The United Kingdom government's borrowing practices and adherence to fiscal rules are drawing increased attention, with implications for public services and economic growth. The government borrows to finance both its day-to-day operational expenses and significant long-term infrastructure developments.
Some economists express concern that the government may be borrowing excessively and at a high cost. Conversely, other economists argue that increased borrowing can stimulate faster economic expansion, ultimately leading to greater tax revenue over the long term. The level of borrowing is a critical factor for the government in its efforts to meet its established fiscal targets.
Upon assuming office in 2024, the Labour government committed to a pledge made by the preceding administration: that total government debt, as a proportion of the UK economy, must decrease over a five-year period. In an effort to secure more funds for investment, the then Chancellor Rachel Reeves altered the definition of debt used for this target in the October 2024 Budget. The government now tracks a broader measure known as public sector net financial liabilities (PSNFL), which includes funds received from sources such as student loan repayments.
As of the end of June 2026, total debt under this revised measure stood at £2.7 trillion, equivalent to 84.5% of the Gross Domestic Product (GDP). The Institute for Fiscal Studies (IFS), a prominent think tank, has criticized the focus on borrowing rules, suggesting they contribute to "dysfunctional policymaking." The IFS advocates for the chancellor to consider a wider array of economic indicators rather than being solely guided by the current fiscal rules.