The UK Government's borrowing reached £151.9 billion for the 2024-2025 financial year, marking the second-highest borrowing level in a decade, according to the Office for National Statistics (ONS). This figure exceeded the Office for Budget Responsibility’s (OBR) forecast by £14.6 billion and was £20.7 billion higher than the previous year’s borrowing. The ONS noted that this was the third-highest annual borrowing since records began in 1947, surpassed only by the Covid-era 2021 and post-financial crisis 2010 financial years.
Increased public sector spending, driven by higher public sector wages and benefit payments, outpaced a rise in tax revenues, contributing to the borrowing overshoot. The figures come as global trade tensions escalate, with US President Donald Trump’s recent tariffs on imports expected to dampen UK economic growth. The International Monetary Fund (IMF) downgraded the UK’s 2025 growth outlook by 0.5 percentage points, citing tariffs, weaker consumer spending, and rising inflation from higher energy costs.
Chancellor Rachel Reeves faces mounting pressure, with economists warning that her fiscal rules, designed to limit borrowing for day-to-day spending, leave little room for error. Matt Swannell of the EY Item Club remarked that the UK’s fiscal position is “on a poor footing,” with US tariffs exacerbating challenges by restricting access to a key export market. Elliott Jordan-Doak of Pantheon Macroeconomics highlighted that “fracturing global trade” could force higher taxes or borrowing in the upcoming October 2025 budget.
Shadow Chancellor Mel Stride criticized the government, arguing that “hardworking people are paying for these eye-watering sums through higher taxes, prices, and mortgage rates.” In response, Chief Secretary to the Treasury Darren Jones emphasized the government’s commitment to fiscal discipline, stating it is “focused on delivering value for taxpayers” through investments in the NHS, border security, and economic growth.
The OBR projects borrowing will decrease to £117.7 billion in the 2025-2026 financial year, supported by measures like increased employer National Insurance contributions. However, Philip Shaw of Investec Economics cautioned that achieving this forecast is uncertain given the 2024-2025 overshoot and global economic risks posed by tariffs.
Current UK Debt: A Growing Burden
As of February 2025, the UK’s public sector net debt stood at £2.8 trillion, equivalent to 95.5% of GDP, according to the Office for National Statistics (ONS) and the House of Commons Library. This marks a significant increase from the £2.59 trillion recorded in September 2023, reflecting the ongoing strain on public finances. The debt-to-GDP ratio is among the highest since the early 1960s, a period when the UK was still recovering from the economic aftermath of World War II. The OBR forecasts that this ratio will remain elevated, potentially rising to above 96% of GDP by 2027/28 if current trends persist. This growing debt pile, coupled with rising interest payments—estimated at £80.8 billion for the financial year to February 2025—underscores the challenges facing the government as it navigates both domestic and global economic pressures.Opinion: Public Spending Out of Control, Debt Risks Ballooning
The UK’s public finances are teetering on the edge of a crisis, with borrowing soaring to £151.9 billion in the last financial year—a stark reminder that public spending is spiraling out of control. Chancellor Rachel Reeves’ policies, including significant tax hikes and increased borrowing, have failed to curb the deficit, leaving the nation vulnerable to a ballooning debt burden. The government’s fiscal recklessness, coupled with external pressures like US tariffs, demands urgent action to prevent a long-term economic disaster.Examples of Out-of-Control Spending
The government’s spending habits are a key driver of this borrowing surge. Notable examples include:- NHS Funding Surge: The 2024 budget allocated an additional £22.6 billion to the NHS for 2025, aimed at reducing waiting lists. While healthcare is critical, the lack of structural reforms to improve efficiency risks pouring money into a system without guaranteed outcomes.
- HS2 Rail Project: Despite cost overruns, the government confirmed HS2 will extend to London Euston, with billions more committed to a project plagued by delays and questionable economic returns.
- Pothole Repair Pledge: An extra £500 million was promised in the 2024 budget to fix 1 million potholes annually, a populist move that critics argue diverts funds from more pressing priorities.
- Welfare Increases: Higher benefit payments, including a £14 weekly rise in Universal Credit by 2030, have contributed to expenditure outpacing revenue, with inflation-linked costs adding pressure.
- Defence Spending Boost: An additional £5.1 billion for defence in 2025-2026, including £2.9 billion initially and £2.2 billion more, reflects rising global tensions but strains the budget further.
How Debt Could Balloon
Without intervention, the UK’s debt could spiral further due to:- Rising Interest Rates: Higher global borrowing costs, exacerbated by US tariffs and geopolitical uncertainty, have increased the cost of servicing UK debt. The OBR estimates an additional £10.1 billion in debt interest by 2029-2030, with annual interest payments already exceeding £100 billion.
- Economic Slowdown: The IMF’s downgraded 2025 growth forecast of 1% (halved from 2%) signals weaker tax revenues. If US tariffs reduce UK exports further, GDP could shrink by up to 1%, wiping out Reeves’ £9.9 billion fiscal headroom.
- Persistent Overspending: The OBR notes that even modest forecast changes, like higher inflation or lower productivity, could erase fiscal buffers, forcing more borrowing. Continued reliance on debt-funded projects like HS2 or welfare expansions risks pushing debt-to-GDP ratios beyond 100%.
- Trade War Fallout: A full-scale global trade war, as warned by the OBR, could deepen the deficit by reducing trade and increasing costs for consumers and businesses, necessitating emergency borrowing.
Solutions to Address the Debt
To rein in the debt and restore fiscal discipline, the government must adopt a multi-pronged approach:- Spending Prioritization and Efficiency: Conduct a comprehensive review of public spending to eliminate waste. For example, streamlining NHS administration or pausing non-essential projects like HS2 could free up billions. A 15% reduction in departmental administrative costs by 2030, as proposed in the Spring Statement, is a step in the right direction but needs rigorous enforcement.
- Tax Reform Without Burdening Workers: Instead of raising income tax or National Insurance, target wealth-based taxes, such as capital gains or inheritance tax, to raise revenue from the wealthiest. The 2024 budget’s £41 billion tax hike, including employer National Insurance, risks stifling businesses and should be balanced with incentives for growth.
- Economic Growth Initiatives: Invest in high-return projects like planning reforms, which the OBR estimates could boost GDP by 0.2% by 2029. Reducing red tape and encouraging private investment can offset the tariff-induced slowdown.
- Debt Management: Issue longer-term gilts to lock in lower interest rates and reduce exposure to volatile global markets. The government should also explore asset sales, such as underperforming public investments, to reduce liabilities.
- Welfare Reform: Tighten eligibility for benefits, as seen with the Spring Statement’s cuts to health-related Universal Credit for under-22s and freezes until 2030. Encouraging workforce participation through training programs could reduce dependency and boost tax revenues.
