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Public sector net debt amounted to 93.8 percent of gross domestic product in the United Kingdom as of 2026. Following the COVID-19 pandemic, UK government debt has reached levels not seen since the early 1960s, due to a considerable increase in borrowing in 2020/21. After peaking at 251.7 percent shortly after the end of the Second World War, government debt in the UK gradually fell, before a sharp increase in the late 2000s at the time of the global financial crisis.

Debt not expected to start falling until 2029/30

In 2025/26, the UK's government expenditure was approximately 1.36 trillion pounds, around 44.6 percent of GDP. This spending was financed by 1.23 trillion pounds of revenue raised, and 132 billion pounds of borrowing. Although the UK government can continue to borrow money to finance its spending, the amount spent on debt interest has increased significantly in recent years. Current forecasts suggest that while the debt is eventually expected to start declining, this is based on falling government deficits in the next five years.

Government facing hard choices

Hitting fiscal targets, such as reducing the national debt, will require a careful balancing of the books from the current government, and the possibility for either spending cuts or tax rises. Although Labour ruled out raising the main government tax sources, Income Tax, National Insurance, and VAT, at the 2024 election, they did raise National Insurance for employers (rather than employees) and also cut Winter Fuel allowances for large numbers of pensioners. Less than a year after implementing cuts to Winter Fuel, the government performed a U-Turn on the issue, and also held back on more significant cuts to welfare.