The bankrupt British

National debt now at post-war level

Prime Minister Keir Starmer must start his term in office with a large debt backpack.

(Bild: AFP/BENJAMIN CREMEL)

Bad news for the new government of Prime Minister Keir Starmer: British national debt has reached the level of economic output for the first time in decades. The reasons for this are manifold, but well-known ...

Public sector liabilities amounted to 100 percent of gross domestic product in August, as the Office for National Statistics announced in London on Friday. This is the highest figure since monthly records began in 1993.

In July, it was 99.3 percent. Bank of England records show that the last time debt was regularly at this level was in the early 1960s. At that time, the UK was still struggling with the financial consequences of the Second World War.

Debt has risen rapidly since the financial crisis
Public debt rose sharply during the global financial crisis from 2007/08 and then again during the coronavirus pandemic. At the same time, the economy has been sluggish, not least due to the country's exit from the EU.

This makes it even more difficult for the new Finance Minister Rachel Reeves to prepare her first budget - especially as new debt is also on the rise. The government took on almost 14 billion pounds (16.68 billion euros) in debt in August, over three billion more than a year earlier. Accordingly, spending on social benefits, for example, increased.

Reeves wants to avoid increases in income tax, corporation tax and VAT rates. This leaves little scope for improving public services and promoting investment.

Economists see "difficult budget situation"
"The figures for public finances in August illustrate the difficult budgetary situation facing the Chancellor of the Exchequer ahead of her first budget," said economist Gora Suri from consultancy firm PwC. During the election campaign, Prime Minister Starmer had pledged to achieve annual economic growth of 2.5 percent. The Bank of England only expects growth of around 1.25 percent this year.

Starmer's Labour Party achieved a landslide victory in the general election on July 4. After 14 years in power, the Conservatives had to make way.