British government debt hit 100 percent of economic output for the first time in recent history and there was another big budget deficit last month, adding to the problems facing finance minister Rachel Reeves as she prepares her tax and spending plans.
Net public sector debt, excluding publicly owned banks, rose to 100 percent. GDP for the first time since monthly records began in 1993, up from 99.3 percent in July, the Office for National Statistics said on Friday.
Bank of England records show debt last hit this level on a regular basis in the early 1960s, when Britain was still dealing with the financial fallout from World War II.
Public debt soared during the global financial crisis and then again during the COVID-19 pandemic. Weak economic growth since then has also contributed to that increase as a share of gross domestic product.
The government borrowed 13.734 billion pounds ($18.29 billion) in August, 3.3 billion pounds more than in August last year. A Reuters poll had pointed to a deficit of 12.4 billion pounds.
The figures showed an increase in spending on social benefits and current expenditure, reflecting higher-than-usual inflation.
Reeves has warned that taxes will rise in his budget on October 30, but has ruled out increases in income tax, corporate tax and value-added tax rates, leaving little room for improvement in public services and boosting investment.
“The August public finance figures highlight the challenging fiscal position facing the Chancellor ahead of her first budget,” said PwC economist Gora Suri.
So far, the government has borrowed £64.1bn during the first five months of the 2024/25 financial year, around £6bn more than the Home Office. Budget Responsibility Forecast published in March.
Deficit figures have been higher than the OBR expected for each of the past four months.
The Bank of England holds hundreds of billions of pounds of government debt. Excluding the Bank of England, debt as a share of the economy rose to 92%, another record, from 91.6% in July.
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