Data released on Friday revealed that the UK’s state debt is now equivalent to the country’s annual economic output, raising concerns as the new government prepares for its first budget. The Office for National Statistics reported that public sector net debt was provisionally estimated at 100 percent of gross domestic product (GDP) by the end of August, a level not seen since the early 1960s.
Prime Minister Keir Starmer, whose Labour party took office in early July, has warned that the upcoming budget announcement on October 30 will be “painful,” with anticipated tax increases and spending cuts. This sentiment was echoed by Finance Minister Rachel Reeves, who is set to present the government’s fiscal plans to Parliament next month.
The government has already faced backlash for its decision to abolish a winter fuel benefit scheme that supported 10 million pensioners. Starmer has defended this move as a necessary “tough choice” aimed at addressing a £22 billion ($29 billion) “black hole” in public finances, which Labour attributes to the previous Conservative administration.
Additionally, Friday’s data indicated that borrowing in August reached the highest level on record, outside of the pandemic period, according to Darren Jones, a senior official at the UK Treasury. He stated, “Debt is at 100 percent of GDP, the highest level since the 1960s. Given the £22 billion shortfall in public finances we have inherited this year, we are now making difficult decisions to stabilize our economy.”
Looking ahead, a government watchdog recently projected that UK state debt could nearly triple over the next 50 years due to factors such as an aging population and climate change. This forecast comes from the Office for Budget Responsibility, which the government relies on for growth and inflation predictions.
