These are pretty dark days for the British economy, you’d have to be a hermit not to have heard the news, but just how bleak are things really?
All too often at the moment we’re hearing claims that the country’s currently dealing with the biggest National Debt which it has ever faced, and while that may be true in nominal terms i.e. the total figure, measured in pounds, is the largest it’s ever been; the truth is that the UK has lived through, and come out of, far worse financial circumstances and without having to make the kinds of drastic cuts which this month’s spending review seems certain to bring.

Lies, Damn Lies and Statistics?
So, how do I explain my claim that we’ve had things worse as a nation, when, on the face of it, Mr Osborne & Co’s claim is correct, this is the largest our national debt has ever been?

UK Public Net Debt as a percentage of Gross Domestic Product (1900-2010)

Although it's true that we've never faced a National Debt as large as the current one, it's clear that the UK has faced far worse, when the overall size of the economy is taken into consideration.

Well, the answer comes down to that old friend of politicians and sales people everywhere, statistics. While it is true that we’ve never owed more as a nation than we do at this current moment, and that the figures do make for impressively scary headlines, they don’t actually mean a lot when taken in isolation; in order to put the National Debt into context one has to look at the state of the national economy in general. For example, if our National Debt was a trillion pounds (thankfully it isn’t) that would seem like a terrifying number to the average guy in the street, and in our current circumstances it wouldn’t be great, but if the Govt’s revenue was £100 trillion a year then a debt of one trillion would clearly be pretty trivial. In other words, it’s all relative.

That is why a more reasonable measure of the severity of national debt is to compare it, in some way, to the state of public finances, or the national economy as whole. If one does then, relatively speaking, things start to look somewhat less stark than the Govt might have us believe. Currently Public Net Debt (PND) is running at ~55% of GDP which obviously isn’t ideal, but when compared to the state of the nation’s finances after the Napoleonic Wars, when PND exceeded 250% of GDP, or World War 2, when the figures once again got close to 250% GDP, it starts to put a little more perspective on the today’s economic crisis.

Read Part 2:Lies, damn lies and statistics

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