Britain's National Debt: A Growing Concern

Strategic Insights -

Britain's national debt has reached alarming levels, exceeding 90% of GDP, with France, Japan, Canada, Italy, and the US also facing high debt-to-GDP ratios. The UK's borrowing costs are the highest among the G7 nations, driven by the government's inability to rein in spending and tackle its "infation outlier" status. The Labour government's fiscal policies have exacerbated the issue, with tax rises and increased public sector borrowing contributing to the country's financial woes.

Key Takeaways:

  • Britain's national debt is over 90% of GDP, with a total borrowing of £20.6 billion in September, the highest level since 2020.
  • The UK's borrowing costs are the highest among the G7 nations, with £120 billion spent on debt interest in the current financial year.
  • The government's "infation outlier" status has led to higher borrowing costs, with inflation rising 3.8% in the year to September.
  • The UK carries a uniquely high share of "index-linked" state debt, which requires more borrowing as inflation increases.
  • About 30% of outstanding UK gilts are "linkers," compared to a G7 average below 10%.
  • The state is also on the hook for liabilities within the Bank of England's asset purchase scheme, PFI debts, and public sector pensions, which take state liabilities up to an estimated 161% of GDP.

Statistics:

  • Britain's national debt: 98% of GDP
  • Total borrowing in September: £20.6 billion (highest level since 2020)
  • Borrowing costs: £120 billion in the current financial year
  • Inflation: 3.8% in the year to September
  • Average G7 inflation: 2.5% last month
  • Share of index-linked debt: 30% of all UK gilts (compared to a G7 average below 10%)
  • State liabilities: estimated 161% of GDP (including liabilities within the Bank of England's asset purchase scheme, PFI debts, and public sector pensions)

Sources:

  • Liam Halligan Economic Agenda (no date)
  • Alan Vallance, chief executive of the Institute of Chartered Accountants (no date)
  • Stuart Machin, Marks & Spencer chief (no date)
  • Bob Lyddon, financial economist at the Institute of Economic and Fiscal Research (no date)
  • Ofce for Budget Responsibility (OBR) (no date)
  • Marks & Spencer (no date)