How much money does the UK government borrow and is it important?

If the government has to allocate more money for debt and interest payments, less money can be spent on public services.

Some economists fear that the government is borrowing too much and spending too much. Others argue that more borrowing helps the economy grow faster — generating more taxes in the long run.

If the government wants to meet the so-called “fiscal regulations”, the amount of credit is very important.

In the year When Labor takes power in 2024, it has decided to stick to the previous government’s pledge that the amount of money borrowed should fall relative to the UK economy within five years.

In the October 2024 budget, then-chancellor Rachel Reeves changed the definition of debt used in the target to allow the government to find more money for investment.

It now tracks a separate, broader measure of debt called Public Sector Net Financial Liabilities (PSNFL).

This includes, for example, money the government receives from people paying off student loans.

By this measure, total debt was £2.7tn at the end of June 2026, equivalent to 84.5% of GDP.

The Institute for Fiscal Studies (IFS) think tank criticized Reeves for being “fixated” on the lending rules, which it said contributed to “unworkable policymaking”.

Instead, he wants the chancellor to lead by broad economic measures.