In theory, a nation can’t run at a loss. The difference between what it spends on social security, defence, education, healthcare and so on must balance the receipts that it receives in various forms of taxation, so any shortfall must be made up from public borrowing. At the end of the financial year, this “national overdraft” is added to the nation’s public debt mountain. In the case of the United Kingdom, public debt stands at about £1.3 trillion or nearly 77% of UK GDP. The UK government has indulged in public borrowing for about three centuries, so this is a long-term problem. The interest that the UK is paying on its public debt is roughly 2% of GDP. To put that in perspective, the UK’s GDP comes in at about £1.5 trillion or so meaning that it costs the nation £30 billion a year to service its debt – for comparison, the cost of funding the NHS is of the order of £108 billion annually. Alternatively, with a population of some 60 million souls, Britain pays £500 per head of population for its debt.
The current government has been at pains to get the deficit under control (not the debt, but the shortfall between accounts received and expenditure). The plan was that the deficit would be reduced by 10% over the next year, but borrowing for September has surpassed expectations, coming in at £11.8 billion, £1.6 billion more than at the same period in 2013. Borrowing between April and September stood at £58 billion, £5.4 billion (almost 10%) up from the same period in 2013. The culprit seems to be that receipts from taxes have been lower than projected because of continuing weakness in global demand and the very anaemic recovery in the Eurozone with whom the UK does most of its trading.