In July 2023 the UK government’s public sector net borrowing fell to £2.5 billion. That’s a big improvement from July 2022. This is £2.3 billion less than in July 2022 when borrowing was £1.1 billion. All of these are signs of improving fiscal stewardship. The growing national debt is an issue that often worries economists and policymakers the most.
In the last complete financial year, ending in March 2025, the UK government ran a deficit of £148.3 billion—meaning they borrowed that money. Government borrowing has ballooned to nearly £2.9 trillion. This figure is more than double what we experienced from the late 1980s through the 2008 financial crash. Combined with effects from the financial crash and the COVID-19 pandemic, this has been a perfect storm resulting in a massive increase in debt. Both of these events put huge stress on the public purse.
Interest payments on this burgeoning debt have experienced volatility. As of July 2025, they amounted to £7.1 billion constituting an increase of £0.2 billion from the same period last year. In June 2024, interest payments reached an all-time high of £3.4 billion. Within a year, they had crashed to just £1.1 billion. These kinds of shifts are a testament to the difficulties of steering a national budget in an unpredictable world with rapidly shifting economic conditions.
Government bonds backed by the British state—called “gilts”—represent a safe haven in which to park one’s assets. Investors generally perceive them as being risk-free for default. And pension funds, investment funds, banks, and insurance companies are eager buyers of these gilts. This is the case for other financial institutions in the UK and overseas. Yet their perceived safety significantly shapes borrowing decisions, as well as their interest rates.
Monthly shifts in the government’s borrowing practices can zero out government borrowing practices at a dramatic PR level. The overall trend is one that encourages prudent management. The cost associated with servicing this debt became increasingly evident following interest rate hikes initiated by the Bank of England in 2021. Despite these challenges, government debt figures remain relatively low compared to much of the last century when assessed against the size of the economy.
The current level of government debt is equal to the value of everything produced in the UK in a year. This measure is known as the Gross Domestic Product (GDP). This alignment should remind us all of the incredible burden that government borrowing continues placing on our economy.
To Chancellor Rachel Reeves’ credit she has launched an effort to change the measurement of debt so as to allow more funding for investment. This was a needed strategic shift to better align financial responsibility with a focus on supporting economic development opportunities.
“There is no doubt about the government’s commitment to economic stability.” – Downing Street