The UK's national debt has climbed above £3trillion for the first time, a milestone that underscores the scale of the fiscal challenge facing Chancellor John Healey ahead of Wednesday's Budget.
It took Britain 300 years for national debt to reach £1trillion in 2010. By 2020, it had doubled to £2trillion, and the next trillion took just six years. The debt is on course to hit £4trillion within the next decade.
Debt as a share of GDP
In 1990, when Margaret Thatcher stepped down, national debt stood at 28.3% of annual economic output, or GDP. When Gordon Brown was voted out in 2010 after the financial crisis, it had risen to 64.6%. Today, it is approaching 100% of GDP.
The increase largely occurred under Conservative rule, although the pandemic contributed. During the coalition government, chancellor George Osborne attempted to reduce the annual deficit and was criticised for imposing austerity, yet the UK still ran a deficit throughout.
The last budget surplus was recorded in 2000/01, when Gordon Brown was still adhering to spending limits inherited from the Tories. After he relaxed those limits, Britain has run a deficit every year since.
Borrowing continues under Labour
In September alone, the government borrowed another £21.2billion, despite rising HMRC revenues following Labour's tax changes. The UK is on course to add £121billion to national debt this tax year, and the figure could be higher.
Britain is not the worst offender among major economies. The current budget deficit is 4.3% of GDP, compared with 5.4% in France and around 6.2% in the US.
Under Donald Trump, US national debt has reached $40trillion, equivalent to 123% of GDP. France is close behind at 119%.
Rising borrowing costs
Years of near-zero interest rates after the financial crisis allowed governments to accumulate debt, but those days are over. Interest rates on French government debt have just topped 5%, the highest in a quarter of a century.
The US can sustain its debt because the dollar is the world's reserve currency and a safe haven in a crisis, but that privilege cannot be taken for granted forever.
The UK government already spends £1 in every £10 on servicing debt. Last year, the interest bill cost £109billion. The country is borrowing £4,000 every second.
Healey's Budget test
Chancellor John Healey has warned the Labour Party conference that the money isn't there, although delegates did not want to hear it.
Healey's Budget on Wednesday should focus on cutting spending, growing the economy and getting debt down, according to the analysis. If he does that, gilt yields may fall.
Fiscal discipline is no longer a luxury but a matter of survival, as historical examples such as the French Revolution and the English Civil War illustrate the consequences of unchecked debt.
