28th August 2026
The national debt is nearing £3 trillion, and almost everything said about that claim is wrong. It is not a debt in the way a household mortgage or a credit card is a debt - it is just the nation's savings.
Here is what that £3 trillion is actually made of: around £2.2 to £2.3 trillion of government bonds held by pension funds, banks and insurance companies; over £200 billion in National Savings; the physical cash in your pocket; and more than half a trillion pounds sitting in the reserve accounts commercial banks hold at the Bank of England. None of it is money the government "owes" in the sense of being unable to pay. The government creates sterling, so it cannot run out of it, and it cannot go bankrupt.
So why do we panic about the interest bill? The government can always pay the interest, because it can always create the money to do so. The cost is a policy choice, not a fact of nature.
The Bank of England sets the rates that drive that £100 billion-a-year bill, and by cutting them, it could save at least £20 billion a year.
Meanwhile, over £20 billion a year is paid to commercial banks on their reserves, a subsidy to bank profits that other central banks have already largely abandoned.
The real danger runs the other way. Trying to "reduce the debt" means higher taxes or deep spending cuts. These could create a recession, falling private wealth, and a poorer economy, with no improvement in the government's financial position.
The national debt is not our burden. It is the savings facility that lets pension funds, insurers and savers hold their money safely, and without it we would all be much poorer. The lie that this debt is a burden is the excuse used to justify austerity, and it is time we stopped believing it.