Public sector finance statistics for January 2009 show that public debt currently stands at £703billion, which includes £50billion from the bailout of Bradford and Bingley last year.

However, when the impact of Lloyds Banking Group and RBS are taken into account, the ONS predicts that the impact to public sector net debt could be between £1trillion and £1.5trillion, which could bring the UK’s total debt to more than £2trillion.

As the UK’s debt stands, £700billion equates to 47.8 per cent of its annual growth (GDP), meaning that a national debt of £2trillion would be the equivalent of 150 per cent of the UK’s GDP.

The news comes as the ONS announced that both RBS and Lloyds Banking Group will be reclassified as public sector from October 13 2008, when Government recapitalisation was agreed.

Commenting on Lloyds and RBS and their part in the banking crisis, Liberal Democrat shadow chancellor Vince Cable said: “The ONS has confirmed what we already knew. The Government has in effect nationalised RBS and has a substantial stake in Lloyds.

“However, it’s extraordinary that statistical conventions mean the public accounts will only include the liabilities of the banks, and not their assets.

“Ministers must now accept the reality that they effectively own two large banks and use them to ensure the flow of much needed credit into the economy.”

© Fair Investment Company Ltd