Britain’s national debt has passed £3 trillion for the first time, official figures showed this morning, a week before the Chancellor delivers his Budget.
The Government borrowed £24.5 billion in September, £1.9 billion more than forecast, and the interest bill hit £10.9 billion, the highest September figure since monthly records began in 1997.
The Office for National Statistics provisionally estimates public sector net debt at £3,005.0 billion at the end of September. That is £91.7 billion more than a year earlier.
The debt first passed £1 trillion in February 2010, after the financial crisis, and £2 trillion in June 2020, during the pandemic. The third trillion has been added in just over six years, under governments of both parties.
As a share of the economy, debt stands at 94.0 per cent of GDP. That is slightly lower than a year ago, but the ONS says it is at levels last seen in the early 1960s.
But Labour is now the Government, and this year’s borrowing is running ahead of its own forecasts.
September borrowing of £24.5 billion was £1.8 billion higher than in the same month last year. Over the first six months of the financial year, borrowing reached £97.8 billion. That is £4.4 billion less than at the same point last year, but £6.0 billion more than the Office for Budget Responsibility, the official forecaster, expected.
The ONS says that was the 10th highest April to September borrowing figure since monthly records began in 1993.
The overshoot is not down to weak tax receipts. Central government receipts were £5.8 billion above forecast, helped by Corporation Tax, National Insurance and Income Tax. The problem is spending. It was £8.9 billion above forecast, with debt interest £3.8 billion higher than expected and benefit payments, including pensions, £2.5 billion higher.
Debt interest alone cost £10.9 billion in September, £1.6 billion more than a year earlier and £2.0 billion more than forecast. It was only the eighth time the monthly bill has topped £10 billion.
Part of that is technical. The ONS says £4.0 billion of the September figure came from the uplift on index-linked gilts, government bonds whose value rises with the Retail Prices Index. But the cost is real, and taxpayers meet it.
Ministers have been reluctant to discuss why borrowing costs are so high. Asked in the House of Lords why Britain’s borrowing costs are the highest in the G7, the Government replied: “It is long-standing convention that the Government does not comment on specific market movements.”
The same answer said: “Fiscal credibility is the Chancellor’s first priority.” It added that the Government would meet its fiscal rules while “controlling borrowing to bear down on inflation and debt interest costs”.
Today’s figures show debt interest running £3.8 billion above forecast in the first half of the year.
The day-to-day deficit, the borrowing used to fund running costs rather than investment, was £64.0 billion in the first six months. That is lower than last year. But the Government’s own target is to balance the current budget by 2029-30, and it has three and a half years left to close the gap.
Chancellor John Healey will set out his Budget on 28 October. Ministers have already said estimates for North Sea tax will be published then.
The questions for the Chancellor are simple. Why is spending running £8.9 billion ahead of plan when tax receipts are beating forecast? What will he do to bring down an interest bill now above £10 billion a month? And will the Budget cut borrowing, or raise taxes again to pay for it?
Public sector net debt stood at £3,005.0 billion at the end of September. The ONS will publish October’s figures next month.
Picture: HM Treasury, 1 Horse Guards Road, Westminster. File photo. Dun.can / Flickr, CC BY 2.0.
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