LONDON, Sept 20 (Askume) – British government debt has hit 100% of economic output for the first time in modern times and a huge budget deficit emerged last month, leaving Finance Minister Rachel Reeves facing a tough time with tax preparation and raising problems when it comes to spending.
Net public sector credit, excluding state-owned banks, rose to 100% of gross domestic product for the first time since monthly records began in 1993, up from 99.3% in July, the National Statistical Office said on Friday.
Bank of England records show the last time debt was at this level was in the early 1960s, when Britain was grappling with the financial fallout of World War II.
Government debt soared during the global financial crisis and again during the Covid-19 pandemic. Since then, its share in GDP has also increased due to weak economic growth.
The government borrowed 13.734 billion pounds ($18.29 billion) in August, up 3.3 billion pounds from August last year. The deficit is £12.4 billion, according to a Askume poll.
The data shows that social welfare expenditure and current expenditure increased, reflecting higher-than-normal inflation.
Reeves warned that his October 30 budget would increase taxes, but ruled out raising income tax, corporation tax, and value-added tax, leaving little scope for improving public services and boosting investment.
PwC economist Gora Suri said: “The August public finance data highlights the challenging fiscal situation ahead of the chancellor’s first Budget.”
The government has so far borrowed £64.1 billion in the first five months of the 2024/25 financial year, around £6 billion more than forecasts published by the Office for Budget Responsibility in March.
Deficit figures have been higher than the UK Budget Office expected in the past four months.
The Bank of England holds hundreds of billions of pounds of government debt. Excluding the Bank of England, debt as a share of the economy rose to 92% from 91.6% in July, a new high.
($1 = 0.7510 British pounds)
