National debt now adds up to £16,700 for every person

Alistair Darling confirmed today the cost of rescuing the high street banks combined with the impact of the ­recession will almost double the nation's overdraft to £1.2 trillion within three years — that's £1.2 million million.

The massive rise in debt will reduce to a hollow boast his predecessor Gordon "Prudence" Brown's cherished rule that borrowing should not go above 40 per cent of its GDP. Last year GDP was around £1.4 trillion.

Economists fear it could take a generation for the Government to bring debt under 40 per cent again and it could be forced to inflict tax increases or public spending cuts on the electorate to get there.

The breaching of the 13-figure debt comes 315 years after King William III approached the banks of London to borrow £1.2 million to pay for the war against Louis XIV's France. Since then national debt has risen one million-fold.

The arithmetic of £1 trillion of debt is eye-watering. It is £16,700 for every man, woman and child in the country and would take 28.5 million years for someone on average London earnings to pay off.

It has led some international financiers to describe Britain as "bankrupt" although it still retains its top-notch AAA credit rating. Until the credit crunch ripped massive holes through Gordon Brown's national finances, the highest level of Government debt was the £743 billion recorded last month.

As recently as last November's Pre-Budget report, the Treasury was predicting a rise to just £602 billion this year, £729 billion by 2010 and £842 billion the year after.

That was before the Government and the Bank of England were forced to open the floodgates to douse the financial conflagration that threatened to bring Britain's economy to its knees.

It is not yet clear how much of the hundreds of billions of pounds spent on the banking rescue will stick as long-term debt but the International Monetary Fund has estimated it at 9.1 per cent of GDP or around £130 billion in today's money.

As a proportion of GDP, national debt will reach almost 80 per cent over the next five years, even on the Government's forecasts, and could even surpass 100 per cent according to some City estimates.

But even that is not a record, as debt hit 250 per cent of income during the Second World War and was still at 100 per cent in 1963. However, it will be the highest level outside the extraordinary circumstances of war. The £1 trillion government debt total has been reached just five years after consumer borrowing passed the same dizzying threshold.

Economists fear that although the debt is serviceable while interest rates remain at their current historic lows, any significant rise in the cost of borrowing could wreak havoc with the national finances.

Carl Emmerson, deputy director of the ­Institute of Fiscal Studies, said that while all developed nations were having to dig deep to cope with the global financial meltdown "our debt is increasing by more than is typical, so we are moving up the international league table of debt".

He added: "If we can continue to borrow at the same level of interest rates then it is not going to be too great a burden. But clearly the risk we're taking is that if there is an upward movement in interest rates then the Government will have to start ­implementing tax increases and public ­spending cuts very quickly.

"Otherwise, the markets will be spooked because they will not think we have a credible plan to reduce the debt. Obviously the more debt you have, the more you are exposed to that risk."