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.

  • In Nov 2019, UK public sector net debt was £1,790.9 billion equivalent to 80.3% of GDP
  • Source: [1. ONS public sector finances,- HF6X] (page updated 15 November 2019)


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 2018-19 net borrowing was £24.7 billion

UK net borrowing


Source ONS

 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.

Read moreUK National Debt

Top 10 British Banks

In recent years, the British Banking system has become highly concentrated due to the wave of mergers following the credit crunch. Top 5 British Owned banks Bank Market value (£bn) As of October 2013 Assets (£bn) As of 31 March 2017 1. HSBC 126 1,936 2. Lloyds Banking Group (Bank of Scotland/Halifax) 53.5 817 3. …

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Economic impact of Margaret Thatcher


A look at the economic and social impact of Mrs Thatcher’s economic policies.

  Summary of Thatcher’s Economic policies

  • Belief in the desirability of free markets over government intervention. E.g. pursuing policies of privatisation and deregulation.
  • The pursuit of supply-side policies to increase efficiency and productivity.
  • Reducing the power of trades unions and increased labour market flexibility.
  • Financial deregulation, e.g. building societies becoming profit-making banks.
  • Reducing higher rates of marginal income tax to increase incentives to work.
  • Ending state subsidies for major manufacturing companies.
  • Encouraging home ownership and share ownership.
  • Targeting money supply and monetarist policies to reduce inflation of late 1979. Monetarism was effectively abandoned by 1984.
  • Joining EU Single Market in 1988

The Economic Impact of Margaret Thatcher

When Mrs Thatcher came to power, she sought to

  • Reduce inflation – running at around 14% in 1979 (after periods of 20% plus in the late 1970s)
  • Reduce budget deficit.
  • Increase efficiency of the economy
  • Reduce the power of trades unions


Monetarist policies

On coming to power, the Conservatives followed a policy of Monetarism – seeking to control the money supply in order to control inflation. This involved higher interest rates and higher taxes. This did reduce inflation to 5% by 1983, but at the cost of a deep recession and unemployment rising to over 3 million.

In 1981, 365 economists signed a letter to the Times newspaper arguing the government should reverse its economic policy and seek an end to the recession. This caused Mrs Thatcher to make her famous speech to the Conservative party conference of 1981.

“To those waiting with bated breath for that favourite media catchphrase, the U-turn, I have only one thing to say: You turn if you want to. The lady’s not for turning! (BBC)

It was great politics, but the economic cost was a significant decline in GDP and unemployment staying at nearly 3 million until the mid-1980s.



Trade unions

In the 1970s, days lost to trade union strikes were at all-time highs. It was feared that poor industrial relations were a key factor in holding back industry. Thatcher was determined to reduce the power of trades unions and end industrial disputes from costing British industry.

Trade union membership fell in the 1980s, forever changing British unions.

There is no doubt that industrial disputes were a real problem in the 1970s (though it should be remembered there are always two sides to industrial disputes – not just unions). Apart from the coal mine strike of 1984, days lost to strikes fell significantly in the 1980s, and there have been improved industrial relations.

To some extent Mrs Thatcher can claim some success, e.g. ending the right to secondary picketing, ending closed shops, compulsory ballots. But, also, the decline in trade union power was also caused by other factors, such as the decline in British manufacturing, British heavy industry and the rise in unemployment.

See more at Trade union density

The coal miners

An iconic moment of Mrs Thatcher’s early policies was the Miners strike of 1984. She successful outmanoeuvred the miners and fundamentally weakened the NUM – no more would the mining unions be able to bring down a government like in the 1970s. The strike was bitter, leaving lasting scars, and miners see the decline of the industry as evidence that their fears over pit closures were true. But, the mining industry had been declining since the 1920s. Even in 1945, half a million people worked in coal mines. Today, the figure is less than 10,000 and is being replaced by cheap imports and other forms of electricity. (see: decline of coal mines) It is hard to justify, given the environmental cost of coal, that a government should have subsidised a declining industry.

UK Unemployment in the 1980s


Unemployment rose sharply at the start of the 1980s, due to deflationary monetary and fiscal policy. The recession of 1981 and decline of heavy industry also caused a rise in structural unemployment – even in the boom years of the mid-1980s, the unemployment rate remained high. Even in the late 1980s, unemployment was over 2 million. A significant factor was the structural and geographical unemployment caused by industrial decline.

More details on this period at The Economy under Mrs Thatcher 1979-84 

Lawson Boom of the 1980s

After 1985, the UK economy grew very rapidly. Economic growth reached 4-5% a year. This was well above the UK’s long-run trend rate. The Conservatives felt there had been a supply side miracle. But, inflation increased to 9%. And in 1990, the boom came to an end, leading to another recession of 1991-92.


From 1985, the UK economic boom and growth in consumer spending cause a deterioration in the current account deficit. In the Lawson boom, the deficit reached 5% of GDP.

Supply-side policies

A key feature of Thatcher economics was the implementation of supply-side policies aimed at increasing the efficiency of the economy. These policies included:

  • Reducing the power of trades unions
  • Privatisation of state-owned assets from BP and BT to gas, water and electricity.
  • Deregulation of monopolies, such as gas and electricity
  • Deregulation of the financial sector, e.g. enabling building societies to become profit-making banks.

Housing Market

A key philosophy of Mrs Thatcher was the idea of a ‘home owning democracy’. During the 1980s, homeownership rates rose. In particular, the policy of selling off council homes to residents helped to increase homeownership rates. It is worth noting that homeownership rates had been rising since the late 1960s. In the 1970s, we see a similar trend in house prices to the 1980s. (1970s housing market) Also in recent years, the percentage of home ownership rates has fallen, due to house prices becoming unaffordable for many.

