London Daily

Focus on the big picture.
Saturday, Sep 05, 2026

How much money is the UK government borrowing, and does it matter?

How much money is the UK government borrowing, and does it matter?

The government is spending more on public services than it raises in tax.

To bridge this gap it borrows money, but this is paid back - with interest.


Why does the government borrow money?


The government gets most of its income from taxes. For example, workers pay income tax, everyone pays VAT on certain goods and companies pay tax on their profits.

It could, in theory, cover all of its spending from taxes, and in some years that happens.

But if it can't, it needs to either raise taxes, cut spending or borrow.

Higher taxes mean people have less money to spend, so businesses make less profit, which can be bad for jobs and wages. Lower profits also mean companies pay less tax.

So, governments often borrow to boost the economy. They also borrow to pay for big projects - such as new railways and roads - which it also hopes will help the economy.

Governments borrow to fund "day-to-day" spending, as well as long-term infrastructure projects like Crossrail


How does the government borrow money?


The government borrows money by selling financial products called bonds.

A bond is a promise to pay money in the future. Most require the borrower to make regular interest payments over the bond's lifetime.

UK government bonds - known as "gilts" - are normally considered very safe, with little risk the money will not be repaid.

Gilts are mainly bought by financial institutions in the UK and abroad, such as pension funds, investment funds, banks and insurance companies.

The Bank of England has also bought hundreds of billions of pounds' worth of government bonds in the past to support the economy, through a process called "quantitative easing".


How much is the UK government borrowing?


The amount the government borrows varies from month to month.

When people submit tax returns In January, often paying a large chunk of their annual tax bill in one go, the government sees a jump in the amount of money it takes in.

So it is more helpful to look at the whole year, or the year-to-date.

In the 2022-23 financial year, the government borrowed £139.2bn. That was up by about 15% from last year.

The total amount the government owes is called the national debt. It is currently just over £2.5 trillion.

That is roughly the same as the value of all the goods and services produced in the UK in a year, known as the gross domestic product, or GDP.

That current level is more than double what was seen from the 1980s through to the financial crisis of 2008.


The combination of the financial crash and the Covid pandemic pushed the UK's debt up from those historic lows to its current level.

But in relation to the size of the economy, today's debt is still low compared with much of the last century, as shown above, and also compared with many leading advanced economies.


Why does it matter if governments borrow more?


The larger the national debt gets, the more interest the government has to pay.

That extra cost was not as big when the interest rates due were low through the 2010s. But it is more noticeable now that interest rates have risen.

Two months in 2022 saw record levels of money set aside for debt interest: £20bn in June and £18bn in December.


During the last financial year, the government put aside £106.6bn on debt interest - more than it spends on education.

Some economists fear the government is borrowing too much, at too great a cost.

Others argue extra borrowing helps the economy grow faster - generating more tax revenue in the long run.


What is the government's plan for debt?


Most economists and politicians agree that debt cannot keep growing compared to the size of the economy forever, because at some point it becomes impossible to pay the interest.

But there is debate about whether or how fast to cut borrowing.

Growing the economy is another way to bring down the main measure of the total national debt: its size compared to GDP.

Governments often increase borrowing when they face unusually difficult situations, such as the coronavirus pandemic, or the current cost-of-living crisis.

Chancellor Jeremy Hunt has blamed the "twin global emergencies of a pandemic and Putin's war in Ukraine" for driving up government costs.

He has said it is "vital [that] we stick to our plan to reduce debt over the medium term".

Prime Minister Rishi Sunak also made reducing the national debt one of his five key promises.


What is the difference between the government deficit and debt?


The deficit is the gap between the government's income and the amount it spends.

When a government spends less than its income, it has what is known as a surplus.

Debt is the total amount of money owed by the government that has built up over years.

It rises when there is a deficit, and falls in those years when there is a surplus.

