Background to the report

Government borrows when it spends more than it raises, for example from taxes. In any year where government borrows more than it repays, its stock of debt increases.

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Borrowing provides government with flexibility to deliver policies and support the economy, particularly if tax receipts fall and spending increases.

Government needs to pay interest on the money it borrows.

Government’s actions to protect the economy and public health in response to ‘shocks’ have contributed to debt rising over time, which has in turn played a part in higher debt interest payments. Debt has increased since 2000 mainly because of the 2007–2009 global financial crisis when the government provided support to the banking sector, and the response to the COVID-19 pandemic, alongside the wider economic impact of these shocks on tax receipts, which fell.

As debt servicing costs rise, choices about spending in different government areas become more acute, particularly at a time when higher inflation places greater pressure on existing budgets.

Scope of the report

This report examines how public bodies pursue the government’s debt management objective, and particularly how government manages the risks of borrowing. It focuses on debt that central government issues.

The report does not seek to comment on the merits of fiscal and monetary policy objectives, and levels of tax, spending and borrowing, which are decisions for ministers. Nor does it evaluate whether government is meetings its fiscal objectives and targets, which is the responsibility of the Office for Budget Responsibility (OBR).


The environment for borrowing and debt management has become more challenging since our last report in 2017. As in other countries, the pandemic led to a large increase in borrowing to accommodate higher government spending to protect public health and the economy. More recently, interest rates have increased as central banks seek to combat inflation – this raises the interest costs of new government borrowing.

Against this backdrop the government has been able to borrow its target amounts through the work of the Debt Management Office (DMO) and National Savings and Investment (NS&I). But at the time of this report, debt interest payments are one of the largest items in government spending.

The environment within which the DMO and NS&I borrow on behalf of government continues to change, and there are substantial challenges ahead for debt management, including refinancing the borrowing made in response to the pandemic.

The DMO and NS&I recognise these challenges, but some risks require an increased focus. For example, the DMO faces significant retention risk that both it and the Treasury will need to manage carefully, and NS&I is concentrated in its operations, products and investors and will need to develop ways of diversifying these risks.


Publication details

Press release

View press release (5 Jul 2023)

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