No wonder Peter Mandelson was so upset about the Starbucks CEO's assessment of the British economy. Sometimes the truth hurts. The British economy has lived on easy credit for too long so paying down the credit and rebuilding is not going to occur quickly.
Gordon Brown suffered a double blow yesterday when government statisticians recalculated Britain's national debt at £1.5tn and the CBI accused the prime minister of lacking a coherent economic recovery strategy.
As the prime minister warned in Rome that the world was being hit by an "economic hurricane", his fightback plan at home was complicated when the Office for National Statistics raised the prospect of Britain's national debt rising to 150% of national income from its current 48%.
The ONS classified Lloyds and Royal Bank of Scotland as public corporations and thus added all their liabilities - up to £1.5tn - on to the taxpayers' balance sheet. The ONS said the recapitalisations of Royal Bank of Scotland and Lloyds Banking Group meant they had in effect become public corporations, which would have to add the full extent of their liabilities to the national debt.
The move, which the Treasury dismissed as a "technical classification" with few policy implications, prompted Tory warnings that Britain was now facing a debt crisis. Kenneth Clarke, the shadow business secretary, called on Alistair Darling, the chancellor, to introduce a dramatic reduction in the growth in public spending from this April, rather than waiting until next year.
"We are going to quite staggering levels of public debt," Clarke told the BBC. "The voters are going to have to pay the interest on all this mounting debt. "
