Where is UK public debt ahead of the autumn 2026 budget?

The UK’s public debt is high but it’s been higher before. What’s different this time is that it’s not on track to come back down, as a growing slice of what the state collects in taxes goes on servicing past borrowing. Every extra pound of debt interest is one that can’t be spent on public services.

Last week, UK public debt passed £3 trillion for the first time, just a week before the budget. It now stands at around 95% of GDP. While this is below the levels seen after the world wars, there are lots of reasons to worry.

Many commentators – including the Office for Budget Responsibility (OBR), the UK’s fiscal watchdog – forecast debt to rise. An ageing population is driving up spending. GDP growth, which makes past borrowing more manageable, has faded. The cost of debt servicing has risen to around £125 billion a year, the UK’s fourth largest line item. And the interest rate that the country pays is the highest in the G7.

Why is the budget so vital this year?

In the spring, the chancellor had around £24 billion of ‘fiscal headroom'. This measure is like a safety buffer – a margin against the government’s main debt rule (that by 2029/30, tax should cover its day-to-day spending, with borrowing only left for investment). In just months, that margin is believed to have more than halved, as weaker growth forecasts and the rising cost of servicing debt have eaten into it.

The margin could be much smaller: for example, EY, a consultancy, now puts it at around £11 billion. Things could get worse if the Strait of Hormuz were to remain closed for a prolonged period, increasing unemployment and borrowing over the period 2026-28. That would put the chancellor around £7 billion on the wrong side of his own rule.

Others are more optimistic. A rosier scenario from the OBR, with higher earnings and lower unemployment, would lift the headroom to around £37 billion. But the balance of risks that the chancellor must plan around is tilted toward the downside.

Figure 1: The UK’s current budget balance in 2029/30 – an interactive chart (select a scenario)

Sources: NiGEM (the National Institute Global Econometric Model); EY calculations using OBR fiscal ready reckoner and OBR fiscal sensitivity analysis.

Headroom matters because it is the government’s room to manoeuvre. The larger it is, the more that chancellors can absorb bad news without breaking the rules that they have set themselves. When it is this thin, almost any shock forces a response: higher taxes, lower spending or both.

Another reason all eyes are on Westminster this week lies across the Channel. France now pays the highest borrowing premium in the eurozone as political deadlock leaves it unable to pass a budget. It is a reminder of how quickly market confidence can turn, and the very risk that the chancellor is trying to avoid this week.

Is UK debt really that high?

By recent standards, yes. UK public debt has risen from under 40% before 2008 to around 95% today, driven up by two shocks – the global financial crisis of 2007-09 and the Covid-19 pandemic – neither of which has been reversed.

But in historical terms, today’s level is far from unprecedented. UK debt exceeded 150% of GDP for much of the interwar period, and it peaked at around 250% in the late 1940s, after the Second World War. Against that, today’s 95% is high but not a record.

Figure 2: The UK’s public sector net debt, 1900 to 2025

Sources: OBR, Office for National Statistics (ONS).

What stands out is the direction. After both world wars, debt fell steadily for decades. The post-war peak of 250% was brought down to around 25% by the early 1990s. That is what makes the current position unusual.

What’s different this time?

In the past, the UK brought debt down without running large budget surpluses. The main reason was growth. When the economy grows faster than the interest rate on government debt, existing debt shrinks relative to the size of the economy.

For most of the post-war period, this is what happened. Strong nominal growth did the work and much of that was inflation. In the 1960s and 1970s especially, rising prices eroded the real burden of the debt, shrinking it relative to the economy.

Things have changed since the global financial crisis. As growth has slowed, the cost of servicing debt has moved closer to, and at times above, the rate at which the economy expands. When that happens, the arithmetic reverses. Debt no longer falls on its own and just keeping it stable requires surpluses. But the UK has not run an annual budget surplus since 2000/01.

Figure 3: The UK’s net borrowing, 1900 to 2030

Source: OBR.

Note: Grey shaded area = forecast.

The official projections reflect this. Figure 4 picks up the same long-run series as before but where debt fell back after earlier peaks, sliding it forward shows the opposite. On the OBR’s long-term projections, it climbs past 300% of GDP by the 2070s on unchanged policy and far higher still if the economy is hit by repeated shocks.

Figure 4: UK public sector net debt, 1900 to 2075 – an interactive chart (drag to reveal the projection)

Source: The OBR’s July 2026 Fiscal Risks and Sustainability report, ONS.

These projections rest on important assumptions. The OBR assumes unchanged policy: that governments simply let the pressures build, and do not adjust tax or spending in response. In practice, governments would act long before debt reached such levels.

