Struggling to live within one's means

COMMENT

clock • 2 min read

The UK, in common with the US and much of the developed world, has been living beyond its means.

In the pre-crisis world, governments and households were borrowing to support a lifestyle they could not afford. Now the bill is still to be paid. In the UK, the ratio of government debt to GDP rose from 45% in 2000 to more than 70% at the end of 2009. The story for households is even more extreme. Over the same period, household indebtedness as a percentage of GDP has increased from 77% to close to 115%. The US tells a similar story: government debt increased from 55% to 83% and household debt is now close to 100% of GDP. The upshot is that government spending will have to be cut acr...

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