How Much Does the UK Government Borrow? Understanding National Debt and Why It Matters

Every year, the UK government spends billions of pounds on essential services like the NHS, education, roads, pensions, and public benefits. However, the money collected from taxes and other sources often isn’t enough to cover all these expenses. When the government spends more than it earns, it needs to borrow money to make up the difference. This process is called government borrowing, and it’s a crucial part of how the country manages its finances. But how much money does the UK government borrow, and does it really matter?

How Much Money Does the UK Government Borrow?

In the most recent financial year ending in March 2025, the UK government borrowed about £148 billion. This figure is known as the government deficit for the year. To put it into perspective, that’s like every person in the UK being responsible for an extra £2,200 in government debt just from this year’s borrowing alone. And this isn’t a one-off event—the UK government has been borrowing large sums for many years to cover the gap between spending and income. In April 2025, for example, the government borrowed another £20 billion, which was £1 billion more than the same month the previous year.

The National Debt Explained

Over time, these annual deficits add up, creating the national debt. Right now, the UK’s national debt stands at about £2.8 trillion, which is almost as much as the entire value of the UK’s economy in a year, known as the gross domestic product (GDP).

How Does the UK Government Borrow Money?

Unlike individuals who might use a credit card or take out a bank loan, the government raises money by selling bonds, known in the UK as “gilts.” A government bond is essentially a promise: the government commits to paying back the borrowed money, plus interest, at a future date. These bonds are bought by pension funds, banks, insurance companies, and even other countries.

Why Investors Buy Government Bonds

Investors like these bonds because they are considered very safe and the UK government has never failed to pay back its debts. Some bonds are short-term, while others can last for decades, allowing the government to spread out its repayments.

Why Doesn’t the Government Just Raise Taxes or Cut Spending?

You might wonder why the government doesn’t just raise taxes or cut spending to avoid borrowing. The answer is that it’s not always practical. Raising taxes too much can leave people with less money to spend, which can slow down the economy and hurt businesses. On the other hand, cutting spending can mean less funding for vital services like healthcare, education, and social support, which most people rely on. Sometimes, especially during economic downturns or emergencies like the COVID-19 pandemic, government borrowing is the best way to keep the country running and support those in need.

What Are the Costs of Government Borrowing?

Borrowing money comes with a cost. Just like with a personal loan, the government has to pay interest on what it owes. When interest rates are low, these payments are manageable. But if interest rates rise, the cost of borrowing increases.

Interest Payments and Their Impact

In April 2025, the government paid about £9 billion just in interest payments. That’s money that could have been used for schools, hospitals, or infrastructure projects. As interest rates have risen in recent years, these payments have become a much bigger part of the government’s budget.

Does Government Borrowing Matter?

This is a topic of debate among economists and policymakers. On one hand, the more the government borrows, the more it has to spend on interest payments, leaving less money for other important areas. If lenders start to worry that the UK might struggle to repay its debts, they could demand even higher interest rates, making borrowing more expensive and risky. There’s also the issue of future generations, today’s borrowing will eventually have to be paid back by tomorrow’s taxpayers, which could put a strain on public finances in the future.

The Case for Responsible Borrowing

On the other hand, government borrowing isn’t always a bad thing. If the money is used to invest in things that help the country grow, like new hospitals, better roads, or advanced technology, it can actually make the economy stronger in the long run. A growing economy means more jobs, higher wages, and more tax revenue, which can help pay off the debt over time.

International and Historical Perspective

Also, while the UK’s national debt is high, it’s not the highest in the world. Countries like Japan, the United States, and Italy have even more debt compared to the size of their economies. Historically, there have been times when the UK’s debt was much higher, such as after World War II, but the country managed to recover and grow.

How Does the Government Manage Borrowing?

To manage government borrowing, the UK sets fiscal rules, like aiming to reduce the national debt as a share of the economy over time. Recently, the government changed how it measures debt to include assets like student loans, giving it more flexibility. However, the main challenge remains: balancing the need to spend on important services with the need to keep borrowing under control.

Debt vs. Deficit: What’s the Difference?

It’s also important to understand the difference between the deficit and the debt. The deficit is the amount the government borrows in a single year because it spends more than it earns. The debt is the total amount the government owes, built up over many years. If the government ever spends less than it earns in a year, it runs a surplus and can start paying down the debt, but that hasn’t happened in the UK for a long time.

Conclusion

In summary, the UK government borrows a significant amount of money each year, about £148 billion last year, with the total national debt now at £2.8 trillion. This borrowing helps fund public services, but it also means higher interest payments and less money for other priorities. Whether government borrowing is a problem depends on factors like interest rates, economic growth, and how the money is used. Borrowing can be a useful tool, but it must be managed carefully to avoid becoming a burden for future generations. The key is to find the right balance between spending, borrowing, and investing in the country’s future.