London Daily

Focus on the big picture.
Friday, Apr 03, 2026

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
Trump’s Strategic Pressure on UK Seen as Push for Stronger Alignment and Fairer Terms
UK Focuses on Trade Finance to Secure Critical Materials for Defence and Energy Sectors
Majority of UK Businesses Hit by Middle East Conflict While Confidence Holds Firm
UK Royal Navy Faces Renewed Scrutiny as Debate Intensifies Over Capability and Readiness
Reform UK Faces Mounting Distractions as Policy Agenda Struggles to Gain Traction
Investigation Launched Into Northern Cyprus IVF Clinics After UK Families Receive Incorrect Sperm
International Meeting Issues Unified Call to Safeguard Navigation Through Strait of Hormuz
Potential Strait of Hormuz Closure Raises Concerns Over UK Food and Medicine Supply Chains
UK Leads Coalition of Over Forty Nations Urging Iran to Reopen Strait of Hormuz
UK Secures Tariff-Free Access for Medicines in Landmark US Pharma Trade Agreement
King Charles III Invited to Address Joint Session of U.S. Congress in Rare Diplomatic Honor
Debate Grows Over Whether Expanded North Sea Drilling Can Reduce UK Energy Bills
UK Faces Heightened Risk of Jet Fuel Shortages, Airline Chief Warns
UK Ends Police Investigations into Lawful Social Media Posts After Review Finds Overreach
Abramovich Moves to Establish Charity for Frozen Chelsea Sale Proceeds Amid UK Dispute
Starmer Reaffirms NATO Commitment While Responding to Trump’s Strategic Critique
UK Aid Reductions Raise Fears of Severe Human Impact Across Parts of Africa
UK Signals Renewed Push for EU Cooperation as Iran Conflict Reshapes Security Landscape
Bank of England Signals Caution as Bailey Advises Markets Against Expecting Rate Hikes
UK to Convene Global Coalition to Restore Shipping Through Strait of Hormuz
Trump Signals Possible NATO Reassessment, Emphasizes Stronger U.S. Strategic Autonomy
Australia Joins British-Led Efforts to Reopen Strait of Hormuz Amid Escalating Tensions
King Charles Plans US State Visit as UK Strengthens Ties with Trump Leadership
UK Regulator Launches Investigation Into Microsoft’s Business Software Practices
Kanye West Set for High-Profile Return to UK Stage at Wireless Festival
Trump Presses Europe to Strengthen Commitment as Iran Conflict Escalates
UK to Deploy Additional Troops to Middle East Amid Rising Regional Tensions
UK Authorities Face Claims of Heavy-Handed Measures in Monitoring Released Pro-Palestine Activists
Trump Calls on UK to Secure Its Own Energy as Iran Conflict Intensifies
Nigel Farage Declines Invitation to UK Conservative Conference Led by Liz Truss
Trump Warns Allies to Take Responsibility as Rift Deepens with UK and France Over Iran Conflict
How Britain’s Prime Minister Controls U.S. Bomber Access in Escalating Iran Conflict
Trump Urges Allies to Secure Their Own Oil Supplies as Hormuz Crisis Disrupts Global Energy
Russia Expels British Diplomat as UK Pushes Back Against Pressure
White House App Faces Scrutiny After Claims of Continuous User Location Tracking
BBC Faces Scrutiny Over Allegations of Paid Content Linked to Saudi Arabia
UK-France Coastal Patrol Agreement Nears Breakdown Amid Migration Pressures
UK Police Detain Pro-Palestine Activist Again Weeks After Bail Release
FTSE 100 Advances as Energy and Mining Shares Gain Amid Middle East Tensions
Eli Lilly Seeks UK Pricing Deal to Unlock Renewed Pharmaceutical Investment
Three Arrested in UK After Massive Cocaine Haul Discovered Hidden in Banana Shipment
UK Fuel Prices Poised for Further Surge Amid Global Energy Pressures
Apple Subsidiary Penalized by UK Authorities for Breach of Moscow Sanctions
Western Allies Intensify Coordinated Sanctions Strategy Against Russia
UK Lawmakers Face Criticism Over Renewed Push for Social Media Restrictions
Starmer Signals UK Crackdown on Addictive Social Media Features
Rising Costs Push One in Five UK Hospitality Businesses to the Brink of Closure
Man Arrested on Suspicion of Attempted Murder After Car Strikes Pedestrians in UK, Injuring Seven
Escalating Conflict Involving Iran Tightens Fiscal Pressures and Highlights UK Economic Vulnerabilities
UK Moves to Confront Russian ‘Shadow Fleet’ Operating in Its Waters
×