British public debt falls less than expected
Reason: pandemic costs and increase in debt interest payments with rising inflation.
Gabriel ThomasSeptember 11, 2026
The UK's public debt fell less than expected in August. That came out from government figures on Tuesday, which pointed to the high running costs of the COVID-19 pandemic and an increase in debt interest payments as inflation rises.
Net public sector borrowing, excluding the state-controlled banks, fell to £ 20.5 billion ($ 28.0 billion) in August, down 21% from the same month last year, but well above the average forecast of 15.6 Billions of pounds is, the economists had given in a Reuters poll.
The UK government's debt skyrocketed over the past fiscal year due to heavy spending on COVID-19, reaching 15.5% of GDP, its highest level since World War II, up from an earlier estimate of 14.2%.
The Office for National Statistics (ONS) said this upward revision reflected higher estimates of the cost of a COVID-19 loan guarantee system and public sector pensions.
Finance Minister Rishi Sunak will announce new budget and growth forecasts on October 27, as well as new multi-year spending limits for individual ministries and possibly some longer-term budget targets.
Spending has fallen sharply in the current financial year, largely due to a sharp decline in the number of people receiving unemployment benefits and similar self-employed benefits.
A total of £ 93.8 billion was raised in the first five months of the 2021/22 financial year, almost half less than in the same period last year.
The biggest reason for the drop in spending was a sharp drop in vacation payments - which will expire this month - and a similar cut in support for the self-employed.
However, higher interest payments on inflation-linked government bonds would have driven debt servicing costs higher in August and would likely continue to rise if inflation continued to rise in the coming months, according to Samuel Tombs, an economist at Pantheon Macroeconomics.
The cost of debt was £ 6.3 billion last month, double what it was a year ago. In terms of GDP, the cost of debt interest remains low by historical standards.
Public debt as a share of gross domestic product rose to £ 2.023 trillion, or 97.6% of GDP, in August, the highest since March 1963.
Earlier this month the government announced that it would raise wage taxes payable by employers and employees by 1.25 percentage points each to fund higher spending on health care and long-term social care.
"We are determined to get our public finances back on track - so we have set out the targeted and responsible steps we are taking to keep debt under control," Sunak said on Tuesday.
Analysts expect the UK's tax burden to rise to a record high in peacetime as the tax increases come into effect.
Last week, the Financial Times reported that Sunak is aiming to end borrowing for daily expenses within three years and also ensure that underlying government debt begins to decline by tax year 2024/25.
"We expect a tax-neutral package of measures in the budget of the next month, with a small profit from the slightly raised GDP forecast for a possible relaxation of budgetary discipline in the run-up to the next parliamentary elections, which are to take place in May 2024," said Tombs from Pantheon.
The UK Treasury Department said no decisions had been taken beyond Sunak's already established goal of putting public finances on a more sustainable footing.
($ 1 = 0.7317 pounds)
