Main information
- UK public sector net debt has reached 100 per cent of GDP for the first time since records began in 1993.
- Government borrowing during the global financial crisis and the COVID-19 pandemic, combined with weak economic expansion, contributed to this growth.
- The August government borrowing figure exceeded expectations, driven by increased spending on social benefits and current expenditure.
UK public sector net debt has reached 100 per cent of GDP for the first time since records began in 1993, surpassing the previous record set in July and marking a significant increase from levels seen in the early 1960s, after the Second World War.
Several factors contributed to this growth, including government borrowing during the global financial crisis and the COVID-19 pandemic. In addition, the sluggish economic expansion exacerbated the problem by increasing the share of debt in GDP.
UK government borrowing figures
In August, the British government borrowed £13.7 billion, exceeding the £12.4 billion forecast in a Reuters poll. The increase was attributed to increased spending on welfare benefits and current expenditure, driven by high inflation rates.
Finance Minister Rachel Reeves is facing increasing pressure as she prepares her next budget on October 30. While tax increases are planned, Ms Reeves has ruled out raising income tax, corporation tax or value-added tax. Options to improve public services and boost investment are therefore limited.
Challenges to be addressed before the budget
Excluding the Bank of England’s holdings, British debt as a share of the economy has reached 92 percent, another record.
The August figures underline the financial challenges facing the Chancellor ahead of her Budget. Borrowing in the first five months of the 2024/25 financial year stands at £64.1bn, about £6bn above the Office for Budget Responsibility’s (OBR) March forecast. Notably, each of the last four months has seen a deficit larger than the OBR’s projections.
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