David Cameron Warns UK Runs Risk of Defaulting on Its Debts

The leader of the UK’s Conservative Party, David Cameron, has been reported as saying that he believes the Government runs the risk of defaulting on its debt due to increased borrowing in recent times. His statement was not intended to be a prediction, but rather a warning intended to show that the same financial issues leading so many UK citizens towards IVAs and even bankruptcy can happen at the national level, as well.

Due to recession fueled drops in tax revenue, the Treasury announced in April that it would borrow 269 billion pounds more than it had previously estimated. The shortfall this year totals 12.4% of GDP (Gross Domestic Product) and is the highest shortfall of all the Group of Seven nations.

Standard & Poor has already warned the UK that it risks losing its AAA credit rating as the debt nears 100% of its GDP which stands at nearly 1.3 trillion pounds. They’ve changed their view from “stable” to “negative”. In June of 2009, the Government had 657 billion pounds of debt which is over 56% of the GDP. The current debt is the largest amount owed since 1976 when the UK borrowed from the International Monetary Fund to meet overseas financial obligations. Other than this, the Government has not defaulted on a payment since the days World War II.

On August 20, the Treasury will reveal the amount it collected in July which is typically the second largest month of revenues in the fiscal year. There has not been a deficit in July since 1996.