The United Kingdom national debt is the total quantity of money borrowed by the Government of the United Kingdom at any time through the issue of securities by the British Treasury and other government agencies.
At the end of March 2023, UK General government gross debt was £2,537.0 billion, or 100.5% gross domestic product.
Approximately a third of the UK National Debt is owned by the British government due to the Bank of England's quantitative easing programme, so approximately a third of the cost of servicing the debt is paid by the government to itself. In 2018, this reduced the annual servicing cost to approximately £30 billion (approx 2% of GDP, approx 5% of UK government tax income).
In 2017, due to the Government's budget deficit (PSNCR), the national debt increased by £46 billion. The Cameron–Clegg coalition government in 2010 planned that they would eliminate the deficit by the 2015/16 financial year. However, by 2014 they admitted that the structural deficit would not be eliminated until the financial year 2017/18. This forecast was pushed back to 2018/19 in March 2015, and to 2019/20 in July 2015, before the target of a return to surplus at any particular time was finally abandoned by the then Chancellor of the Exchequer George Osborne in July 2016.
Definition
The UK national debt is the total quantity of money borrowed by the Government of the United Kingdom at any time through the issue of securities by the British Treasury and other government agencies.
Debt versus deficit
The UK national debt is often confused with the government budget deficit (officially known as the Public Sector Net Cash Requirement (PSNCR)). For example, the then Prime Minister David Cameron was reprimanded in February 2013 by the UK Statistics Authority for creating confusion between the two, by stating in a political broadcast that his administration was "paying down Britain's debts". In fact, his administration had been attempting to reduce the deficit, not the overall debt; which continued to rise even as the deficit was reduced.
UK budget
The public debt increases or decreases as a result of the annual budget deficit or surplus. The British government budget deficit or surplus is the cash difference between government receipts and spending. The British government debt is rising due to a gap between revenue and expenditure. Total government revenue in the fiscal year 2015/16 was projected to be £673 billion, whereas total expenditure was estimated at £742 billion. Therefore, the total deficit was £69 billion. This represented a rate of borrowing of a little over £1.3 billion per week.
Gilts
The British government finances its debt by issuing gilts, or Government securities. These securities are the simplest form of government bond and make up the largest share of British government debt. A conventional gilt is a bond issued by the British government that pays the holder a fixed cash payment (or coupon) every six months until maturity, at which point the holder receives the final coupon payment and the return of the principal.
Cost of servicing the debt
Distinct from both the national debt and the PSNCR is the interest that the government must pay to service the existing national debt. In 2012, the annual cost of servicing the public debt amounted to around £43bn, or roughly 3% of GDP.
In 2012, the British population numbered around 64 million, and the debt therefore amounted to a little over £15,000 for each individual Briton, or around £33,000 per person in employment. Each household in Britain pays an average of around £2,000 per year in taxes to finance the interest.
By international standards, Britain enjoys very low borrowing costs.
Credit rating
Like other sovereign debt, the British national debt is rated by various ratings agencies. On 23 February 2013, it was reported that Moody's had downgraded UK debt from Aaa to Aa1, the first time since 1978 that the country has not had an AAA credit rating.
This was described as a "humiliating blow" by Shadow Chancellor Ed Balls. George Osborne, the Chancellor, said that it was "a stark reminder of the debt problems facing our country", adding that "we will go on delivering the plan that has cut the deficit by a quarter". France and the United States of America had each lost their AAA credit status in 2012.
The agency Fitch also downgraded its credit rating for British government debt from AAA to AA+ in April 2013.