The chancellor has unveiled his budget for the upcoming financial year. Alongside spending and taxation changes, figures have been released from the Office for Budget Responsibility showing the size of the national debt which is forecast to rise to almost £2.8 trillion next year.[1] This figure alone is more than the UK’s gross domestic product (GDP) is forecast to be in 2024-25, yet this is only part of the picture with regard to the UK’s debt.
A fuller picture of the UK government’s liabilities should be regularly reported: the real national debt. This includes areas of future spending which are not officially recognised in the whole of government accounts or the monthly public sector finance bulletins published by the Office for National Statistics (ONS). The basic state pension and many public sector workers’ pensions are not formally counted as a liability, since they are only reported to match the period of entitlement.[2] Yet combined these are likely to reach £9.1 trillion in the next financial year.
In recent years, the cost of servicing government debt has become more challenging amid increased spending because of external shocks and political choices as well as inflation and interest rates rising sharply. Almost a third of conventional gilts have a rate of four per cent or more,[3] and debt interest in 2022-23 alone cost £112.1 billion,[4] – almost as much as the entire amount spent on education by the UK in 2022-23.[5] Given the size of the liabilities, they present a challenge to the long-term stability of the public finances. A plan for prudent management of all liabilities – not just public sector net debt – must be an urgent priority for the government to ensure public funds are primarily spent on services, not debt interest.
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Key findings
- In 2024-25 the real national debt will be £12.1 trillion. This is more than the economic output of Africa, Central America, Canada, Australia and New Zealand combined, which total £11.8 trillion.[6],[7],[8]
- The real national debt, in 2024-25, is equivalent to more than four times the size of the UK economy or 434 per cent of forecast nominal GDP.
- On a per household basis, the real national debt will equate to £430,332 in 2024-25. On a per person basis, it is £180,534.
- The weight of the number of one pound coins equivalent to the real national debt would be almost 18 times more than that of the Great Pyramid of Giza.[9],[10]
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[1] Office for Budget Responsibility, Public finances databank –March 2024, 6 March 2024, obr.uk/download/public-finances-databank-march-2024/?tmstv=1709732995, (accessed 6 March 2024).
[2] HM Treasury, Whole of Government Accounts year ended 31 March 2021, July 2023, p. 15.
[3] United Kingdom Debt Management Office, Gilts in Issue, www.dmo.gov.uk/data/pdfdatareport?reportCode=D1A, (accessed 29 January 2024).
[4] Office for Budget Responsibility, Public finances databank –March 2024, 6 March 2024, obr.uk/download/public-finances-databank-march-2024/?tmstv=1709732995, (accessed 6 March 2024).
[5] Drayton, E, et al., Annual report on education spending in England: 2023, Institute for Fiscal Studies, December 2023, p. 12.
[6] International Monetary Fund, GDP, current prices: Purchasing power parity; billions of international dollars, 2024, www.imf.org/external/datamapper/PPPGDP@WEO/OEMDC/ADVEC/WEOWORLD/CHN/AFQ/AZQ, (accessed 11 January 2024).
[7] Bank of England, Daily spot exchange rates against Sterling, www.bankofengland.co.uk/boeapps/database/Rates.asp?Travel=NIxAZx&into=GBP, (accessed 11 January 2024).
[8] The daily spot exchange rate against the US dollar for sterling was 0.7852 on 10 January 2024.
[9] The Royal Mint, The £1 Coin, 28 March 2017, www.royalmint.com/discover/uk-coins/coin-design-and-specifications/one-pound-coin/, (accessed 8 February 2024).
[10] Cassel, D., The Ultimate Logistics Problem: Building the Great Pyramid of Giza, The New Stack, 8 October 2017, thenewstack.io/ultimate-logistics-problem-building-great-pyramid/, (accessed 8 February 2024).