So, the value of the exercise is not in the precise numbers but in the direction in which they point. Left unaddressed, today’s settings put debt on a rising path. If not a precise forecast, they are certainly a warning.

What’s driving up the debt?

Compare the population today (teal) with the projection for 2075 (red). The balance tips from younger ages towards older ones – fewer children and workers, more people in later life. Over the coming decades, there will be more pensioners drawing on the state and relatively fewer workers paying the taxes that support them.

The main driver is demography. People are living longer and birth rates have fallen, so the share of the population past working age is rising.

Figure 5: The UK’s population by age, 2025 and 2075 – an interactive chart (hover to compare)

Sources: OBR, ONS.

That shift pushes up exactly the kinds of spending that are hardest to contain: the state pension, healthcare and social care all rise as the population ages. The OBR projects that these pressures alone lift age-related spending by several points of GDP by the 2070s.

This is not mainly a matter of one government’s choices. The people who will be retired in 40 years are already born so much of this pressure is already locked in.

How much is debt already costing us?

Costs are high and rising. Debt interest is now the fourth largest item of government spending, at around £125 billion, costing more than defence, policing and justice combined.

Figure 6: The UK government’s spending by function, 2024/25 (£ billion)

Source: HM Treasury.

Another way to see the scale is as a share of tax revenue. For most of the 2010s, low interest rates kept the cost down. Debt interest took only a few pence of every pound that the government raised. As rates rose, that share climbed sharply, spiking to its highest in decades before settling at around 9%, a level that the OBR expects to persist.

Figure 7: The UK’s debt interest as a share of government revenue

Source: OBR.

These figures come from the OBR’s March 2026 forecast. Borrowing costs have risen since, so the next forecast (on budget day) may well revise the interest bill upwards.

Either way, a growing slice of what the state collects goes not on services but on servicing past borrowing. Every extra pound of debt interest is a pound that cannot go to schools, hospitals or anything else – a large part of why the chancellor’s room for manoeuvre has shrunk.

How does the UK compare internationally?

High debt and rising interest costs are not unique to the UK. Across the G7, governments borrowed heavily through the pandemic, and all have faced higher borrowing costs. In that sense, the UK’s predicament is a shared one.

But the UK is now at the top of the pack. For most of the past two decades its borrowing costs sat inside the G7 range, often in the middle. Today, they are at the very top.

Figure 8: The UK’s ten-year bond yield against the G7 range

Source: London Stock Exchange, accessed 26 October.

For a country that must also refinance a large stock of debt that matters. Higher borrowing costs today feed directly into the servicing bill already squeezing the budget.

Is there any good news?

Yes, in one important respect. Not all debt is equally risky and here the UK has a genuine advantage: the maturity of its debt.

The longer that a government’s debt takes to mature, the less it has to refinance each year and the less exposed it is when borrowing costs rise. On this measure, the UK stands out. The average UK government bond matures in around 13 years, the longest in the G7, and the UK relies far less than its peers on short-term debt.

Figure 9: Debt maturity and short-term borrowing across the G7

Source: World Economic Outlook (October 2026), published by the International Monetary Fund (IMF).

This acts as a shock absorber. When rates rise, the cost feeds through only gradually, as older and cheaper debt is slowly replaced, buying time that more exposed countries lack. It is not a cure. The rising interest bill and demographic squeeze remain. But the UK faces them from a more resilient starting point than its headline debt figure suggests.

Where should I look next?

This is a fast-moving picture and the UK budget is only one marker. Several events in the months ahead will shape how the debt story develops:

28 October 2026 – UK budget and OBR forecast: chancellor John Healey’s first budget, with updated OBR projections the same day.
3 November 2026 – US midterm elections: A divided Congress would make America’s fiscal fights harder, unsettling the world’s largest bond market.
5 November 2026 – Bank of England decision on monetary policy: Bank Rate currently stands at 3.75%. Its path feeds straight into UK borrowing costs.
11 December 2026 – US funding deadline: The current stop-gap expires, and another government shutdown is possible, months after the longest on record.
Spring 2027 – French presidential election: With Marine Le Pen leading in the polls, this is a potential flashpoint for eurozone debt.

Where can I find out more?

Public sector finances, UK: September 2026: ONS report.

The outlook for the public finances: An October 2026 report from the Institute for Fiscal Studies (IFS) by Nick Ridpath, João Sousa and Isabel Stockton.

Economic and fiscal outlook – March 2026: OBR report.

Fiscal risks and sustainability – July 2026: OBR report.

World Economic Outlook: Resilience under strain, urgent choices: October 2026 report from the IMF.