The chancellor is set to present her budget for the next financial year in October.[1] Much attention will be paid to the spending and taxation changes announced, but alongside this, figures will be released by the Office for Budget Responsibility revealing the state of the public finances and the outlook for the economy.[2] Prominent amongst this data will be the size of the national debt. In recent years this figure has spiralled upwards with the latest data forecasting public sector net debt excluding the Bank of England to be £2.6 trillion in 2024-25, almost 92 per cent of UK gross domestic product (GDP).[3]
Rising debt is not an issue exclusive to the current government, with the majority of recent prime ministers preceding Sir Keir Starmer overseeing an increase in the government’s financial obligations. Since the coronavirus pandemic, the issue of the debt has increased in importance because of the rise in inflation and interest rates. The former leading to a direct impact of increased borrowing to pay for more spending on inflation linked benefits, tax credits and public service pensions, therefore adding to the total size of the debt, the latter has led to an increased cost of servicing the debt which in each of the last two financial years has cost over £100 billion, making it the fifth largest spending area for the government.[4]
This note analyses the current size of the debt and debt interest payments, comparing them to historic levels in 2023-24 prices, and analyses the impact of each prime minister on the debt since 1997-98.
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Key findings
- Public sector net debt excluding the Bank of England has increased from £658 billion in 1997-98 to £2.45 trillion in 2023-24 prices, an increase of 273 per cent. By 2028-29 the debt is forecast to rise to £2.81 trillion, a 15 per cent increase from its current level.
- In 2023-24 prices, central government debt interest has risen from £22.3 billion in 1955-56 to £102.2 billion in 2023-24, an increase of 358 per cent.
- In 2008-09, during the financial crisis, public sector net debt excluding the Bank of England increased by 33.6 per cent or £283 billion, in 2023-24 prices. This is the largest percentage increase in a single year since 1997-98.
- Debt as a percentage of gross domestic product (GDP) increased from 36.7 per cent in 1997-98 to reach a record 89.3 per cent in 2023-24. As a percentage of GDP, debt is forecast to continue rising until 2028-29 when it falls to 92.9 per cent from 93.2 per cent in 2027-28.
- In 2028-29, debt is forecast to be almost 16 percentage points higher than the pre-pandemic level of 77.1 per cent in 2019-20 and 57 percentage points higher than the pre-financial crisis level of 35.8 per cent in 2007-08 relative to GDP.
- Since 1997-98, Gordon Brown was the prime minister who oversaw the largest increase in the national debt during his tenure as a percentage and in cash terms. In 2023-24 prices, the debt rose by almost 70 per cent or £589 billion while he was prime minister.
- Theresa May was the only prime minister who oversaw a decrease in the national debt since 1997-98, in percentage and cash terms. The debt fell by 3.1 per cent or £62 billion in 2023-24 prices while she was prime minister.
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[1] Office for Budget Responsibility, Autumn 2024 forecast date announced, 29 July 2024, obr.uk/autumn-2024-forecast-date-announced/#:~:text=The%20Chancellor%20has%20announced%20that,released%20on%20the%20same%20day, (accessed 23 August 2024).
[2] Ibid.
[3] Office for Bude Responsibility, Public finances databank – July 2024, obr.uk/download/public-finances-databank-july-2024/?tmstv=1724397374, (accessed 23 August 2024).
[4] TaxPayers’ Alliance, Briefing: what debt interest could pay for, 8 August 2024, www.taxpayersalliance.com/briefing_what_debt_interest_could_pay_for, (accessed 23 August 2024).