Newsletter

Related Articles

0:00
0:00
Close
UK Urges Households to Keep Emergency Supplies Amid Severe El Niño Warning
Prime Minister Andy Burnham Sets Out Regional Industry and Prison Reform Agenda
Siemens Energy Wins Rolls-Royce Small Modular Reactor Manufacturing Contract
UK Mortgage Costs Rise as Gilt Yields and Swap Rates Climb
Bank of England’s Huw Pill Calls for Prompt Rate Rise as Inflation Risks Persist
National Audit Office Warns UK Is Unprepared for Major Food Supply Disruptions
British Army Suspends Some Training Exercises as Budget Pressures Intensify
HMS Queen Elizabeth Deploys as NATO Allied Response Force Command Ship
Reform UK Suspends Two Senior Officials Over Alleged Foreign Donation Scheme
UK Reasserts Falkland Islands Sovereignty After Argentina Threatens Sanctions
Scottish Tech Company PureLifi Enters Administration With More Than 40 Job Losses
Scottish Government Names Alyn Smith Innovation and Education Minister
Green Party Co-Leader Zack Polanski to Contest By-Election for Keir Starmer’s Former Seat
Palestine Action Activists Appeal Terrorism-Related Prison Sentences
PwC Report Highlights Persistent Regional Spending-Power Divide Across Britain
UK Names Hundreds of Employers for Minimum Wage Violations
UK Commits £400 Million to International Tropical Forest Fund
UK Extends £2 Bus Fare Cap Across England Through 2027
UK Warns Travellers as US-Iran Tensions Disrupt Middle East Security and Shipping
Andy Burnham Faces Kemi Badenoch in First Prime Minister’s Questions
Kemi Badenoch Names Andrew Griffith Shadow Chancellor in Conservative Reshuffle
UK Treasury and Markets Focus on Fiscal Headroom Ahead of Autumn Budget
UK Government Reverses Early Release Plans for Serious Violent and Sexual Offences
UK and France Review Border Cooperation After 48,000 Small-Boat Crossings Prevented
UK Growth Outlook Weakens as Inflation and Energy Costs Rise
Breeding Tropical Mosquitoes Discovered in East London
Sadiq Khan Agrees to Search of Digital Communications in Palantir Lawsuit
Scottish Protesters Call for Moratorium on AI Data Centre Expansion
Uber Drivers Bring London Class Action Over Algorithmic Management
Reform UK Accepts £4 Million Donation From Cryptocurrency Billionaire Pardoned by Trump
Justice Secretary Tightens Early Release Scheme to Exclude Manslaughter Offenders
Kemi Badenoch Reshuffles Conservative Team as Reform UK Pressure Grows
British Mortgage Rates Rise as Global Bond Sell-Off Pushes Up Borrowing Costs
UK Records Hottest Summer on Record in 2026
UK Government Urges Households to Stock Essential Supplies Ahead of Severe El Niño Risk
UK Prepares Targeted Sanctions Over Israeli Settlements in West Bank
Reform UK Faces Electoral and Police Scrutiny Over Foreign Donation Allegations
UK and France Expand Channel Migration Cooperation as Trade Tensions Surface
UK Marks Merchant Navy Day With Tribute to Civilian Seafarers
Burnham Pays Tribute to Two Police Officers Killed on Duty in Northern England
Booking.com Left Fake Downing Street Listing Online for Two Months, Which Says
Burnham and Macron to Review UK-France Cooperation on Channel Crossings
UK Business Confidence Improves Slightly but Investment Concerns Persist
Burnham Faces Pressure Over Future North Sea Oil and Gas Licences
Burnham Pushes Wider English Devolution Through ‘Number Ten North’
British Chambers of Commerce Raises 2026 UK Growth Forecast to 1%
Keir Starmer Resigns as Holborn and St Pancras MP, Triggering By-Election
UK Chancellor Faces Tighter Budget Headroom as Long-Term Borrowing Costs Rise
UK Government Weighs Thames Water Nationalisation as Financial Crisis Deepens
Prime Minister Andy Burnham Faces First Commons Questions Over Tax and Spending Plans
×