The UK national debt is the total amount of money the British government owes to the private sector.
At the end of December 2008, UK public sector net debt was £697.5 billion. (or 47% of National GDP) - Source: Office National Statistics [1]
Graph Showing UK National Debt
National debt UK
National Debt as a % of GDP has increased from 30% in 2002 to 37 % in 2007. This was despite the long period of economic expansion. It is primarily due to the governments decision to increase spending on health and education. There has also been a marked rise in social security spending.
National Debt has increased sharply in the past 12 months because of:
- Slowing Economy (lower tax receipts, higher spending on unemployment benefits)
- Financial bailout of Northern Rock, RBS and other banks.
Although 47.5% 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 second world war is was over 150% of GDP.
National Debt and Financial Bailout
(updated)
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 rise to 45% of National Debt by April 2009
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 good chance of getting 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 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]
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
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
31 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?
Leave a Comment