London Daily

Focus on the big picture.
Thursday, Dec 04, 2025

UK government spending on virus measures pushes debt to £2 trillion

UK government spending on virus measures pushes debt to £2 trillion

UK government debt has risen above £2 trillion for the first time amid heavy spending to support the economy amid the coronavirus pandemic.

Spending on measures such as the furlough scheme means the debt figure now equals the value of everything the UK produces in a year.

Total debt hit £2.004tn in July, £227.6bn more than last year, said the Office for National Statistics (ONS).

Economists warned the situation would worsen before improving.

It is the first time debt has been above 100% of gross domestic product (GDP) since the 1960-61 financial year, the ONS said.



The July borrowing figure - the difference between spending and tax income - was £26.7bn, down from a revised £29.5bn in June.

It was the fourth highest borrowing in any month since records began in 1993. The three higher figures were the previous three months.

Those are big figures. What do they mean?


Ruth Gregory, senior UK economist at Capital Economics, said July's borrowing figure was "another huge sum and pushes borrowing in the year to date to £150.5bn".

"That is close to the deficit for the whole of 2009-10 of £158.3bn, which was previously the largest cash deficit in history, reflecting the extraordinary fiscal support the government has put in place to see the economy through the crisis."



Chancellor Rishi Sunak said: "This crisis has put the public finances under significant strain as we have seen a hit to our economy and taken action to support millions of jobs, businesses and livelihoods.

"Without that support, things would have been far worse.

"Today's figures are a stark reminder that we must return our public finances to a sustainable footing over time, which will require taking difficult decisions."

How did it get to this?



£2 trillion is, obviously, a large amount of money. But in the circumstances, it was inevitable that government debt would cross that threshold.

Tax revenue has been hit hard by the pandemic as people and businesses earn and spend less. Government spending on programmes such as the furlough scheme has headed upwards. So the total amount owed has also increased, rapidly.

But the government's borrowing costs - the interest rates it has to pay - are low. And some of the extra borrowing in effect ends up with the Bank of England, which has been buying government debt (known as gilts) in the financial markets under its quantitative easing (QE) programme.

QE is not specifically intended to ease the government's financial strains - it's meant to stimulate the economy - but it does have that effect.

In relation to annual national income, debt has crossed the 100% level. There's no doubt the government would rather that had not happened.

But by that measure, government debt is still far short of the highs it reached in the aftermath of wars - the two world wars and the Napoleonic wars more than 200 years ago.

Is it surprising?


Carl Emmerson, deputy director of the Institute for Fiscal Studies, told the BBC's Today programme it was "not really a surprise" that the government was borrowing a lot of money, given the size of its efforts to support people hit by the pandemic.

However, he added that interest rates were so low that the government was actually spending less on servicing its debts than had been forecast before the coronavirus crisis.

The ONS cautioned that borrowing estimates were subject to "greater than usual uncertainty".

It said the June figure had been revised down by £6bn, largely because of stronger than previously estimated tax receipts and National Insurance contributions.

Should we be worried?


Analysts reckon there is worse to come, but that things will get better after that.

However, the sheer size of the debt means that the Treasury will be wary of doing anything that might make it any worse - and that means there may be less economic support for ordinary people in future.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, noted that borrowing remained on course this year to hit its highest share of GDP since World War Two.

"Looking ahead, borrowing looks set to jump temporarily in August, as the government makes the second and last Self-Employment Income Support Scheme payment and funds the Eat Out to Help Out scheme," he said.

"Thereafter, it will decline, as the Coronavirus Job Retention Scheme, which cost £6.9bn to operate in July, is wound down ahead of its closure at the end of October, and firms make a huge VAT payment in March, for sales generated in Q2, as well as in that month."

However, he added that with borrowing for this financial year expected to be about 17% of GDP, the chancellor was likely to be "relatively cautious" in his autumn Budget.

