How much money is the UK government borrowing, and does it matter?
If the government has to set aside more cash for paying debts, it may mean it has less to spend on public services.
Some economists fear the government is borrowing too much, at too great a cost. Others argue extra borrowing helps the economy grow faster – generating more tax in the long run.
The increase in long-term interest rates seen in January prompted some economists to warn that the government was “on course” to miss its own borrowing targets.
Labour decided to stick to a rule followed by the previous government that the total amount of money owed must have fallen as a proportion of the UK economy in five years’ time.
In October’s Budget, Chancellor Rachel Reeves changed the definition of debt that the government would use in the target to enable her to raise more money for investment.
It will now track a different, broader measure of debt called public sector net financial liabilities (PSNFL). This includes, for example, the money the government gets from people repaying their student loans.
Downing Street said there was “no doubt about the government’s commitment to economic stability”, and that “meeting our fiscal rules is non-negotiable”.
The independent Office for Budget Responsibility (OBR) – which monitors the government’s financial performance – will present its latest economic forecast to Parliament in late March.
It has previously warned that public debt could soar as the population ages and tax income falls.
In an ageing population, the proportion of people of working age drops, meaning the government takes less in tax while paying out more in pensions.
