UK Government Debt Debate: What the Figures Really Show

Chief Secretary to the Treasury Laura Trott and BBC PM presenter Evan Davis engaged in a tense exchange regarding the trajectory of UK government debt, sparking a debate on fiscal accountability.

Davis questioned how the government could adhere to its commitment to reduce debt while contemplating tax reductions, pointing to official projections indicating a rise in debt.

Trott countered, asserting that debt was decreasing relative to GDP, prompting Davis to express disbelief at her apparent lack of awareness, insisting that debt was indeed escalating.

Contrary to Trott’s claim, official figures utilized to assess this pledge corroborated Davis’s assertion.

The pledge entails reducing debt as a percentage of GDP over five years, a forecast derived from the independent body, the Office for Budget Responsibility (OBR), which evaluates the government’s fiscal plans and formulates economic predictions accordingly.

The OBR’s projections display a slight decline expected in 2028-29 compared to the preceding year, indicating alignment with the debt reduction target.

Davis referenced these OBR figures to challenge Trott, which exclude the Bank of England‘s balance sheet and depict an increase in public sector net debt, refuting Trott’s claim of having ‘different figures’.

The Treasury provided the OBR forecasts including the Bank of England’s balance sheet upon inquiry, revealing an anticipated rise next year followed by consecutive declines over the subsequent four years, positioning debt lower in 2028-29 compared to the present.

However, the measure excluded the Bank of England from the government’s debt pledge evaluation due to the institution’s interventions to bolster the economy, which involved temporary debt surges beyond the government’s control.

Furthermore, the exclusion aligns with the OBR’s rationale that excluding the Bank of England’s contributions to public sector net debt better reflects the repercussions of governmental decisions.

Conclusively, on the specific metric employed by the government for its debt targets, it is inaccurate to assert that debt is diminishing or will be lower in the forthcoming five years.

Labour’s shadow chief secretary to the Treasury, Darren Jones, criticized Trott’s purported lack of basic knowledge while Chancellor Rishi Sunak affirmed the debt’s trajectory toward decline, deviating from his previous claim suggesting debt regression.

The regulator, Sir Robert Chote, emphasized the challenge for the public in discerning intricate public finance statistics and precise definitional nuances surrounding factual claims, implying a complexity surpassing general comprehension.