Why the UK government is not facing a debt crisis

Borrowing may have soared, but historically low debt interest payments mean there is no need for austerity.

A clock on the Royal Exchange in front of the Bank of England. (Photo By Oli Scarff/Getty Images)

The UK’s national debt now stands at 98.8 per cent of GDP, the highest ratio since the 99.5 per cent recorded in March 1962 (see today’s ONS release). Chancellor Rishi Sunak has warned that increased borrowing will necessitate a new round of austerity, but Britain is not facing a Greek-style debt crisis.

In the financial year 2020-21, public sector debt interest as a share of public sector revenues did not increase. It instead fell to a record low: 2.9 per cent (see graph).

Government debt interest as a share of public sector current receipts remains at a historic low

Office for Budget Responsibility — central government debt interest as a share of public sector current receipts, 1946 – today. Forecasts included

Though debt interest payments are forecast to rise, they are not expected to do so radically. Owing to the Bank of England, which has used electronically-created money to buy government debt (quantitative easing), and an average debt maturity of 14 years, Britain is in a far more comfortable position than many of its competitors.