Newsletter

Related Articles

0:00
0:00
Close
UK Inquiry Finds Putin ‘Morally Responsible’ for 2018 Novichok Death — London Imposes Broad Sanctions on GRU
India backs down on plan to mandate government “Sanchar Saathi” app on all smartphones
King Charles Welcomes German President Steinmeier to UK in First State Visit by Berlin in 27 Years
UK Plans Major Cutback to Jury Trials as Crown Court Backlog Nears 80,000
UK Government to Significantly Limit Jury Trials in England and Wales
U.S. and U.K. Seal Drug-Pricing Deal: Britain Agrees to Pay More, U.S. Lifts Tariffs
UK Postpones Decision Yet Again on China’s Proposed Mega-Embassy in London
Head of UK Budget Watchdog Resigns After Premature Leak of Reeves’ Budget Report
Car-sharing giant Zipcar to exit UK market by end of 2025
Reports of Widespread Drone Deployment Raise Privacy and Security Questions in the UK
UK Signals Security Concerns Over China While Pursuing Stronger Trade Links
Google warns of AI “irrationality” just as Gemini 3 launch rattles markets
Top Consultancies Freeze Starting Salaries as AI Threatens ‘Pyramid’ Model
Macron Says Washington Pressuring EU to Delay Enforcement of Digital-Regulation Probes Against Meta, TikTok and X
UK’s DragonFire Laser Downs High-Speed Drones as £316m Deal Speeds Naval Deployment
UK Chancellor Rejects Claims She Misled Public on Fiscal Outlook Ahead of Budget
Starmer Defends Autumn Budget as Finance Chief Faces Accusations of Misleading Public Finances
EU Firms Struggle with 3,000-Hour Paperwork Load — While Automakers Fear De Facto 2030 Petrol Car Ban
White House launches ‘Hall of Shame’ site to publicly condemn media outlets for alleged bias
UK Budget’s New EV Mileage Tax Undercuts Case for Plug-In Hybrids
UK Government Launches National Inquiry into ‘Grooming Gangs’ After US Warning and Rising Public Outcry
Taylor Swift Extends U.K. Chart Reign as ‘The Fate of Ophelia’ Hits Six Weeks at No. 1
250 Still Missing in the Massive Fire, 94 Killed. One Day After the Disaster: Survivor Rescued on the 16th Floor
Trump: National Guard Soldier Who Was Shot in Washington Has Died; Second Soldier Fighting for His Life
UK Chancellor Reeves Defends Tax Rises as Essential to Reduce Child Poverty and Stabilise Public Finances
No Evidence Found for Claim That UK Schools Are Shifting to Teaching American English
European Powers Urge Israel to Halt West Bank Settler Violence Amid Surge in Attacks
"I Would Have Given Her a Kidney": She Lent Bezos’s Ex-Wife $1,000 — and Received Millions in Return
European States Approve First-ever Military-Grade Surveillance Network via ESA
UK to Slash Key Pension Tax Perk, Targeting High Earners Under New Budget
UK Government Announces £150 Annual Cut to Household Energy Bills Through Levy Reforms
UK Court Hears Challenge to Ban on Palestine Action as Critics Decry Heavy-Handed Measures
Investors Rush Into UK Gilts and Sterling After Budget Eases Fiscal Concerns
UK to Raise Online Betting Taxes by £1.1 Billion Under New Budget — Firms Warn of Fallout
Lamine Yamal? The ‘Heir to Messi’ Lost to Barcelona — and the Kingdom Is in a Frenzy
Warner Music Group Drops Suit Against Suno, Launches Licensed AI-Music Deal
HP to Cut up to 6,000 Jobs Globally as It Ramps Up AI Integration
MediaWorld Sold iPad Air for €15 — Then Asked Customers to Return Them or Pay More
UK Prime Minister Sir Keir Starmer Promises ‘Full-Time’ Education for All Children as School Attendance Slips
UK Extends Sugar Tax to Sweetened Milkshakes and Lattes in 2028 Health Push
UK Government Backs £49 Billion Plan for Heathrow Third Runway and Expansion
UK Gambling Firms Report £1bn Surge in Annual Profits as Pressure Mounts for Higher Betting Taxes
UK Shares Advance Ahead of Budget as Financials and Consumer Staples Lead Gains
Domino’s UK CEO Andrew Rennie Steps Down Amid Strategic Reset
UK Economy Stalls as Reeves Faces First Budget Test
UK Economy’s Weak Start Adds Pressure on Prime Minister Starmer
UK Government Acknowledges Billionaire Exodus Amid Tax Rise Concerns
UK Budget 2025: Markets Brace as Chancellor Faces Fiscal Tightrope
UK Unveils Strategic Plan to Secure Critical Mineral Supply Chains
UK Taskforce Calls for Radical Reset of Nuclear Regulation to Cut Costs and Accelerate Build
×