UK Debt as a % of GDP

The best way to measure national debt is the debt as a % of GDP.

National debt as % of GDP

Source: ONS

National Debt Statistics since 1990

net borrowing

National Debt during 20th Century

The Importance of Debt as % of GDP

In the post war period, economic growth has averaged 2.5%. Therefore, if the real level of national debt stayed the same as a % of GDP it would fall.

If real levels of national debt increase by 2.5% a year and we have economic growth of 2.5%, then national debt as a % of GDP will stay the same. Assuming constant interest rates, the cost of servicing the national debt (paying debt interest) should stay the same as a % of GDP. Therefore, tax rates would not have to rise. However, if national debt as a % of GDP rises, then debt interest payments will also rise as a % of GDP, therefore a bigger share of tax revenue will have to be used to meet the debt interest payments.

Another problem of debt rising as a % of GDP is that markets may become more reluctant to buy the debt from the government. If markets fear the government may default, it becomes very expensive and difficult for the government to sell the debt. At the moment, this is not really a problem for the Debt Management Office DMO. But, it could be in the future.

Currently, we are being insulated from rising debt interest payments because interest rates are so low. However, if interest rates rise, then the UK will be facing a higher cost of servicing debt

• National Debt UK