Deflating The State

THE recession that swept around the world and through Britain last year may now be ending but, like a great storm, it has destroyed much in its wake. Jobs have been carried away, firms felled, fortunes lost. Even in a landscape littered with economic wreckage, Britain's public finances stand out for the battering they have taken.

Until this year the biggest post-war deficit was in the early 1990s, when borrowing peaked at almost 8% of GDP. In the mid-1970s, when Britain had to go cap-in-hand to the IMF for an emergency bail-out, the deficit reached 7% of GDP. Yet both these shortfalls, so alarming at the time, will be dwarfed by borrowing in 2009-10, projected by the Treasury in April to reach 12.4% of GDP. Even that forecast may prove on the low side, given the scale of borrowing in the first five months of the fiscal year.