http://news.independent.co.uk/business/news/story.jsp?story=621785

      By Jason Nisse
      20 March 2005


      Britain is the fourth-most indebted country in the world, with higher
aggregate borrowings than Argentina, which had to undergo a debt
refinancing, and the US, where the budget deficit has been dragging the
dollar down to historic lows.

      According to a study by economists at ING, the Dutch bank, if you take
into account borrowing by companies and individuals as well as government
debt, the UK is borrowing nearly twice its annual GDP. They are warning that
this indebtedness could be a drag on future growth.

      Only Japan, the Netherlands and Israel are more deeply in debt. The
US, by comparison, has total borrowings of around 125 per cent of GDP while
Argentina, which caused a world crisis when it said it could not pay its
debts in 2002, has only borrowed 70 per cent of its annual GDP.

      This is also in sharp contrast to the positive picture painted by
Gordon Brown in the Budget on Wednesday. Then he said that he expected total
government net borrowing for the current financial year to be just £34.4bn -
though figures released on Friday indicated that this may be an
underestimate and that total net borrowing may actually be about £36bn.

      However, in the UK it is not government debt that is the problem - it
is household borrowing, which soared above the £1,000bn mark last year.
Figures last week showed that British households are still borrowing
heavily - with total net lending by members of the Council of Mortgage
Lenders standing at £17.2bn in February.

      Charles Robertson, the principal author of the report at ING, said
that the performance of highly indebted countries such as the Netherlands,
Germany and Italy was a bad indicator for the UK. "Much of this private
sector debt is not going into productive assets; it is funding spending on
consumer goods," he said. "It is hard to expect that the UK will be taking
on debt at the same rate going into the future."

      Mr Robertson also pointed to what happened in Japan as a worrying
signal for the UK economy. He noted that in the early 1990s, when the
Japanese economy was still performing well, government debt was low but
leading to the private sector was extremely high. When Japan ran into
trouble - with a massive property crash - the government was forced to bail
out many of the troubled banks, and ended up taking on a lot of the problem
debts.

      While this is not a scenario that is likely in the UK, many experts
are worried about the level of debt here. Mervyn King, the Governor of the
Bank of England, has repeatedly warned about the level of consumer lending.




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