Current Level of UK Government Debt and Its Sustainability

2nd January 2026

As of late 2025, the UK government's public sector net debt — the headline measure of government borrowing — stands at around 94-96 % of GDP. This means the total debt the government owes (after accounting for financial assets) is nearly as large as the UK economy itself.

These levels are similar to the highest seen since the early 1960s, reflecting sustained borrowing that was heightened during the COVID-19 pandemic and has remained elevated since.

Total net debt is roughly £2.9-£3 trillion, with gross debt somewhat higher before accounting for government cash and liquid assets.

Borrowing continues through 2025/26, with deficits well over £100 billion per year and debt still rising as a share of GDP. This deepens the fiscal strain and means the UK government must devote a meaningful share of its budget simply to servicing its existing debt—the interest costs on that debt have increased sharply in recent years.

From a sustainability perspective, debt at these levels is manageable in the short term, but it makes public finances more vulnerable to economic shocks and rising interest rates. The independent Office for Budget Responsibility (OBR) and other analysts have repeatedly highlighted that persistent deficits and structural pressures — particularly ageing populations and rising welfare spending — could push debt higher without policy changes.

Efforts to constrain debt growth are part of fiscal planning, but, without strong economic growth or changes to spending and revenues, debt levels are expected to remain high.

How Government Spending Is Allocated

The UK government budget distributes spending across many areas, but the largest categories typically include the following big ticket items:

Social security and welfare: This accounts for the biggest share of the UK's budget, including pensions, disability payments, unemployment support, and income-related benefits.

Healthcare: Funding the National Health Service (NHS) is a core priority, absorbing a significant share of public expenditure to support services from primary care to hospital treatment.

Education: Schools, further and higher education, and childcare support are another major component, aimed at human capital development.

Defence and security: The UK has committed to increasing defence spending in the coming years, with ambitions to boost defence capacity and meet NATO targets. This will put additional pressure on other areas of the budget.

These broad categories collectively account for the bulk of public spending, while other areas such as transport, justice, housing, environment, and economic affairs receive smaller, but still significant, shares. Rising debt interest costs are also consuming a larger portion of the budget, limiting fiscal flexibility.

Current UK Fiscal Policy

Fiscal policy refers to how the government uses taxation and spending to influence the economy. In the post-pandemic period, UK fiscal policy has focused on managing the aftermath of COVID-19 support measures, energy cost support, and broader economic challenges like inflation and slower growth. The government has been committing to spending reviews to reset priorities across departments, balancing growth incentives, social support, and efficiency in public services.

Rather than drastic immediate cuts, the current approach has been to tighten costs where possible and aim for slower debt growth over the medium term. The government has legislated fiscal targets that include reducing the current budget deficit (the gap between everyday spending and revenues) to zero by the end of March 2030 and ensuring that public sector net financial liabilities (a broader measure of indebtedness) start to decline relative to GDP.

However, these targets are long-range and dependent on economic conditions. In the near term, fiscal policy has been shaped by efforts to support the economy through slower growth and high inflation rather than aggressive austerity.

Deficits and the Future of Taxes

The UK has consistently run budget deficits in recent years — meaning it spends more than it receives in taxes. In the financial year ending March 2025, public sector borrowing was substantial, and projections for 2025/26 point to continued deficits in excess of £100 billion. The government has affirmed its intention to reduce deficits over time, primarily through a combination of modest spending restraint and revenue growth as the economy expands and tax receipts increase.

Whether taxes will need to be raised in the future remains a matter of policy debate. Many economists and fiscal watchdogs argue that without higher revenue or slower growth in spending — especially on social security and health care — the deficit and debt trajectory will remain unfavourable. Political leaders have signalled reluctance to pursue large tax increases now, but future governments may face pressure to adjust tax policy if debt servicing costs continue to rise and if spending commitments — such as defence or long-term care — grow.

Comparison with Other Developed Economies

When compared to other advanced economies, the UK's debt-to-GDP ratio of around 95 % sits near the upper end of the spectrum but is not the highest. Some European countries such as Italy, Greece, and France have higher ratios, often exceeding 100 % of GDP. Meanwhile, others like Germany have lower ratios, and emerging Asian economies often have comparably lower public debt burdens. This places the UK in a group of developed economies with high debt, but not an extreme outlier like Japan, where debt ratios can exceed double or more of GDP.

In terms of interest costs and fiscal pressures, the UK faces relatively significant borrowing costs compared with some peers, partly because of the structure of its debt and past inflation dynamics.

As with other high-income countries, there is ongoing debate about how best to balance growth, public services, and long-term sustainability.
Research Briefings

The UK's public finances show high debt levels near 95 % of GDP, ongoing deficits in the tens or hundreds of billions annually, and spending heavily weighted toward social security, health, education, and rising defence costs. Fiscal policy aims to tame deficits over the medium term, but with economic uncertainties and rising debt servicing costs, future decisions on taxation and spending will be central to long-term sustainability.

Compared with other developed economies, the UK's debt burden is high but not the highest, and policymakers continue to navigate the balance between supporting public services and stabilising the public finances.

Further Reading On The UK Economy

The UK Housing Market and the Economy - A Delicate Balance

The State of the UK Labour Market in 2025 Trends Challenges and the Road Ahead

Inflation in the UK Where We Stand Now and What Comes Next

What are the key risks to the UK economy in the short and long term

Current state of UK economic growth