How much money does the UK government borrow, and why does it matter?

The UK government generally spends more than it raises in tax.

To fill this gap it borrows money, but that has to be paid back - with interest.

The government gets most of its income from taxes. For example, workers pay income tax and National Insurance , everyone pays VAT on certain goods, and companies pay tax on profits.

It could, in theory, cover all of its spending from taxes and that sometimes happens.

But, if it can't, the government covers the gap by raising taxes, cutting spending, or borrowing money.

Higher taxes mean people have less money to spend, so businesses make less profit, which can be bad for jobs and wages. Lower profits also mean companies pay less tax.

So, governments often decide to borrow to boost the economy. They also borrow to pay for big projects, like new railways and roads.

The government borrows money by selling financial products called bonds.

A bond is a promise to pay money in the future. Most require the borrower - in this case, the government - to make regular interest payments.

UK government bonds - known as "gilts" - are normally considered very safe, with little risk the money will not be repaid.

Gilts are mainly bought by financial institutions in the UK and abroad, such as pension funds, investment funds, banks and insurance companies.

The government sells short and long-term gilts to allow it to borrow money over different time periods, with varying interest rates.

Government borrowing was £16bn in June 2026 , according to the latest data from the Office for National Statistics (ONS), which was down £7.9bn from the same month last year.

The amount the government borrows fluctuates from month to month.

For instance, it tends to borrow less in January, when many people pay a large chunk of their annual tax bill.

So, it can be more helpful to look across a whole year, or the year-to-date.

In the full financial year to March 2026, the government borrowed £128bn.

The total amount the government owes is called the national debt. Public sector net debt currently stands at nearly £3 trillion.

That is almost as much as the value of all the goods and services produced in the UK in a year, known as the gross domestic product, or GDP.

The current level is more than double that seen from the 1980s through to the financial crisis of 2008.

The combination of the financial crash and the Covid pandemic pushed the UK's debt up.

But, in relation to the size of the economy, UK debt figures are still low compared with much of the last century. They are also less than the equivalent figures for some other leading economies.

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The larger the national debt, the more interest the government pays.

That cost was not as great when interest rates were low during the 2010s, but became more noticeable after the Bank of England started raising interest rates in 2021.

After peaking at 5.25%, the Bank began cutting rates in 2024 and they now stand at 3.75%.

However, further rate cuts in 2026 are now seen as unlikely because of the impact of the Iran war, and there has been some speculation that rates may even rise.

The amount of interest the government pays on national debt varies from month to month.

In June 2026, the interest payments on government debt were £11.8bn. Although that was £5.3bn than a year earlier, it was still the fourth highest June figure on record.

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If the government has to set aside more cash for paying debts and interest, it may have less to spend on public services.

Some economists fear the government is borrowing too much, at too great a cost. Others argue extra borrowing helps the economy grow faster - generating more tax in the long run.

The amount of borrowing is also very important if the government wants to keep meeting its so-called "fiscal rules".

When Labour came into power in 2024, it decided to stick to a pledge by the previous government that the total amount of money owed must have fallen as a proportion of the UK economy in five years' time.

In the October 2024 Budget, the then Chancellor Rachel Reeves changed the definition of debt that the government would use in the target to enable her to raise more money for investment.

It now tracks a different, broader measure of debt called public sector net financial liabilities (PSNFL).

This includes, for example, the money the government gets from people repaying their student loans.

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

The Institute for Fiscal Studies (IFS) think tank has criticised Reeves for being "fixated" on the borrowing rules, which it says contribute to "dysfunctional policymaking".

It wants the chancellor to be guided by a broader set of economic measures instead.

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Debt is the total amount of money owed by the government that has built up over years.

The deficit is the gap between the government's income and the amount it spends.

When a government spends less than its income, it has what is known as a surplus.

Debt rises when there is a deficit, and falls in those years when there is a surplus.