The United Kingdom’s state debt is equal to the country’s annual GDP, as the new administration warns of tough tax and spending decisions ahead of its first budget.
According to the Office for National Statistics, public sector net debt was provisionally assessed to be 100% of GDP as of the end of August. According to the ONS, this level is comparable to that of the early 1960s.
Prime Minister Keir Starmer, whose Labour Party was elected in early July, has warned Britons that the October 30 budget statement will be “painful,” with tax increases and spending cuts planned.
This warning was reiterated by Finance Minister Rachel Reeves, who will present the country’s budgetary plans to parliament at the end of next month.
The government is already under widespread criticism for canceling a winter fuel-benefit scheme for 10 million retirees.
Starmer has consistently defended the move as a necessary “tough choice” to help fill a “black hole” in public finances estimated by Labour to be worth £22 billion ($29 billion) left 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 to fix the foundations of our economy,” he added.
Looking even further ahead, a government watchdog last week predicted that the UK’s state debt might nearly triple over the next 50 years due to an ageing population and climate change. The prognosis came from the Office for Budget Responsibility, which the government depends on to forecast UK GDP and inflation.
Written by Jennifer Amarachi
