UK National Debt

The UK national debt is the total amount of money the British government owes to the private sector and other purchasers of UK gilts.


Source: ONS debt as % of GDP – HF6X | PUSF – public sector finances at ONS

Budget deficit – annual borrowing

This is the amount the government has to borrow per year.

  • In 2013/14 net borrowing is forecast at £98.5bn or 5.7% of GDP (excluding public banks)
  • In 2014-15 net borrowing is forecast at £88 billion (4.9% of GDP)
  • In 2015-16  net borrowing was £71.7 billion. (3.8% of GDP

UK net borrowing


Latest statistics at OBR

UK net borrowing as % of GDP


Figures for 2014-15 onwards are forecasts. | View: Latest statistics at OBR

Further reading on

Deficit down but debt up?

One potential confusion is that politicians may say the budget deficit is coming down. But, at the same time, national debt is rising.

  • If annual borrowing falls from £80bn to £50bn, the annual deficit is lower. But, at the same time, the national debt (total debt) can still be rising.

Debt as % of GDP

The most useful measure of national debt is to look at debt as a % of GDP. For example in 1950, UK national debt was £640bn (at 2005 prices) – but this was 250% of GDP.

Recent history of UK National Debt

UK national-debt-since 1975
UK national-debt-since 1975
  • After a period of financial restraint, from mid 1990s, public sector debt as a % of GDP fell to 29% of GDP by 2002.
  • From 2002 – 2007, national debt increased to 37% of GDP. This increase in debt levels occurred despite the long period of economic expansion; it was primarily due to the government’s decision to increase spending on health and education (see: Government spending in this period). There has also been a marked rise in social security spending.

2008-2015 – public sector debt has increased sharply because of:

  • 2008-13 recession (lower tax receipts, higher spending on unemployment benefits) The recession particularly hit stamp duty (falling house prices) income tax and lower corporation tax.
  • These cyclical factors have also exposed an underlying structural deficit. (deficit caused by spending greater than tax, ignoring cyclical factors)
  • Financial bailout of Northern Rock, RBS, Lloyds and other banks.
  • From 2011-2015, the pace of increase in the public sector debt has slowed due to the government attempts to reduce the budget deficit. The government has announced strict spending limits.

Comparison with other countries

Although 80% of GDP is high by recent UK standards, it is worth bearing in mind that other countries have a much bigger problem. Japan, for example, has a National debt of 225%, Italy is over 120%.  The US national debt is close to 80% of GDP. [See other countries debt]. Also, the UK has had much higher national debt in the past, e.g. in the late 1940s, UK debt was over 200% of GDP.

History of national debt

UK National Debt since 1900.

uk-debt-100-yearsSource: Reinhart, Camen M. and Kenneth S. Rogoff, “From Financial Crash to Debt Crisis,” NBER Working Paper 15795, March 2010. and OBR from 2010.

See also: Historical National debt

These graphs show that government debt as a % of GDP has been much higher in the past. Notably in the aftermath of the two world wars. This suggests that current UK debt is manageable compared to the early 1950s. (note, even with a national debt of 200% of GDP in the 1950s, UK avoided default and even managed to set up the welfare state and NHS. In the current climate, the UK would struggle to borrow the same as in the past.  For example, private sector saving is lower, and the US wouldn’t give us big loan like in the 1950s.

Debt reduction and growth

The post-war levels of national debt suggest that high debt levels are not incompatible with rising living standards and high economic growth.

The reduction in debt as a % of GDP 1950-1980 was primarily due to a prolonged period of economic growth.

How much can a government borrow?

Historical budget deficit

Annual borrowing since 1950


Debt and bond yields

Bond yields reflect the cost of borrowing. Lower bond yields reduce the cost of government borrowing.


Since 2007, UK bond yields have fallen. Countries in the Eurozone with similar debt levels have seen a sharp rise in bond yields putting greater pressure on their government to cut spending quickly. However, being outside the Euro with an independent Central Bank (willing to act as lender of last resort to the government) means markets don’t fear a liquidity crisis in the UK;  Euro members who don’t have a Central Bank willing to buy bonds during a liquidity crisis have been more at risk to rising bond yields and fears over government debt.

