The UK national debt is the total amount of money the British government owes to the private sector and other purchasers of UK gilts. In recent months, government debt has increasingly been bought by the Bank of England in its policy of quantitative easing.
From figures published November 2009, UK public sector net debt was £870 billion. (or 61.7% of National GDP) – Source: Office National Statistics [1]
Excluding Financial sector intervention, public sector debt is £740 billion or (52.5% per cent of GDP)
Graph Showing UK National Debt
National debt UK : ONS
After a period of financial restraint, National debt at a % of GDP fell to 29% of GDP by 2002. Then, national Debt as a % of GDP increased from 30% in 2002 to 37 % in 2007. This was despite the long period of economic expansion. It was primarily due to the governments decision to increase spending on health and education. There has also been a marked rise in social security spending.
Since 2008, National Debt has increased sharply because of:
- Economics Recession (lower tax receipts, higher spending on unemployment benefits)
- Financial bailout of Northern Rock, RBS and other banks.
Although 61% of GDP is alot it is worth bearing in mind, that other countries have a much bigger problem. Japan for example have a National debt of 194%, Italy is over 100%. The US national debt is close to 71% of GDP. [See other countries Debt]. Also the UK has had much higher National Debt. e.g. after the second world war it was over 150% of GDP.
National Debt and Financial Bailout
The Nationalisation of Bradford & Bingley and Government purchase of shares in major banks like HBOS will cause even more borrowing. It is estimated National debt will could rise close to 100% of GDP by 2012
It is way above the government’s sustainable investment rule of 40% maximum. However, the debt is different in the sense that the government has a reasonable chance of getting, at least, some of its money back. It is different to say borrowing to pay pensions.
What is the Real Level of UK National Debt?
However, it is argued that UK’s national debt is actually a lot higher. This is because national debt should include pension contributions and private finance initiatives PFI which the government are obliged to pay.
The Centre for Policy Studies (at end of 2008) argues that the real national debt is actually £1,340 billion, which is 103.5 per cent of GDP. This figure includes all the public sector pension liabilities such as pensions, and Private Finance Initiative contracts e.t.c (Northern Rock liabilities).
- However, these pension liabilities are not things the government are actually spending now. Therefore, there is no need to borrow for them yet. It is more of a guide to future public sector debt. I don’t accept the fact that future pension liabilities should be counted as public sector debt. In 2006, the Statistics Office did change calculations to include some PFI into public sector debt figures [pdf - Treasury.gov.uk]
- However, it is a sign that it will be difficult to improve finances in the future.
Another problem is that with the financial crisis, the government have added an extra £500bn of potential liabilities. Note: the Government has offered to back mortgage securities. They are unlikely to spend this money. But, in theory the government could be liable for extra debts of upto £500bn. If we include this bailout package as a contingent liability National debt would be well over 100% of GDP.
Forecast for National Debt
Source: HM Treasury – may prove to be overly optimistic
The Public Borrowing Requirement forecast for 2009/10 is net borrowing of £178 billion.
Problems of National Debt
- Interest Payments. The cost of paying interest on the government’s debt is very high. In 2008 Debt interest payments will be £31 billion a year (est 2.5% of GDP). In 2009, they will be £35 billion (similar to defence budget). Public sector debt interest payments could be be the 4th highest department after social security, health and education.
- Higher Taxes in the future.
- Crowding out of private sector investment / spending
- The debt problem will only get worse as an ageing population places greater strain on the UK’s pension liabilities. (demographic time bomb)
- Negative impact on Exchange Rate (link)
See also:
- Should We worry about National Debt?
- US National Debt
- Books on Debt at Amazon.co.uk
- What went wrong with US economy?
- Problem of Personal Debt in the UK
- How is National Debt financed?
- Public Debt at the Office of national Statistics
History of National Debt
national debt as % of GDP: Source: no 10.gov.uk
National Debt since 1900
61 comments ↓
I would like to say thank you for the revision guide they have been a great help in simplifying economics.. i have been looking for something like this for two years and finally found it a month before my exam.. life saver.
