Britain’s national debt has nearly tripled as a share of GDP since 2006 – Here’s how we got here
Britain’s public finances have undergone a dramatic transformation over the past two decades, with national debt ballooning from a relatively modest level to one that now hovers near historic highs.
According to the Office for Budget Responsibility’s (OBR) latest Economic and Fiscal Outlook, released on Tuesday (3 March), public sector net debt (PSND) as a share of GDP has nearly tripled since around 2006, rising from a pre-financial crisis baseline of about 36-37% to around 94-95% by 2024-25.
This surge reflects a series of economic shocks, persistent government borrowing, subdued growth, and escalating interest costs that have reshaped the UK’s fiscal landscape.
The OBR’s report paints a picture of a nation grappling with the aftermath of multiple crises, where plans to reduce borrowing have been repeatedly derailed. Debt servicing costs alone have skyrocketed from £39 billion (1.7% of GDP) in 2019-20 to £106 billion (3.6% of GDP) in 2024-25, amid UK bond yields being the highest in the G7.
Here’s a breakdown of the key milestones and factors that got us here.
The pre-crisis low: 2006-2008
Back in 2006-07, before the global financial meltdown, UK’s public sector net debt stood at around 36-37% of GDP – a level considered sustainable and low by historical standards.
The economy was booming, with steady growth and balanced budgets under the Labour government. Borrowing was minimal, and the debt burden seemed under control. This era marked the end of a long period of relative fiscal prudence following the high debts of the post-World War II years.
The global financial crisis: 2008-2014
The 2008 financial crash changed everything. Banks collapsed, credit froze, and the UK economy plunged into recession. The government responded with massive bailouts and stimulus spending, pushing borrowing to a peak of 10.2% of GDP in 2009-10.
By 2014-15, PSND had soared to 79% of GDP. The Coalition government’s austerity measures, deep cuts to public spending, aimed to rein in the deficit, but subdued growth post-crisis meant debt continued to climb as a share of the economy.
Even as borrowing fell to a post-crisis low of 2.0% of GDP in 2018-19, bringing debt down slightly to 72%, the scars of the crisis lingered. Productivity stagnated, and real wages struggled to recover, setting the stage for future vulnerabilities.
The COVID-19 pandemic: 2020-2021
The next major blow came with the COVID-19 pandemic. Lockdowns shattered economic activity, and the government unleashed unprecedented support packages, including furlough schemes and business loans. Borrowing hit a post-war high of 14.7% of GDP in 2020-21, causing debt to surge again.
The OBR notes that this period alone contributed to persistent deficits of around 5% of GDP over the following four years, exacerbated by weak real GDP growth and lingering spare capacity in the economy.
The energy price shock and aftermath: 2022-2025
Just as recovery seemed underway, Russia’s invasion of Ukraine in 2022 triggered a global energy crisis. Soaring gas and electricity prices forced the UK government to intervene with subsidies, while inflation spiked and growth faltered. Borrowing remained stuck around 5% of GDP (e.g., 5.0% in 2021-22 and 5.2% in 2024-25, totaling £153 billion in the latter year).
Policy decisions played a role too. Successive governments loosened fiscal plans, delaying consolidation efforts. Increases in departmental spending, such as £4.4 billion annually on special educational needs and disabilities (SEND) by 2030-31, and local authority borrowing added to the tally.
Meanwhile, economic headwinds like lower net migration, loosening labour markets, and subdued productivity (forecast at just 1.0-1.1% by 2030-31) kept growth tepid, preventing debt from falling.
The UK followed trends among advanced economies but at higher levels, with borrowing persistently above averages. Valuation effects from financial transactions, like student loans (£11 billion annually on average) and losses from the Bank of England’s Asset Purchase Facility (£4.4 billion per year), further inflated the debt stock.
Where we stand now and the outlook
As of 2024-25, PSND sits at 94-95% of GDP, with PSND excluding the Bank of England at around 90.6% by 2025-26.
The OBR forecasts debt to remain broadly stable, peaking at 96.3-96.5% in 2028-29 before dipping slightly to 95.1% by 2030-31, thanks to lower cumulative borrowing and higher tax receipts from equity prices and capital gains.
Borrowing is expected to decline from 4.3% in 2025-26 to 1.6% by 2030-31, with tax-to-GDP rising to a historic high of 38-38.5%.
However, risks loom large. The report warns of long-term pressures, including an ageing population, rising welfare caseloads, and defence spending potentially climbing to 3.5% of GDP by 2035 (£40 billion extra).
Without policy changes, debt could explode to 275% of GDP by the 2070s. Emerging threats, like escalation in the Middle East conflict, could deliver fresh shocks.
In essence, Britain’s debt tripling stems from a perfect storm of unforeseen crises compounded by structural weaknesses in growth and productivity.
As the OBR emphasises, stabilising debt will require not just fiscal discipline but also addressing these underlying economic challenges.
