David Cameron: 'British Government could default on its debts'

Comment: Do we see anything familiar here?

Gordon Brown is running the risk that the British Government will be unable to pay back the money it is borrowing from international investors, the Conservative leader said.
Mr Cameron said Labour’s plan to borrow an extra £700 billion over five years and take the national debt to £1.4 trillion was a “disgrace” that exposes the UK to serious economic risks.

Governments borrow by selling bonds – a form of IOU note – to investors, who then receive interest payments on the loan.


The Treasury forecasts that paying the interest on the national debt will cost taxpayers £42.9 billion in 2010/11, more than the annual budget of the Ministry of Defence. Grant Thornton, an accountancy firm, estimates that by 2013, debt interest will cost £58 billion.

Normally, governments can borrow much more cheaply than other institutions, because investors are confident they will get their money back.

But speaking at the Royal Society of Arts, Mr Cameron warned that Labour is now borrowing so much that some investors will demand higher interest rates to reflect what they see as the increased risk of British government debt.

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