Another of Prime Minister Rishi Sunak’s five key priorities for 2023 is in doubt as national debt reached 100% of GDP.
The third of the government’s five targets is to reduce the national debt but official figures from the Office for National Statistics (ONS) showed it increased in May to the highest in more than 60 years.
Public sector debt topped £2.567trn at the end of May, equivalent to 100.1% of GDP. In just that month £20bn was borrowed by the public sector – £10.7bn more than the same period a year earlier.
This means the public sector, excluding public sector banks, spent more than it received in taxes and other income and borrowed the shortfall.
GDP – or gross domestic product – is a key metric of economic output, tracking everything produced in an economy. The ONS said the 100% of GDP statistic should be treated as “highly provisional and likely to be revised” as it relies on GDP estimates from the independent finance analysts, the Office of Budget Responsibility.
During the COVID-19 pandemic there had been similar early estimates that the debt to GDP ratio had reached 100% but they were revised down when stronger GDP data replaced the forecasts.
Borrowing is high after periods of large state spending, such as on wars or pandemic measures.
Due to the cost of energy schemes, benefit increases and staffing costs, the figures also showed the second-highest May borrowing since the ONS’s monthly records began in 1993.
Benefits payments increased in line with the inflation rate of 10.1% recorded in January.
In response to the announcement, Chancellor Jeremy Hunt said: “We rightly spent billions to protect families and businesses from the worst impacts of the pandemic and Putin’s energy crisis.
“But it would be manifestly unfair to leave future generations with a tab they cannot repay. That’s why we have taken difficult but necessary decisions to balance the books in order to halve inflation this year, grow the economy and reduce debt.”