The interest is paid i presume, to the bank of england that lends the money to our government. If this is correct and i’m sure that it is, why have successive governments(this is a rhetorical question by the way) allowed our currency to be controlled by private banking elites without as much as admitting this to the public and asking for the support to fight and win back control over the currency. Much like the american presidents andrew jackson and abraham lincoln did.Forget the big brother control grid, at least for now because the banking system IS the biggest tyranny we face today.
[...] to a comment on UK National Debt, “The interest is paid i presume, to the bank of england that lends the money to our [...]
[...] UK National Debt [...]
[...] National Debt in the UK is high at 40% of GDP £535bn. However, you could argue comparatively it is not too bad. National Debt has been much higher e.g. last recession, it reached over 45% of GDP National Debt in European countries like Italy is over 100%. See: National Debt statistics [...]
[...] also: UK National Debt [...]
[...] Official national debt is £512bn. The Centre for Policy Studies says that if Northern Rock liabilities and state pension liabilities (they’re taking money to pay into the state pension, it should be reasonable to expect it to be paid out) are added to the official figure then it’s more like £1.3 trillion or 103.5% of GDP. Add this half a trillion on top and national debt is more like £1.8 trillion. Count the zeroes – 1,800,000,000,000. That’s 180% of GDP, 22% higher than Japan at the height of recession when banks were failing every few days and they were knocking zeroes off the Yen every couple of months. [...]
[...] UK National Debt continues to grow. Next year, many are now forecasting a public sector net cash requirement of [...]
[...] UK National Debt 43% of GDP (UK) [...]
I understand that the UK national debt is 1.6 trillion maybe to rise to 2 trillion. Is this correct? and to whom do we owe all of this
[...] UK national Debt is currently just over 610 billion. See (UK National debt) (This figures includes the recent cost of the Northern Rock [...]
why is our currancy falling due to the fact that we owe 700 billion in national debt ??, the USA has accumilated over 59 trillion dollars of goverment liabilities (thats 500,000 + per every single household) and yet the US dollar is stable ??????????????????
The top civilized governments of this world are ALL in
big DEBT problems. The G8 should meet to revise the
old system using john maynard keynes and britton woods agreement or post WWII to rebuild the govs of
Europe and devote 50% of the World Bank and Internatl
Monetary Funds Projects to G8 gov needs currently or
stop giving it ALL away to fourth and fifth world govs.
Projects undone by USA,UK,France,Russia,Germany,Japan,China,Canada,Spain,Italy,Iraq,Mexico,Poland and probably six more majors
should now be invested into by offshore bank trading regimes with Billion Dollar Tranches to aid NOW developing countrys as well. Their treasurys can’t fund
their negleted hospitals,welfare issues,roads,school
buildings,new sources of energy,new hybrid autos,global warming filters for coal and fossel fuels
power plants etc. THEN OUR GOVS can concentrate on
paying off our debts EARLIER and the dollar should soar
as the ORIGINAL BENCHMARK as intended by Britton
Woods and top 25 Bank Trading Programs. Please check
boulat.com for more specific info on these programs and
how they work. Thanks very much. Also…concerning our
G8 taxes which is a thorny issue of course…our govs should invest in tranches to the Worldwide Bank Trading
Programs run by the US Fed Reserve and major world
banks and the IMF and World Bank so that the original
one dollar of revenue in our treasury would summate
at the end of one year to 10 up to 15 dollars return on
TAX INVESTED FUNDS to help pay off Treasury Issues
of our mutual World Govs. Make your money on the
ten year advancing dollar against lesser currencys while
your “tax man” is at it HUH? Keep doing that until we
ALL RISE ABOVE THIS DEBT DEBACLE…HURRAH! Thanks
from J Johnston…PS The Isle of Man, Gibraltar and the
Isle of Curacao have banks to help us do this today!
the usa in answer to your question are stable as it is due to the trade of oil being in dollars. as soon as new technology for energy or the change in the currency used for oil happens, the usa will crumble unless they sort out the debt.
and john thats interesting but i for certain would not trust the US feds with my money, let alone the worlds
[...] would be interesting if the BBC added a chart for the UK national debt. There is some information here and here but I would like to see a long term table [...]
