UK Debt Continues to Pile Up

Public sector debt levels in Britain are still rising as the government commits to “ending austerity”. Borrowing hit £9.4 billion in September, which puts the government on track to borrow more than £50 billion by the end of the 2019/20 financial year. 

The United Kingdom has been running budget deficits for 18 years, with the last budget in surplus occurring in the 2nd New Labour government in 2001. During this timeframe national debt as a percentage of gross domestic product has shot up from 33.5% to around 85.2% in March 2019.

In gross terms, the estimate of total UK national debt is now officially over £1.8 trillion. This is a conservative figure, independent think-tanks such as the Institute for Economic Affairs (IEA) had found the actual figure could be much higher. The IEA calculated the figure climbs to around £5.5 trillion when other liabilities such as state and public sector pensions are factored in. Whilst this research is from 2011 the government has been running significant budget deficits in this period, so it is reasonable to believe this figure is greater than £5.5 trillion today. 

Despite all these gloomy statistics, the Chancellor Sajid Javid has committed to “ending austerity”, which has supposedly been a hallmark of British Budgets for the last 9 years. Total government expenditure has been steadily rising since 2013, currently peaking in 2018 at £842 billion. 

It is worth examining how gold has performed in this time period. In early 2001, an ounce of gold cost £179.59. At the time of writing, gold is now £1172.35 an ounce, which is an astonishing increase of 552.79%. Those who have possessed gold in this time period must be laughing! So, when the government commits to piling on more debt, take some time to consider if this is the opportune time to invest in gold. 

The 2011 IEA research can be found here.  

Gold Price 2001 - 2019