Sent from my -BlackBerry Phone- -----Original Message----- From: MeLinda MeLisa <[email protected]> Sender: [email protected] Date: Thu, 20 Jan 2011 06:34:51 To: <[email protected]> Reply-To: [email protected] Subject: [StockForex] UK Bank bail-out adds £1.5 trillion to debt UK Bank bail-out adds £1.5 trillion to debt Source: http://marketpin.blogspot.com/ Britain's public debt is set to soar from under £1 trillion to more than double that landmark figure when official figures are updated this month to take into account the impact of the banking bailout. The amount the UK is shown to owe will balloon as the public sector's finances start incorporating figures for the state-backed Royal Bank of Scotland and Lloyds Banking Group. Their liabilities could add up to £1.5 trillion extra, a burden equivalent to around 100pc of gross domestic product (GDP), to the public sector net debt, according to the Office for National Statistics (ONS). That would more than double the figure for the debt, which hit £971bn – equivalent to just over 65pc of GDP, a record – in November. The move into 13-figure territory will intensify pressure on the Coalition to rein in the public finances and highlights the scale of the nation's intervention in the banking sector. The taxpayer owns 84pc of RBS and 41pc of Lloyds, which the ONS has classed as public corporations. "It really does throw into a very clear light exactly how big the intervention in the banking system was," said Philip Shaw, economist at Investec. Jonathan Loynes, chief European economist at Capital Economics, said the new figure would underline the "additional risk" the nation has taken on by propping up the banks. General government debt has already passed £1 trillion if it is calculated in a way set by the Maastricht Treaty, which showed the figure hit £1,000.4bn at the end of March. But the new public finances data will show the UK's own headline figure has passed that threshold for the first time. Even without the change in accounting method, the net debt was set to hit £1 trillion in the coming ONS results for December, after Government spending surged in November. December tends to be a heavy month for borrowing, which helped the debt rise £27bn two years ago. "An indicative analysis suggests that the addition to Public Sector Net Debt is likely to be in the range between £1 trillion and £1.5 trillion," the ONS warned when it announced the change. The ONS has not released updated forecasts since then and will detail how it works out its calculations when the latest public finances are released on January 25. "If you buy or nationalise a bank, your net debt automatically goes up," Mr Shaw said. If trends stayed steady in December, the UK last year paid around £32bn in interest servicing its Government debt e_SEnD roughly £1,250 per household. The additional debt from the banks will not worsen this figure as it does not represent a round of new borrowing by the state, Gemma Tetlow at the Institute for Fiscal Studies said. Rather, the bank debt was effectively off the balance sheet previously. The Government looks at figures which strip out the "temporary" distortions caused by financial interventions, the ONS notes, when it sets fiscal policy. That data showed the debt was £863bn in November, equivalent to 58pc of GDP – a new record – but not one that will be affected by the Lloyds and RBS figures. A Treasury spokesman said: "It's been the ONS's intention to incorporate Lloyds and RBS into the public finances since 2009, following the support they received in 2008. This change won't affect the Government's deficit reduction plan." The public finances already include figures for rescued bank Northern Rock. 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