Britain notched up another grim economic landmark today when official figures showed the public debt mountain is now as big as the nation’s entire GDP for the first time since 1961.
Latest figures from the Office for National Statistics (ONS) today revealed that public sector net debt stood as precisely 100% of annual economic output, a level reached when the Harold Macmillan was Prime Minister but borrowing levels were coming down after the Second World War spending splurge on defeating the Nazis.
The last time Britain’s debt was over 100% of GDP and still rising was in March 1947. This time the public finances have been put under enormous strain by the costs of responding the triple whammy of the financial crisis, the pandemic and the energy crisis.
The milestone underlines the scale of the task facing Rachel Reeves in her Budget next month as she struggles to get to grips with the deficit.
Last week the Government’s public finance watchdog the Office for Budget Responsibility warned that, on current trends, the UK’s debt mountain will almost triple to more than 270% of national income over the next 50 years because of pressures from an ageing population, the climate crisis and security risks,
Today’s ONS figures also show that borrowing in August was £13.7 billion, more than £3 billion higher than in August 2023 and the third highest August borrowing since monthly records began in January 1993.
The state spent £103.1 billion in the month but collected only £89.4 million in tax and other receipts.
Borrowing in the financial year to August 2024 was £64.1 billion, up £0.3 billion on the same five-month period a year earlier and the third highest year-to-August borrowing since monthly records began in January 1993.
Chief Secretary to the Treasury Darren Jones said: “When we came into office, we inherited an economy that wasn’t working for working people. Today's data shows the highest August borrowing on record, outside the pandemic. Debt is 100% of GDP, the highest level since the 1960s. Because of the £22 billion black hole in our public finances we have inherited this year alone, we are now taking the tough decisions now to fix the foundations of our economy, so we can rebuild Britain and make every part of the country better off.”
Alison Ring director of public sector and taxation, at the accounting body ICEAW said: “The public finance numbers for August, released today, were worse than expected, with the reported deficit for the month of £13.7bn higher than predicted, while net debt increased to 100.0% of GDP, at £2.768 trillion.
“Although disappointing, Chancellor Rachel Reeves will be relieved that the cumulative deficit for the year to date is not as bad as it could have been, as she faces a series of tough choices in advance of the Autumn Budget next month.
“While the Chancellor’s primary focus will be on bringing public spending under control in the short-term, we hope she will also be thinking about how best to lay the ground for economic growth. Reform of business rates, VAT and employment statuswithin the tax system needs to be high up the agenda as part of a wider tax roadmap for businesses to stimulate economic growth and boost investment, while at the same time she needs to set out a fiscal strategy to put the public finances onto a sustainable footing over the long-term.”
