Executive summary
- Debt will be serviced and paid back or rolled over in the future using tax receipts extracted overwhelmingly from the future’s GDP, not current GDP.
- Debt is often expressed as a share of GDP, to measure how affordable it is. But future GDP provides a better measure of the affordability of debt than measuring it against current GDP.
- Slower growth prospects make debt less affordable relative to when growth prospects are faster.
- Debt last surpassed the 2024-25 level of 93.9 per cent of GDP in 1963-64 when it was 94.7 per cent of GDP. But it was just 36.3 per cent of future GDP then, compared to this year’s figure of 67.3 per cent of future GDP.
- Debt in 2024-25 is £1.2 trillion larger than it would be if debt was as affordable as it was in 1963-64.
- Debt in 2024-25 is equivalent to 176 per cent of GDP by the 1963-64 standard of affordability against future GDP.
- Future GDP provides a useful, secondary measure of the affordability of public sector debt, which could aid public understanding of the issue. The government should therefore consult on how best to incorporate a measure of debt-to-future-GDP into its debt statistics.