Re comment #2 by Simon Lomax: “The interest is paid i presume, to the bank of england that lends the money to our government. If this is correct and i’m sure that it is, why have successive governments(this is a rhetorical question by the way) allowed our currency to be controlled by private banking elites without as much as admitting this to the public and asking for the support to fight and win back control over the currency. Much like the american presidents andrew jackson and abraham lincoln did.Forget the big brother control grid, at least for now because the banking system IS the biggest tyranny we face today.” – Simon raises an important question which nobody seems to clarify. Is it true that citizens are paying huge interest payments to private bankers on “loaned money” which has been created out of nothing? If so, why don’t we nationalise the national debt, and pay it off with the amounts that apparently are being paid to private bankers?
[...] Current Public sector net Debt [...]
If we get interest rates to stay at zero percent, this will greatly enhance the servicing of national debt. For instance we woudl completely avoid £30b+ in interest for 2009
It can be done as Japan has had zero interest adn USA is close to it already. Everybody benefits excepts savers ( and they can find smarter ways of investing ).
Can you explain the difference between gross and net national debt?
We should go to 0% interest as the country in the long run will only benefit and we will become a stronger and better financial force in the long run.
[...] I wonder what the yearly interest on that is. Think i’ve found the answer to my question UK National Debt | Economics Blog [...]
[...] UK National debt [...]
[...] 3 http://www.economicshelp.org/blog/uk-economy/uk-national-debt/ [...]
In my opinion, irresponsible lending, combined with over materialistic spending has contributed to this huge problem we see right now. Those graphs are very telling of the state of public excess.
Luckily the FSA are going to start heavily regulating the lenders to help get the economy out of this hole.
[...] National debt in the UK [...]
[...] National debt as a percentage of GDP, including the cost of stabilising the banking system, will increase from [...]
[...] indebtedness is not the worst in Europe, and is actually not the worst we’ve ever endured. It’s quite a lot smaller than the debt we ran up during the second world war – and somehow we recovered from [...]
@Yusuf Husein – I completely agree, interest rates should be reduced, it may help to stabilise some of our more volatile industries.
@Debt Management Tips – It is funny you should bring up this point, I had a conversation with a friend today about the whole Irresponsible Lending vs Consumer Overspend debate and in the end we both agreed that on the whole it was the lenders responsibility to ensure that credit and credit limits were appropriate.
I’m glad the FSA are going to step in and place some restrictions on lenders. There are so many rogue firms out there being irresponsible in their approach to lending.
The company “Brighthouse” in the news right now is a perfect example of a company that should not be allowed to operate.
Interesting article, just shows what a mess our current financial situation really is.
All very interesting. Although I’m not sure what bonds, gilts and treasury bills actually represent. Are they the UK’s potential GDP that will be earned in the future? – i.e. the potential to pay back the debt. Is there some sort of guarantee, or do lenders just give over their money with an element of risk? Also, how by selling bonds, gilts etc and increasing money supply, and further increasing it by then applying fractional-reserve banking on this new money, is inflation unavoidable, and that an increase in National Output is the only realistic factor (in the equation MV=PY) that will limit inflation and more importantly pay the original loan and the interest? How is the interest paid without borrowing more money? How did the UK decrease debt in the past?
I read recently (Money Matters, Alastair Sawday publishing 2009) that we are still paying for the ransom of Richard the Lionheart (1157-1199). Can anyone here refute this allegation?
