Debt - how bad is Britain's problem?

Official figures today revealed that Britain's debts have hit £1trillion for the first time. We look at how debt is measured and how UK borrowing compares with other countries.
Despite the austerity cuts, Britain's state debts are still growing at a steady pace. The Government is still spending significantly more than it is earning.
But at least the over-spend is improving.
At the start of the sovereign debt crisis, the UK was one of the worst offenders for failing to balance the books. It had one of the worst budget deficit's in the EU in the last fiscal year (to April 2010), at more than 10 per cent of GDP. It was beaten only by Ireland (32.4 per cent) and Greece (10.5 per cent). Basically that means the British government spent more than it earned - to the tune of £146billion.
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IOU: The UK now owes more than £1trillion, but the difference of spending above tax is falling to give Chancellor George Osborne a fighting chance of hitting deficit reduction targets.
The last time a surplus was recorded - by the Government spending less than its income - was in the 2001/02 financial year when it made a meagre repayment of £243million. But that period of falling debt is a distant memory.
Labour's big spending saw steady rises in borrowing from 2002 onwards, but it was the financial crisis which created most of the debt. A colossal slide in the economy - it contracted more than 6 per cent between 2008 and 2009 - made a huge dent in tax receipts. And there was also a hit from some initial tax cuts, such as the reduction back then of VAT from 17.5 per cent to 15 per cent (it has since been raised to 20 per cent) .
While the overspend is now being reduced, the UK's debts continue to grow.
Britain owed £1003.9bn in December, a leap from £883bn a year earlier, according to the ONS [read the full release] and nearly double the £534.6billion figure at the end of 2007. The government needs to borrow more than £127bn in the current year, lower than the £142.7bn the previous year.


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