The UK government is making a significant change in how it tracks its financial commitments, transitioning to a broader measure known as public sector net financial liabilities (PSNFL). This comes as the current level of government debt reaches an unprecedented £2.8 trillion, a figure that has more than doubled since the 1980s and the financial crisis of 2008.
As the government continues to spend beyond its means, borrowing figures fluctuate monthly. For the last full financial year ending in March 2024, the government borrowed a staggering £125.1 billion. The latest monthly data reveals that in November 2024 alone, borrowing totaled £11.2 billion. This amount reflects a decrease of £3.4 billion compared to the same month the previous year, marking it the lowest November borrowing figure in five years.
Since March 2024, the cumulative borrowing has reached £113.2 billion, making it the third-highest total for any financial year up to November since records began in 1993. The government's ongoing borrowing trends raise concerns about its fiscal health, especially since the total debt is now roughly equivalent to the UK's gross domestic product (GDP).
Gilts, or UK government bonds, are generally viewed as safe investments with minimal risk of default. These bonds are primarily purchased by financial institutions such as pension funds, investment funds, banks, and insurance companies. However, recent increases in long-term interest rates have led some economists to express caution regarding the government's ability to meet its borrowing targets.
In light of these changes, Downing Street reiterated its commitment to maintaining economic stability. "There is no doubt about the government's commitment to economic stability," a spokesperson stated, adding that "meeting our fiscal rules is non-negotiable."
Despite these assurances, the fluctuation in borrowing patterns indicates a growing challenge for the government. The recent interest rate of 5.25% on 30-year gilts adds further complexity to the fiscal landscape, potentially affecting future borrowing costs and strategies.
The Office for Budget Responsibility (OBR) is set to present its latest economic forecast to Parliament in late March, which will provide further insight into the government's financial outlook and its strategies for managing public debt.
Overall, as the UK government adjusts its approach to measuring debt and navigates a fluctuating borrowing environment, it faces tough decisions ahead to ensure economic stability while managing an ever-increasing financial burden.