The national debt is going beyond a joke even worse google is owned by someone in america and its the biggest shopping window i the world and they are putting all the .coms above uk businesses, why google why?
[...] Question: I would like to know more on the issue of who exactly benefits from the UK national debt that my great grandchildren are going to be [...]
[...] on June 2009, UK public sector debt stood at £798.8 billion (or 56.6% of GDP) – UK National Debt [...]
In answer to the questions answering who the government pays interest to…
The government issues government bonds or guilt edged stock which normally pays a fixed percentage of the value of the bond each year to the bond owner. The person who buys the bond gives the government the face value of the bond and in return the government gives the bondholder the fixed percentage of the face value each year until it buys the bond back which normally only occurs with fixed term bonds (eg. 5, 10, 25, 50, 100 etc year bonds although I don’t know if we still issue them).
I hope this helps….
people have to know that what is the yearly condition for debt of national sector and private sector. Here i am thankful for sharing helpful information.
[...] UK ‘Public Debt’ is now approximately £798 billion (June 2009 – http://www.economicshelp.org/blog/uk-economy/uk-national-debt/), and according to the media because of this all the main parties agree that the public sector (our [...]
The email you sent out on 15/16th Sept 2009 on the subject of government borrowing says “The irony is that many people in the UK who have private pensions indirectly have lent money to the government”. Too right. I would go a lot further: I suggest that behind this “irony” there is hornets’ nest, as follows.
Governments borrow to a large extent because the politicians in charge think they can make themselves popular by sparing voters the pain of additional tax. But as you rightly point out, this policy simply results in voters lending instead of paying taxes. The reduced personal consumption by voters is pretty much the same in each case.
Incidentally, this is a classic example of one of the most common mistakes in economics: the mistake of assuming that micro economic laws work at the macroeconomic level. To illustrate, if I PERSONALLY borrow to buy a new car, I can delay the pain of working and saving in order to get the cash to buy the car. But this does not work at the macro economic level.
I’ve actually set up a blog, which claims that government borrowing is largely a farce. I dont think there should be NO government borrowing, because if governments and/or central banks can alter interest rates and the total amount they borrow, this is a useful regulatory tool. See: http://govtdebt.blogspot.com/
What appears tragic from this is that Britain’s cultural history can be read off from the 1900 – 2000 PSBR debt burden chart from the Bank of England above.
The chart’s peaks of PSBR above 100% of GDP mirror exactly the historical periods of social misery which George Orwell documented during the 1920s, 1930s and 1940s, with Britain characterised as a land of rootless tramps and unemployed all reliant on piecemeal charity, low paid jobs and money-lenders, a nation which even Orwell himself could not envisage having a universal welfare state.
Our collective memories of this poverty finally begin to lift around 1965 and Beatlemania, a time exactly co-inciding with PSBR finally falling below 100% of GDP.
It looks like our nation’s all too brief summer of credit looks set to end and the Orwellian social conditions and dismantled welfare state look set to return.
[...] Readers Comment: From National Debt: What appears tragic from this is that Britain’s cultural history can be read off from the 1900 – 2000 PSBR debt burden chart from the Bank of England above. [...]
I’d like to querie the above first para: “The UK national debt is the total amount of money the British government owes to the private sector.”
According to a “City Wire” site, nearly all the increased so called “national debt” in recent months is debt owed by the government to the Bank Of England (on account of the latter’s generous decision to print loads of money and give it to government). This so called “debt” (owed effectively by one government entity to another) is not a debt in any normal meaning of the word.
See the following City Wire site, second graph or “bar chart” and the para just above it: http://www.citywire.co.uk/personal/-/news/money-property-and-tax/content.aspx?ID=352818
thanks Ralph, Yes, in recent months things have been changing quite significantly. I will update post
What an insight into the nation debt. Great article, so informative and thanks for covering this.
[...] a writer on the blog ‘Economics help’ points out; From National Debt: What appears tragic from this is that Britain’s cultural history can be read off from the 1900 [...]
