Economic Affairs Committee launches new inquiry on the sustainability of the UK’s national debt

UK public sector net debt, often referred to as ‘national debt’, currently stands at just under 100 per cent of GDP.

The UK’s growth outlook remains weak; quantitative easing has significantly increased the sensitivity of the UK’s debt to changes in short-term interest rates; and it is unclear whether the Government’s fiscal rule, as it relates to the national debt, is fit for purpose.

The committee’s inquiry will investigate whether the UK’s national debt is on a sustainable path; if not, what steps are required; and whether the Government’s fiscal rule regarding the national debt is meaningful.

The committee is seeking answers to the following questions:

• What is meant by a “sustainable” national debt? Does the metric of debt as a percentage of GDP adequately capture sustainability?
• The Government’s target is for public sector net debt (excluding the Bank of England) to be falling, as a percentage of GDP, by the fifth year of the OBR’s forecast. How meaningful is this target; and how does it inform an evaluation of the sustainability of our national debt?
• How robust are the assumptions used by the Office for Budget Responsibility when forecasting our national debt?
• What implications does the structure of the UK’s national debt have for its short and longer-term funding?
• What are the market risks created by high levels of public debt; and what factors will influence the market’s appetite for this debt?
• What levels of productivity and growth are required to ensure our national debt is sustainable?
• If we are to ensure our national debt is sustainable, what might this mean for fiscal policy?
• Should the definition of the national debt differentiate between debt incurred for investments (which generate revenue for the Government), and other areas of spending?

Commenting on the launch of the new inquiry, Lord Bridges of Headley, Chair of the Economic Affairs Committee, said:

“Our national debt stands at an incredible £2.6 trillion. A recent OBR report stated that the 2020s were turning out to be “a very risky era” for the public finances. Our inquiry will explore if and how the UK can manage this level of indebtedness.

“To inform our work we want to hear from as broad a range of people as possible. If you have a view on any aspect of debt sustainability, look at our call for evidence and let us know what you think.”

The deadline for the submission of written evidence is Friday 9 February 2024.

Read the call for evidence and find out how to submit evidence.