The UK’s public debt has reached a significant milestone, with state debt now equivalent to the country’s annual output, according to data released by the Office for National Statistics (ONS) on Friday. The public sector net debt was provisionally estimated to be 100% of gross domestic product (GDP) by the end of August, a level last seen in the early 1960s.
Newly elected Prime Minister Keir Starmer, whose Labour Party took office in early July, has warned that the upcoming October 30 budget will involve “painful” measures, with anticipated tax increases and spending cuts. Finance Minister Rachel Reeves is set to deliver the fiscal plan, which aims to address the country’s financial challenges.
The Labour government is already under fire for its decision to scrap the winter fuel-benefit scheme, which was set to support 10 million pensioners. Starmer has defended the move, describing it as a “tough choice” necessary to address a £22 billion ($29 billion) deficit in public finances, which he attributed to the previous Conservative administration.
The ONS report also revealed record borrowing levels for August, excluding the pandemic period. Darren Jones, a senior official at the UK Treasury, emphasized the gravity of the situation: “Debt is 100 percent of GDP, the highest level since the 1960s. Because of the £22 billion black hole in our public finances, we are now taking the tough decisions to fix the foundations of our economy.”
Looking further ahead, a recent projection from the Office for Budget Responsibility (OBR), the government’s economic watchdog, warned that UK state debt could almost triple over the next 50 years due to the pressures of an ageing population and climate change.
With Britons facing difficult economic choices, the government’s budget announcement at the end of October is expected to outline the path forward for stabilizing the country’s finances.
