Debt hits 100pc of national income for first time since 1960s 'driven by increases to public sector pay'

20 September 2024, 09:38 | Updated: 20 September 2024, 09:41

Britain’s public debt has grown as big as the nation’s entire GDP for the first time since 1961.

The latest official figures from the Office for National Statistics show that public sector net debt is 100% of the nation’s economic output.

Borrowing rose to £13.7 billion last month, marking the third highest August on record, driven by higher spending on public services due to increased running costs and pay increases.

The increase means public sector debt hit 100% of gross domestic product (GDP) at the end of August 2024.

The figure, which excludes public sector banks, means national debt is at levels last seen in the early 1960s, the Office for National Statistics (ONS) said.

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The grim economic news will pile fresh pressure on Chancellor Rachel Reeves ahead of her first Budget this autumn.

ONS chief economist Grant Fitzner said: "Borrowing was up by over £3 billion last month on 2023's figure, and was the third highest August borrowing on record.

"Central Government tax receipts grew strongly, but this was outweighed by higher expenditure, largely driven by benefits uprating and higher spending on public services due to increased running costs and pay."

The ONS said public sector borrowing was £3.3 billion more than in August last year.

The total for August was also more than the £11.2 billion forecast by Britain's official forecaster, the Office for Budget Responsibility (OBR), and more than the £13 billion most economists were pencilling in.

Chief Secretary to the Treasury Darren Jones said: "When we came into office, we inherited an economy that wasn't working for working people.

"Today's data shows the highest August borrowing on record, outside the pandemic. Debt is 100% of GDP, the highest level since the 1960s.

"Because of the £22 billion black hole in our public finances we have inherited this year alone, we are taking the tough decisions now to fix the foundations of our economy, so we can rebuild Britain and make every part of the country better off."

It comes after the new Chancellor accused the previous Conservative government of leaving a £22 billion black hole in the public finances.

The Government's recent decision to restrict winter fuel payments to only those on pension credit is among the "tough decisions" Ms Reeves has said she will have to make in October, as part of an effort to plug the spending gap.

Borrowing in the financial year so far to August 2024 was £64.1 billion, £0.3 billion more compared to the same five-month period a year earlier.