. This has made it possible to service a larger debt stock relative to income levels, but current exceptionally low interest rates will not last forever and a large part of household and corporate lending remains exposed to possible future falls in residential and commercial property prices.”

PwC’s main scenario is that UK GDP growth will be around 2% in 2011 and average around 2.5% over the following four years to 2015. In this scenario, as shown in Table 2 below, rising government debt as a share of GDP is narrowly outweighed by more constrained growth in private sector debt over this period, so that the ratio of total UK debt to GDP declines slightly from 543% in 2009 to 536% in 2015.  But this is a very marginal change that would still leave total debt near to historic record highs.  Plausible alternative scenarios could see UK debt in 2015 anywhere between 500% and 580% of GDP, depending on both the health of the economy and the appetite of both lenders and borrowers. But in all scenarios the total debt to GDP ratio in 2015 remains very high by historic standards. 

Table 2 – Main scenario projections for UK debt stock in 2015

Debt in cash terms (£ trillion) Debt as % of GDP
2009 2015 2009 2015
Households 1.5 1.9 110 101
General government 0.9 1.4 67 77
Non-financial companies 1.7 2.2 122 116
Financial sector 3.4 4.5 245 242
Total UK debt 7.5 10.2 543 536
Plausible range n/a 9-11.5 n/a 500-580

Source: PwC estimates and projections based on ONS Blue Book data for 2009
John Hawksworth, chief economist at PwC, concluded:

“Total debt in our main scenario is projected to top the symbolic figure of £10 trillion by 2015 at a time when GDP will still be less than £2 trillion.  This is a very heavy burden of debt for the economy to continue to bear, particularly with interest rates likely to rise significantly at some point over the next five years or so.

“The severe fiscal squeeze planned by the coalition government should allow interest rates to remain lower for longer and so should delay the point at which any such debt service squeeze on spending power would take effect. It should also cap the rise in public sector debt.

“Nonetheless, it is worrying that private sector debt levels in the UK have reached historically unprecedented levels. Sooner or later, this will have to be addressed either through debt being run down sharply, which would risk triggering another recession, or more likely through a persistently heavy debt service burden that could dampen economic growth for decades to come. Either way, deleveraging will be a painful process for the UK that goes well beyond the immediate challenge of getting the public finances under control.”

END of PwC Press Release - Published by PriceWaterhouseCoopers at 14:19 PM on 09 November 2010

Therefore there is no doubt that the Blair years were a complete mirage to reality and where this debt was subdued by the government of the time (The Blair years) for obvious reasons. The BREXIT vote to leave the EU, did not cause any economic woes, but the Blair government. Due to the mismanagement of the UK economy by the Blair/Brown government, our financial institutions have at least now debts of £4.5 trillion and why another far greater financial meltdown can happen anytime and probably will.

Overall, that is what PwC’s analysis says if readers have a modicum of intelligence after reading the 2009 press release.

Dr David Hill
CEO, World Innovation Foundation
17 August 2016

PwC projects total UK public and private debt to hit £10 trillion by 2015 -

Tony Blair can’t escape blame for trashing the economy -

The great debt deceit: how Gordon Brown cooked the nation’s books -


National debt 'is rising £700,000 each minute and is almost treble the Government figure' -

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