The UK government’s debt payment burden is low and its ability to borrow at record low interest rates is an opportunity. But that ability to borrow needs to be used wisely. Investments would best be made in areas that save public money in the future while tackling key problems such as the climate emergency and the cost, availability and quality of housing. Investments which also reduce the UK’s financial deficit with the rest of the world (e.g. by reducing imports of fossil fuels) will also help protect UK citizens from future global debt and financial crises.
However, faced with an aging population and significant poverty and inequality, the UK also needs to increase its tax revenue. Ongoing funding is needed to maintain and improve public services such as healthcare and rebuild our social safety net, and there is significant scope to increase our tax take to do this.
The UK’s private debt remains high by historical and international standards and a significant concern. The rise in high cost household debt is putting increased financial burden on the poorest people. Lending needs to be regulated to protect people from high cost loans, while increased wages and an adequate social safety net are needed to protect people from having to resort to borrowing just to get by.
And greater attention is urgently needed on strengthening the regulation of our financial system to reduce our exposure to global financial volatility and the risks it poses to the economy.
Ten key facts everyone should know before discussing debt issues in the UK:
1. A quarter of UK government debt is owed to the UK government itself
2. Three-quarters of UK government debt is owed to people and institutions in the UK
3. Of G7 economies, only Germany has a lower government debt (as a proportion of GDP) than the UK
4. The UK government can currently borrow at the cheapest interest rates in its history
5. The UK government is paying virtually the lowest amount of interest on its debt in recorded history, as a proportion of GDP
6. UK government tax revenue (as a proportion of GDP) is the third lowest of G7 countries, and well behind other European countries
7. The debt of the UK’s private sector is more than four times as big as that of the government
8. Unsecured personal debt in the UK is rising rapidly
9. The UK economy has the largest deficit with the rest of the world of any rich country
10. The UK’s finance sector is the most exposed to a crisis of any G7 economy