  • Home Ownership – Mrs Thatcher encouraged a belief in home-ownership. Many Council houses were bought by tenants. It led to a rise in home-ownership rates.

    UK Social Trends 20th Century. Research Paper 99/111. 21 December 1999

House prices in the late 1980s boomed, with record house price inflation, especially in the south-east. This created a powerful feel-good effect and contributed to the Lawson boom of the late 1980s. But, the growth in house prices was also unsustainable and prices fell after 1990.

Another feature of the 1980s housing market was a slowdown in house-building compared to the previous decades; this contributed to housing shortages in 1990s and 2000s.

New housing builds GB
Source UK Social Trends 20th Century. Research Paper 99/111. 21 December 1999

See more details on


Read moreEconomic impact of Margaret Thatcher

Balanced and unbalanced economic growth

What do we mean by balanced economic growth? Also, is it important for an economy to promote a balanced approach to growth? A balanced economy suggests that economic growth is sustainable in the long-term, and the economy is also growing across different sectors – and not focused on one particular industry or area. A balanced …

Read moreBalanced and unbalanced economic growth

Monetary and Fiscal Policy in the UK


Readers Question: What do you understand by the terms ‘monetary policy’ and ‘fiscal policy’? Explain with reference to a country of your choice:- a) How these policies have been used by the government to try to achieve its objectives Definition – monetary and fiscal policy Monetary policy is managed by the Bank of England. They have …

Read moreMonetary and Fiscal Policy in the UK

Impact of rising population in the UK

The UK population is projected to increase by 9.7 million over the next 25 years from an estimated 64.6 million in mid-2014 to 74.3 million in mid-2039. (ONS). Approx. 50% of the population increase is expected due to net migration.

This is a look at the economic and social impact of a rise in the population.

The UK is bucking the trend of many Western economies, such as Italy, France and Japan – who are seeing low birth rates, an ageing population and declining populations.


UK population projections at BBC

The growth of the UK population raises many issues, some positive and some negative. From an economic perspective, the population growth is generally good news. The growing population will increase the productive capacity of the economy, and help the UK avoid a demographic time bomb through improving tax revenues. However, a growing population will exacerbate existing problems, such as the long-standing housing crisis and a shortage of supply. It will also put pressure on existing infrastructure and the transport network. To deal with the rising population and congestion, we are likely to see increased building on greenbelt land and a change in the UK’s landscape.

On the one hand, population growth will help the UK economy become one of the largest in the EU, but as a consequence, we will have to deal with increased congestion and increased demand on local infrastructure.



The UK is already struggling to meet existing demand for housing. A rising population will put even more pressure on housing; also, the rise in the number of households is greater than the rise in the population due to the growth of single occupancy households.

As mentioned in ‘housing crisis’, the UK already has a persistent shortage of housing. Demand is rising faster than our willingness to build. This shortfall is causing an increase in long-term house prices, reducing affordability. If the UK population continues to grow to 71 million plus it will, ceteris paribus put upward pressure on house prices. It will require a dramatic change in housing policy and could require large-scale new towns to catch up with the shortage.


House price to earnings for first time buyers likely to keep rising.

If the supply of housing fails to meet the growth in the number of households, it will increase the cost of living. House prices will rise and the cost of renting will also continue to rise. This is likely to exacerbate the growth in wealth inequality we have seen in the past few years.

Arguably we could deal with the housing shortage if the political will is there. In the 1950s, we built 400,000 new homes a year. But, given the current resistance to even moderate new home building programmes, 300-400,000 new homes a year will be very difficult.

Limiting the impact of an ageing population

Many countries with declining populations are seeing a rise in the percentage of people over retirement age. This puts pressure on government spending (health and pensions) and leads to lower tax revenues (See: impact of an ageing population). The UK population is rising due to net migration and higher birth rates. This means the UK has a higher % of people of working age, who are net contributors to the exchequer (paying income tax, not receiving pensions)

Therefore the growth in the population improves the long-term UK budgetary position, reducing the need for spending cuts and/or tax increases.

The growth in the working age population also increases the size of the UK labour force, enabling higher productive capacity. This will help increase UK real GDP compared to other countries. (note, GDP per capita – GDP per head may not be affected by a growing population.)

However, by mid-2039, more than 1 in 12 of the population is projected to be aged 80 or over. (ONS)

Increased efficiency of greater population density

Increased population density is more efficient from both an environmental and economic perspective. The highest carbon per capita consumption comes from rural/low population density areas. There are economies of scale in providing transport and infrastructure which helps reduce the per capita impact on both government spending and the environment.

(Report: increased efficiency of higher urban density) (Study: efficiency of public services from higher density)

Read moreImpact of rising population in the UK

Buy British campaigns

At different times there have been campaigns to ‘Buy British’ – patriotic efforts to support the economy. The campaigns seem quite popular, but usually fade out, having made little difference to major macro-economic variables. It is a form of economic nationalism and similar campaigns can be seen in many different countries. Buy British campaigns can …

Read moreBuy British campaigns

Threats to UK economy

The UK economy is showing signs of economic recovery. Positive economic growth, falling unemployment, and after a long gap – rising real wages. However, despite positive economic growth, there are many potential threats that could derail the economy and lead to a period of prolonged weak growth or even future recession. Some of the main …

Read moreThreats to UK economy

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