UK’s debt hits landmark, equates annual nation’s output – Report

UK state debt is equivalent to the country’s annual output, data showed Friday, as the new government warns of tough decisions on tax and spending ahead of its maiden budget.

“Public sector net debt… was provisionally estimated at 100 percent of gross domestic product at the end of August,” the Office for National Statistics said in a release.

This matched a level last seen in the early 1960s, the ONS added.

Prime Minister Keir Starmer, whose Labour party was elected in early July, has warned Britons that the budget announcement on October 30 will be “painful”, with tax rises and spending cuts expected.

This warning has been echoed by finance minister Rachel Reeves, who will deliver the country’s fiscal plans to parliament at the end of next month.

The government is already facing criticism from all sides over scrapping a winter fuel-benefit scheme for 10 million pensioners.

Starmer has repeatedly defended the move as a necessary “tough choice” to help fill a £22-billion ($29 billion) “black hole” in public finances which Labour claimed was left behind by the previous Conservative administration.

Friday’s data also showed “the highest August borrowing on record, outside the (Covid) pandemic”, Darren Jones, a senior official at the UK Treasury, said in a statement.

“Debt is 100 percent of GDP, the highest level since the 1960s. Because of the £22 billion black hole in our public finances we have inherited this year alone, we are now taking the tough decisions now to fix the foundations of our economy,” he added.

Looking much further ahead, a government watchdog last week forecast that UK state debt could almost treble over the next 50 years owing to an ageing population and climate change.

The projection came from the Office for Budget Responsibility, which the government relies on for UK growth and inflation predictions.

Vanguard