Thank you for this article, it is are to find this kind of info in such an easy to read format.
I have one question however, who is all this money owed to? Who is so rich that they can lend countries so much money?
It the Banking system that has failed because of very loose lending system. Instead of excessive borrowing and provide the stimulus. The government should directly control most of the Bank and public sector unit , create more employment. The government should also put a cap on the exposure on all public fund i.e, the safeguard the pension fund. Instead of talking of liberalisation, its time to talk about protectionism.
too late for protectionism, we are now in a world of globalisation, most of our labour workforce has shifted to India and China, its fine showing debt as a percentage of GDP, look at the GDP after the war and look at it now, huge difference.here in the UK we have had 10 years of plenty, why didnt we save for the lean times ?only today it was revealed the bank of England lent 61 billion to HSBOS and RBS (behind closed doors). i tend to go with conspiry theorists when it comes to money, google
zeitgeist addendum
[...] an important economic and political question is when and how to tackle the government’s public sector debt. It is currently over £800bn (56%) but growing very [...]
I agree with Martyn above,… massive debt is bad enough but when quantified against GDP it is even more horrific! What do we produce??? Some oil, about to run out, aviation,..given away to EU and the world (Frank Whittle), some military,…. Most money is generated by the city looking after global finance, and what happens when the bubble bursts on global markets (Japan about to pop)? Game over, thats what! Build that wind turbine and get diggin the veggies baby, Mad Max here we come!!
Blah it’s ok – just blame the disabled and unemployed – scroungers!!!
All those loverly houses and smart cars and fashionable attire and 2 foreign holidays you all supposedly ‘worked hard for’ in jobs that actually only cost the nation money as opposed to earning it any and at a rate of anything from 5 times as much to 1000’s of times as much as the unemployed are scrounging in order to exist in this looney system we all call capitalism? Millions of pounds bonuses for running our monetary system into the ground?? Millions of pounds for politicians that have never sucessfully resolved any issue and if you look have actually caused more international resentment and competetive rivalry than all the fascists put together.
Then you spend millions to send our soldiers to go force this nightmare on other unsuspecting countries saying how great and fair it is?? Its a free for all grab a wad to any who have acquired the means to do come and ‘have some!!’ imigrants with dosh acquired in the same manner from even more impoverished populations welcomed too – We been a good cash cow for generations, come get some and then do it to your indigenous population just like we do!! When it gets a bit unruly we can start another world war and duck the conscription like last time.
Bring lots of problematic refugees from all over the world and flood the stable society – gives them at the bottom something else to worry about instead of watching us mugging the national income with ever complicated – but legal – systems and techniques – oh and whilst we send some of them terrrible unemployed people who worked on the side trying to calve out of this ‘overfull’ system, an income for themselves and their family – we will dip into the expenses system for a mortgage we dont have and havent had for nearly 2 yrs at a tune of £40,000.
All this we never would have known about if someone hadnt spilled the beans in protest at our lack of ability to supply our soldiers in harms way with proper and adequate life saving equipment. This isnt Grt Britain or England the land of angels – this is a land of foreigners and cash grabers who have no interest to work for it’s preservation cos they never knew it as what it was,
We’ve been Hijacked!!
[...] create will also be a nice little contribution to the estimated total UK debt of around £800bn ( As of July 2009 Source), though why now, could this not have been done 2/3 years ago at [...]
what are the security for these guilts or bonds that the government exchange for the currency?
[...] National Debt is currently £830bn or just under 60% of GDP. But, with a budget deficit of approx £180bn forecast for 2010, this will rise rapidly. UK Borrowing [...]
Isn’t the problem that the younger generation have had their future wealth largely taken by the older generation? It may have happend by mistake but in any event longer life expectancies and high pension entitlements are a time bomb for the futre, aren’t they? There is an article discussing the subject at http://www.recession.vo.uk.
