Chancellor John Healey has been told he is "walking a difficult tightrope" ahead of his first Budget as Britain's national debt reached £3 trillion. The UK's debt mountain looks set to rise further, with projections from the Office for Budget Responsibility indicating that public sector net debt is expected to reach about £3.75tn by March 31, 2033.
Public sector net debt was 95.1% of GDP at the end of August, up from 93.8% at the end of August 2025.
PM's fiscal responsibility pledge questioned
Prime Minister Andy Burnham said the Government would be "grounded in fiscal responsibility" at his first Prime Minister's Questions in September. He was responding to Conservative Party leader Kemi Badenoch, who asked where spending would be cut and what his plans are to tackle Britain's mounting debt.
Valentin Boboc, chief economist at the Institute of Economic Affairs think tank, said Mr Burnham's promises of fiscal responsibility ring hollow without a credible plan to bring spending under control.
He added: "Taxpayers cannot keep being handed the bill for commitments politicians are unwilling to fund through savings elsewhere."
Debt servicing costs squeeze public finances
Mr Boboc said the UK spends over £100bn a year servicing its debts, squeezing the room for tax cuts and essential services. The expert explained: "Further taxes on work and investment risk weakening the very growth needed to bring the debt burden down. The Government must curb spending growth and dismantle the planning and regulatory barriers holding back enterprise."
"Until ministers confront those choices, taxpayers face a miserable bargain, seeing more of their earnings swallowed by the state, with public finances still dangerously exposed to the next crisis."
Meeting interest payments on the national debt was one of the biggest areas of Government spending in 2025, exceeding defence and policing. Polling by Ipsos and the National Institute of Economic and Social Research shows that 53% of Britons think financial markets will lose confidence in the Government's ability to repay its debt over the next five years.
Growth seen as key to reducing debt
Alex Bogdan, director at Ipsos, UK, said: "Our latest polling lays bare the difficult tightrope the Chancellor must walk in this month's Budget."
Dr Alessandro Di Nola, assistant professor in economics at the University of Birmingham, said reducing the national debt will require difficult choices, but the debate should not focus exclusively on whether taxes should rise or public spending should fall. He said: "A crucial part of the problem is economic growth. Since the financial crisis, UK productivity growth has been exceptionally weak. This matters enormously for the public finances."
"Sustained growth raises household incomes and company profits, increasing tax revenues without requiring higher tax rates. It also makes an existing stock of public debt smaller relative to the size of the economy."
"Without stronger productivity and economic growth, stabilising and eventually reducing the debt-to-GDP ratio becomes much more difficult."
Dr Di Nola said the best long-term strategy for the UK is not simply austerity or higher taxation, but to combine credible control of Government spending and borrowing with reforms which raise productivity. He added: "Britain will find it extremely difficult to reduce its debt burden sustainably unless its economy starts growing faster."
HM Treasury was approached for comment.
What is national debt?
Generally, the Government spends more than it takes in taxes and other income. This means it has to borrow money from financial markets each year to cover its extra spending.
Government debt is the entire amount the Government owes its creditors from past borrowing. Debt interest is the cost of servicing debt through regular interest payments.
Most borrowing is made through Government bonds, known as gilts. They are called gilts because the original paper certificates the Government issued had a gold, or gilded, edge.
When investors buy a gilt, they lend money to the Government for a fixed term. The Government pays interest and repays the original amount when the gilt reaches maturity.
Holders of gilts include pension funds, insurance companies and banks. About a third of gilts are held by overseas investors. The Bank of England currently holds about 18% of gilts, down from a peak of around 34% in 2022, according to the House of Commons Library.