See also: Bond yields on European debt | (reasons for falling UK bond yields)

Cost of Interest Payments on National Debt


The cost of National debt is the interest the government has to pay on the bonds and gilts it sells. In 2011/12, the debt interest payments on UK debt are anticipated to be £48.6 bn (3% of GDP). This is a sharp increase from two years ago, but still quite manageable.  See also: UK Debt interest payments

As a % of GDP, debt interest payments are relatively low.


In 1985-86, debt interest payments reached 4.5% of GDP

How to reduce the debt to GDP ratio?

  • Economic expansion which improves tax revenues and reduces spending on benefits like Job Seekers Allowance. The economic slowdown which has occurred since 2010 has pushed the UK into a period of slow economic growth – especially, if we consider GDP per capita growth. Therefore the further squeeze on tax revenues has led to deficit reduction targets being missed.
  • Government spending cuts and tax increase (e.g. VAT) which improve public finances and deal with the structural deficit. The difficulty is the extent to which these spending cuts could reduce economic growth and hamper attempts to improve tax revenues. Some economists feel the timing of deficit consolidation is very important, and growth should come before fiscal consolidation.
  • See: practical solutions to reducing debt without harming growth

 What will be the impact of Chancellor’s plan to run budget surpluses?

Is it a good idea to enshrine in law the idea of a government being forced to run a budget surplus?

What is the real level of UK national debt?

It is argued by some that the 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 (and 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 –]
  • 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 up to £500bn. If we include this bailout package as a contingent liability National debt would be well over 100% of GDP. However, with a modest improvement in the bank sector, the necessity for these bailouts look unlikely, unless there is a very sharp deterioration in global finance markets – which is always possible.

Forecast for National Debt

  • Current forecasts for UK debt predict that the UK public sector debt to GDP ratio will peak at just over 80% in 2016-17. However, in the past few years, government forecasts have regularly been revised upwards due to poor growth and disappointing deficit reduction
  • What are the prospects for UK debt default?

Potential problems of National Debt

  1. Interest payments. The cost of paying interest on the government’s debt is very high. In 2011 debt interest payments will be £48 billion a year (est 3% of GDP). Public sector debt interest payments will be the 4th highest department after social security, health and education. Debt interest payments could rise close to £70bn given the forecast rise in national debt.
  2. Higher taxes / lower spending in the future.
  3. Crowding out of private sector investment/spending.
  4. The structural deficit will only get worse as an ageing population places greater strain on the UK’s pension liabilities. (demographic time bomb)
  5. Potential negative impact on exchange rate (link)
  6. Potential of rising interest rates as markets become more reluctant to lend to the UK government.

However, Government Borrowing is not always as bad as people fear.

  • Borrowing in a recession helps to offset a rise in private sector saving. Government borrowing helps maintain aggregate demand and prevents a fall in spending.
  • In a liquidity trap and zero interest rates, governments can often borrow at very low rates for a long time (e.g. Japan and the UK) This is because people want to save and buy government bonds.
  • Austerity measures (e.g. cutting spending and raising taxes) can lead to a decrease in economic growth and cause the deficit to remain the same % of GDP.  Austerity measures and the economy | Timing of austerity

Who owns UK Debt?

The majority of UK debt used to be held by the UK private sector, in particular, UK insurance and pension funds. In recent years, the Bank of England has bought gilts taking its holding to 25% of UK public sector debt.


Overseas investors own about 25% of UK gilts (2016). See more at: Who does the UK own money to?


More at: who owns UK debt?