Red you are spot on, The Goverment should print the money then we would have no interest to pay on the debt. The goverment should abolish fractional banking. Let the Banks that have Lost money go bankrupt. Banks are Just leaches keeping us all as slaves. Get ready for hyper inflation, higher taxes. No doubt they will do something to are currency, join the Euro so that they can make it even more worthless . After all that to keep the majority of people in the dark ,we as a nation will go to war. This is all been engineered by the Banks. Dont forget wealth is not lost, just transfered.
[...] It seems clear that both Tory and Labour seem to want to lock us into an authoritarian statist and high tax agenda for another 5 years at [...]
US Government debt is approaching 100% and will breach 100% of GDP by 2010 or 2011 adding over 1 trillion dollars of debt yearly. Interest payments alone are 500 billion yearly and rising.
America has not invested in each infrustructure, educating it’s workforce, Environmental Standards and Sustainable developement,etc. It has spent huge sums of money on Military adventures, Police-Prison Industrial Complex, Homeland Security, CIA, NSA, FBI, ATF, etc,etc which are basically aimed at controlling US Citizens under a Dictatorship.
While it has given trillions of Dollars to banks and other Corporations and most of all the Federal Reserve.
On Top of this most of the debt or a good portion is owed to Europe and Asia while Countries like Japan have invested in INfrastructure, education, etc and owe the money to themselves! A big difference!!!!!
Japan and Germany for Example are large Creditor Nations because they have large Export Industries and Services which Create Great wealth for these countries, the average Citizen Saves money or invests it while keeping a 15% savings rate which allows Japan or Germany to Borrow Money from their own people because the People along with the Country and Corporations based in these countries have huge sums of wealth which is not the case for a country like the USA who has a huge current account deficit, it’s citizens do not save and are deep in debt, the Companies are deep in debt so when it comes time for the US Government to borrow they increasingly borrow from other countries with the profits going overseas and giving these countries political leverage and economic leverage over the USA or any other country that is in this same game like the UK.
This is not mentioned but Japan has a large Government debt and Germany has a lessor Government debt but they are huge Current Account Nations with high savings rates and most the their Corporations have large pools of cash on hand. These countries also invest back into their country unlike the USA.
Why does the press not pick up on these facts?
Could the Press also be owned by the Germany and Japanese-Oh I forgot in America the Newsprint and Books are mostly owned by German Multinational Companies! And a large chuck of American Assets overall are owned by a few Creditor Nations so try to report on the truth-If your not already bought up !!!
[...] claims that “Public debt soars to record at 61.7% of GDP” It was last at this level as recently as the 1960s. The Wall Street Journal reports that there was solid demand for the latest gilt [...]
a £100 economy is made it borrows this £100 at say 5% interest or £5.00
value of economy = £100 = peoples wages/goods bought and sold etc .. its activity
who and how is the interest of £5 payed
Hiya basicly this recession is far from over there far more to come alot more. In 2011 the debt has to start to be paid back which has been put to one side for 2 years with full on borrowing and spending by the goverment labour. People dont relise in 2011 where going to be in for a rough time with the debt needing to start paying it back.
Meaning higher taxes, Spending cuts, Cuts on services and far more things. Which will result in people having less money. Life will get harder and things will not run as they should be and things will be let go in to a state out of control making things go worse.
I’ve watched this recession when it started to now wats happening. I dont trust anything you hear were coming out of recession its complete rubbish. All the jobs lost have not been replaced at all so this shows its alot of rubbish. If you cant replace those jobs lost with new ones it wont get any better.
All the signs are clear to see and hear were in for a rought time and its time people woke up and relised this. You cant keep spending debt when you havn’t payed it back or saved a penny. Because there all in a bubble world and its going to hit them all.
Best thing you can do stay clear of any debt and any borrowing after 2011 if you can avoid it. Because those are the people who are going to feel it big time and people on low incomes as well suffer to which is wrong.
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