London Daily

Focus on the big picture.
Tuesday, Oct 27, 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
Education or Indoctrination? The Growing Debate Over Religious Participation in British Schools
Germany's Vanishing Shopfronts: The Silent Collapse of the Businesses That Built Its Cities
Transport for London Unveils Expanded Zero-Emission Bus Fleet to Meet Capital Air Quality Targets
Higher Education Institutions Face Deepening Financial Strain Amid Declining International Student Enrolment
Automotive Industry Leaders Criticize Government Tax Policies and Urge Action on Retail Consumer Confidence
Environment Agency Issues Flood Alerts Across Scottish and English Waterways Following Heavy Rainfall
Independent Audit Highlights Persistent Security Vulnerabilities Across Legacy Government Digital Portals
Northern Ireland Political Leaders Clash Over Westminster Funding Allocations Ahead of Autumn Budget
Ethnic Minorities in England Face Significant Disparities in Routine Breast Cancer Diagnosis Rates
National Police Chiefs Report Alarming Surge in Domestic Abuse Cases Fuelled by Expanding Illegal Cocaine Market
Government Announces Two Hundred and Twenty Million Pound Pothole Funding Boost for Local Highway Authorities
China Issues Formal Warning Over Potential United Kingdom Restrictions on Chinese Electric Vehicles
British Defence Ministers Sign E5 Pact to Enhance European Military Capabilities and Industrial Cooperation Within NATO
United Kingdom Business Activity Expands at Fastest Pace in Eight Months According to S&P Global Flash Survey
Chancellor John Healey Prepares Major Devolution Package and Bank Profit Surcharge Ahead of Upcoming Autumn Budget
National Health Service Consultants in England Announce Two-Day Strike Action Scheduled for November
Major Clean-Up Under Way Across Britain Following Destruction Caused by Consecutive Storms Austen and Boelo
KEY TRENDS TO WATCH
Declassified Intelligence Files Reveal British Security Services Monitored National Health Service Founder
British Government Launches Sweeping Regulatory Crackdown on High-Risk Cosmetic Procedures
Scottish National Party Demands Ban on Using Scottish Revenues to Fund English Nuclear Energy Projects
Mayor of London Initiates Landmark Pedestrianisation of Oxford Street to Revitalise Global Retail Hub
British Judges Granted Expanded Legal Powers to Punish Convicted Killers Who Refuse to Attend Sentencing
United Kingdom Poised to Miss Reduced International Aid Spending Targets Ahead of Fiscal Review
Surging Cocaine Consumption Drives Record Drug Fatalities and Rising Crime Rates Across Britain
Department of Health and Social Care Announces One Hundred and Forty Million Pound Boost for Urgent Care
British Services Sector Records Strongest Growth in Eight Months Despite Broader Economic Uncertainty
United Kingdom Retail Sales Suffer Unexpected Decline as Consumer Confidence Plummets
Greater Manchester Mayor Andy Burnham Urges National Debate on Restoring European Union Free Movement
Deep Cabinet Divisions Emerge Over Controversial Approval of North Sea Fossil Fuel Projects
United Kingdom Government Urges Citizens to Stockpile Essential Supplies in National Resilience Pivot
Storm Boelo Kills Two People and Cuts Power to Tens of Thousands Across Great Britain
Critical Software Flaw Forces Dozens of United Kingdom Government Services Offline Amid Mass Security Warnings
UK Consumer Confidence Tumbles Amid Rising Energy Costs and Global Commodity Price Pressures
North Sea Transition Authority Approves Production from Jackdaw Gas Field to Bolster Domestic Energy Security
Storm Boelo Leaves Tens of Thousands of Households Without Power Across Scotland and Northern Ireland
UK Government Launches National Be Ready Campaign Urging Households to Prepare Three Days of Emergency Supplies
Department for Environment Food and Rural Affairs Implements Stricter Water Quality Regulations for British Rivers
Welsh Government Launches Major Renewable Energy Initiative to Expand Offshore Wind Capacity Along the Coast
Northern Ireland Executive Reaches Final Agreement on Comprehensive Regional Infrastructure Modernization Plan
Office for National Statistics Reports Moderate Increase in British Retail Sales Driven by Autumn Discounts
Scottish First Minister Announces Emergency Housing Strategy to Tackle Severe Homelessness Across Urban Centers
Automotive Industry Leaders in the United Kingdom Urge Government Support for Electric Vehicle Manufacturing Transition
United Kingdom and European Union Initiate High-Level Negotiations on Post-Brexit Defense and Security Pact
National Health Service England Introduces Sweeping Digital Reforms to Reduce Hospital Waiting Lists Nationwide
Chancellor of the Exchequer Outlines Emergency Fiscal Measures to Address Local Government Funding Crises Across England
Bank of England Governor Warns of Persistent Inflation Pressures Impacting Interest Rate Decisions in the United Kingdom
UK Conservative Party Suspends Former Electoral Candidate Following Undercover Investigation
Actors and Writers Condemn British Anti Terror Legislation Targeting Activist Groups and Free Speech
Central Bank and Treasury Monitor Inflation Risks as International Monetary Fund Upgrades United Kingdom Growth Forecast
×