Total UK Debt – government + private

  • Another way to examine UK debt is to look at both government debt and private debt combined.
  • Total UK debt includes household sector debt, business sector debt, financial sector debt and government debt. This is over 500% of GDP.Total UK Debt

Private sector savings


When considering government borrowing, it is important to place it in context. From 2007 to 2012, we have seen a sharp rise in private sector saving (UK savings ratio). The private sector has been seeking to reduce their debt levels and increase savings (e.g. buying government bonds). This increase in savings led to a sharp fall in private sector spending and investment. The increase in government borrowing is making use of this steep increase in private sector savings and helping to offset the fall in AD. see: Private and public sector borrowing

Government spending


More statistics on UK government spending

Other countries debt

See also:

336 thoughts on “UK National Debt

  1. Thanks for the information, succinctly written. The UK government are borrowing every year to pay off the previous year’s shortfall. This borrowing incurs an interest charge, so it cannot be counted as “income”, and every year we are borrowing more to pay off the loans. This is ” Wonga loans” economics.

      1. So governments can never get into debt because they can create as much money as they like at any time. If that was the case there would be no need to sell bonds, they wouldn’t exist because the government would simply create the money. But bond markets do exist so either Warren Mosler is a fool or I am.

        1. They do need to save bonds. To people who want a safe place to store pounds. But they dont need to sell bonds to raise income. No.

      2. Warren Mosler is a fraud. I quote the “fact” he presents to support his first assertion.

        “Federal government spending is in no case
        operationally constrained by revenues, meaning that there is no “solvency risk.” In other words, the federal government can always make any and all payments in its own currency, no matter how large the deficit is, or how few taxes it collects.”

        This is nonsense. Governments can and do default. Argentina and Russia to give two fairly recent examples. Also, the ability to print money does not mean you can in reality repay a debt. If the government borrows money in its own currency, then devalues that currency to the point where it is worthless, then repays the debt in the worthless currency, has the lender been repaid? I think not. You really can lose money lending to a government. Which means a comment I observed below saying gilts are 100% secure is also wrong.

        1. Governments can choose to default but they dont have to. The BOE the US federal bank have all explained that is impossible for those central banks to be forced into insolvency. SO Mosler is right. IT is a fact. We get our income from govt, govt doesnt get income from us.

          1. It is not a fact, we do not get our income from governments (it doesn’t even make sense) Most of the money is not created by the government or indeed the central bank. In the crudest terms Most is created by banks lending it, and then re-lending the money when it is re-deposited. Any one who says that borrowing more money is the answer when you are already borrowing more than £1,500 per second does not know what they are talking about. Let me say that again we are currently borrowing more than £1,500 every second of every days, yes even when you are sleeping. Borrowing more is crazy, we are spending more than we can afford.

        2. in its own currency,

          Countries that borrow in other currencies may have problems if they cannot earn (or buy) the foreign currency.

  2. Hello, Public sector net debt (ex. public sector banks) was £1,606.9 billion.

    In this number is excluded the amount of gilts held by boe (357 mld of sterling), beacause with consolidation was removed?

  3. Can I ask why our of my tax comes a national Al debt interest payment? I never signed any agreement saying I was liable for interest. I have not seen the agreement. I am not sure if PPI was included in that agreement.

  4. The government bailed out RBS in 2007, but was this because RBS held a substantial amount of Government debt, and if the bank failed the treasury would have to repay that money to the liquidators. Do we know how much government debt RBS holds?

  5. You say this, “In the current climate, the UK would struggle to borrow the same as in the past. ”

    However, this is not true. Indeed UK Government gilts are 100% guaranteed safe, the government will always be able to repay any amount – it owns the currency after all!. Indeed in this uncertain climate today, investors are so desperate to move cash to something safe, they are willing to accept just fractions of a percent interest on 2 year and 5 year gilts, rather than invest it in companies.

    If anything, the government can (and should be) issuing far more debt, in order to kickstart the economy and get peoples standard of living back to where it was 10 years ago.

    1. I agree to an extent. Certainly, they can borrow more than the current 80% of GDP. What I really meant is levels seen in 1950s of over 200% of GDP.

