The UK's national debt could be a £1.2 trillion bigger
problem than currently feared, according to analysis of
long-term GDP figures by the TaxPayers' Alliance.
The last time debt surpassed the current level of 93.9
per cent of GDP was in 1963-64. However, significant growth
in the years after this point meant the debt was far more
affordable than today, the group has found.
Highlighting the fact that most UK debt is not due to be repaid
until after 2029, with much of it not due until 2044 or beyond,
TPA researchers have assessed the level of debt compared to an
average of GDP over the next 15 years and compared it to the 15
years after 1963-64. In the latter case, the level
of debt 60 years ago was worth only 36.3 per
cent of future GDP, measured as the average GDP of
the following decade and a half. Now, based on OBR growth
forecasts, debt is worth 67.3 per
cent of the next fifteen years of forecast GDP
growth.
It means that debt is a 2.6 times larger
problem compared to if it was as affordable as it
was when the Wilson government came to power in 1964. This is
equivalent to an additional £1.2 trillion. The UK's current
national debt stands at £2.6 trillion and is increasing by £542.9
million per day, according to the TPA's digital debt clock.
This warning comes just days after the ONS revealed that the UK
economy grew by just 0.1 per cent between October and December
2024, with GDP per capita shrinking for the second successive
quarter in what the TPA termed a
“personal recession.”
While the OBR already forecasts debt to GDP until as far as
the 2070s, measuring current
debt the future GDP establishes a clearer link between when
borrowing occurs and when repayment is due.
Future GDP provides a useful, secondary measure of the
affordability of public sector debt, which could aid public
understanding of the issue. The TPA is calling on the government
to consult on how best to incorporate a measure of
debt-to-future-GDP into its debt statistics.
CLICK HERE TO READ THE
FULL RESEARCH
Executive summary:
- Debt will be serviced and paid back or rolled over in the
future using tax receipts extracted overwhelmingly from the
future's GDP, not current GDP.
- Debt is often expressed as a share of GDP, to measure how
affordable it is. But future GDP provides a better measure of the
affordability of debt than measuring it against current GDP.
- Slower growth prospects make debt less affordable relative to
when growth prospects are faster.
- Debt last surpassed the 2024-25 level of 93.9 per cent of GDP
in 1963-64 when it was 94.7 per cent of GDP. But it was just 36.3
per cent of future GDP then, compared to this year's figure of
67.3 per cent of future GDP.
- Debt in 2024-25 is £1.2 trillion larger than it would be if
debt was as affordable as it was in 1963-64.
- Debt in 2024-25 is equivalent to 176 per cent of GDP by the
1963-64 standard of affordability against future GDP.
- Future GDP provides a useful, secondary measure of the
affordability of public sector debt, which could aid public
understanding of the issue. The government should therefore
consult on how best to incorporate a measure of
debt-to-future-GDP into its debt statistics.
Chart 1: debt as a share of GDP and future GDP
CLICK HERE TO READ THE
FULL RESEARCH
Darwin Friend, head of research of the TaxPayers'
Alliance, said:
"The paltry growth figures released last week bode ill for
taxpayers today but just as significantly for tomorrow, given the
desperate state of the debt.
“The last time the public finances were in this state,
fifteen years of strong economic growth significantly diminished
the scale of the problem. There is little evidence that this will
be the case this
time.
“Ministers need to
incorporate an understanding of future GDP in their policymaking
to ensure they aren't ignorant of the challenges of the future
picture of the economy.”
TPA spokespeople are available for live and pre-recorded
broadcast interviews via 07795 084 113 (no texts)
Notes to editors:
- Founded in 2004 by Matthew Elliott and Andrew Allum, the
TaxPayers' Alliance (TPA) campaigns to reform taxes and public
services, cut waste and speak up for British taxpayers. Find out
more at www.taxpayersalliance.com.
- TaxPayers' Alliance's research
council.
- The TPA are running a campaign on the national
debt, including a digital
debt clock which shows the debt increasing by
£6,284 per second and £542.9 million per day.
