Debt is only projected to begin falling in the latter half of the decade

“Three of my right hon. Friend the Prime Minister’s five pledges at the start of the year were economic: to halve inflation, grow the economy and reduce debt. Today I can report to the House that we are delivering on all three.”

During the Autumn Statement chancellor Jeremy Hunt claimed that the government was “delivering” on all three of its pledges for 2023 relating to the economy, including to “reduce debt”.

The Prime Minister Rishi Sunak made a similar claim at PMQs shortly before this, saying “We have indeed reduced debt”.

Whether or not this is correct depends on how you interpret the pledge the Prime Minister made at the start of the year regarding the national debt.

If the pledge was to reduce debt this year, this hasn’t happened.

But in his statement the chancellor referred to longer-term projections, suggesting that this pledge refers to plans to reduce the debt in the long run—mirroring the government’s official debt target—not this year, as has been widely assumed.

What was the pledge?

On 4 January, Rishi Sunak outlined “five key priorities for 2023”, the third of which was: “We will make sure our national debt is falling so that we can secure the future of public services.”

Mr Sunak did not give a specific timeframe for this pledge (unlike his pledge to halve inflation, which he stated would happen “this year”), and we’ve asked Number 10 whether one was set out.

However, many of those (including Sky News, the New Statesman and the House of Commons Library) tracking the government’s progress on achieving Mr Sunak’s five priorities appear to have done so on the basis that he was pledging to get the national debt falling by the end of the year.

In an article about the progress made on the priorities published in July, the House of Commons Library said: “the Prime Minister’s pledge does not have an explicit timescale attached, although he said that his pledges were his priorities for 2023.”

During Wednesday’s Autumn Statement, when talking about the pledge to reduce debt, Mr Hunt referred to longer-term projections which show debt is set to fall in the latter half of the decade.

It appears from this that the government is suggesting the pledge refers to plans to reduce the debt in the long run, rather than this year, as has been widely assumed.

This would be similar to the government’s separate “debt target”, also known as the “fiscal mandate”, set out in the Charter for Budget Responsibility, which is for debt to be falling, as a percentage of GDP, by the fifth year of the Office for Budget Responsibility’s (OBR) forecast. 

The Treasury did not directly confirm whether Mr Hunt was stating that the Prime Minister’s debt pledge was the same as the government’s fiscal rule.

Debt has not fallen in the last year

If Mr Sunak’s pledge referred to debt falling in the short term, as we’ve previously written, this hasn’t happened.

There are two main measures of national debt, neither of which show that it has fallen in the last year, according to the latest data.

The government’s official debt target focuses on ‘underlying’ public sector net debt, which excludes the amount owed by the government to public sector banks, and the Bank of England’s debt.

In October 2023, underlying public sector net debt was £2,394.8 billion, around 88.6% of the UK’s gross domestic product (GDP)—higher than it was in October 2022.

Meanwhile overall public sector net debt excludes the amount owed by the government to public sector banks, but does include the Bank of England’s debt. According to the ONS, this is the most commonly used measure of public debt, and is also sometimes referred to as the “headline” measure.

In October 2023, overall public sector net debt was £2,643.7 billion, around 97.8% of GDP—also higher than 12 months ago.

Longer-term projections

The OBR has published forecasts for both underlying and overall debt covering a period to the 2028/29 financial year.

These projections suggest that underlying debt is set to continue increasing until 2027/28, peaking at £2,947 billion and 93.2% of GDP. Underlying debt is then set to begin falling as a percentage of GDP in 2028/29 (though will continue to increase in cash terms).

Overall debt meanwhile is set to peak at 98.6% of GDP, or £2,802, in the next financial year (2024/25), before decreasing as a percentage of GDP over the following four years.

This means that the government is currently projected to meet its official debt target. This trend was also forecast by the OBR’s projections in November 2022, though the level of debt as a percentage of GDP is now projected to be lower than the OBR’s forecast at that time, and in March 2023, when the OBR forecast overall debt would exceed 100% of GDP.

Claims about progress on the Prime Minister’s five priorities made without appropriate context and caveats can damage public trust in politicians. Ministers should ensure that all relevant context and caveats are included when discussing its record, and rectify oversights when they occur.

Image courtesy of HM Treasury