  6. What I want to know is simply how much of the ‘National Debt’ is owned by people or organisations outside of the UK and how much within…

  7. I think our national debt is quite simply staggering but at £1.7 trillion? and rising at £5500 per second! it obviously isn’t going to be paid off anytime soon.
    You say that reducing government spending isn’t going to reduce our national debt much if at all? Well I can see that because it reduces the amount that people spend in the economy producing government revenue such as VAT. But it also seems more likely that the huge increase in the money supply since the eighties has made it much harder for governments to keep proper control over national debt much of which is fuelled by rapid increases in investment. The trouble is that the credit crunch of 2008/9 has quickly proved how vulnerable ours and other economies are in relation to borrowing too much for investment. It looks as though some of our future plans may have to change regarding this and focus on more manageable priorities to deal with this. There are many ” catch 22s ” involved in the situation but, if the next financial crisis involves a collapse in property prices then that would probably involve much less money being circulated and spent which equally would mean that the national debt would still take many years to pay off and could actually increase it probably. But it still looks as though the world economy cannot go on sustaining such high levels of debt. We cannot also probably relate our current economy to what happened before in any meaningful way.

  8. Anyone who believes that a debt over a £trillion is sustainable in the long run ,and to be paid by future generations not born yet…does not understand economics
    Money created by banks from nothing with interest charged for each $£ not democracy,is immoral,un-ethical..should be made illegal…as is counterfeiting money…which is what modern money is…governments need to create money..debt free and interest free to pay for public services and public infrastructure

    1. Agree. And they can.
      But the entire mechanism of money creation & money trading needs an overhaul. However, there is no political party proposing this. Is there a single politician who understands what is required?

  9. You are all missing the point.What will bankrupt Britain is this.
    We are coming to the end of a 31 year cycle of low interest rates and cheap money.
    We have gone well past the point of no return.
    Interest rates are rising.Inflation has returned.
    Even if Britain stopped public spending tomorrow,we could never pay the higher interest on our current £1.7 trillion debt pile.
    Britain is doomed.Within 5 years it will be poorer than Bangladesh.

    1. It doesn’t matter what interest rates are as amalgam Greenspan said in 2005 solvency is not an issue when the debt is in the same currency that the government can create.

      Government debt income is well below any private household debt income ratios but the government has far longer timescales than private households and can create as much money as it needs to buy any goods and services that are for sale in its currency.

      As a matter of fact the Bank of England has bought £453 billion of government debt and could easily buy up the rest and then there would be no interest to pay at all.

    2. It has been govt education policy throughout the West to withhold teaching basic economics & How Money Works to unsuspecting students – all the better to screw them throughout the rest of their lives (e.g. Student Debt).
      The problem with that is that even those running the economy have little idea how it works, and billionaire bankers are setting their agenda, for no other objective than their own bank balances.
      In the past, govts could get wise & correct these trends but banks have now been consolidated, in just one generation, into a small number of enormous institutions, larger & more powerful than most countries. And of course, unrestrained by nuisances such as representative democracy.
      Yes, we’ll all get relatively poorer, as we are willingly being taken for a ride and reacting exactly as planned.

  10. the entire fiat monetary system is a scam to its core. created by the criminal elite, to transfer the wealth of the world from the masses to the few at the top. and they have done a very good job of it. the system was designed to fail many years after its creation whilst in the meantime the criminal elite could steadily consolidate its power and wealth. we are coming very close to the point where the system completely fails and a new system, of their design, can be introduced. and its all been part of the plan all along. there is no fix other than to not recognize the existence of any monetary system

  11. One question I have – as National Debt accumulates due to the deficit adding to it, I assume that at the same time that National Debt is slowly been paid back via bonds or gilts maturing, or have I got that wrong. ?

    1. As bonds mature the principal money or capital is repaid but government debt is simply rolled over by issuing new bonds or national savings products, for that matter. The nominal debt keeps increasing unless government tax flows exceed government spending which is a relative brake on the economy compared to the government running a deficit.

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