The UK government pays itself approximately 8% of its debt interest

Countries & Cities · Published 14 October 2026 Swipe more like this →

In short: When the British government services its national debt, a significant portion of that money never actually leaves the public sector. Due to past central bank policies, nearly one-tenth of the cost of maintaining the country's liabilities is essentially a circular payment from the state to itself.

The UK national debt is officially measured as the public sector's net liabilities, excluding public sector banks. As of late 2025, this figure was provisionally estimated at £2,927.7 billion, representing roughly 95.6% of the nation's gross domestic product (GDP). While the government borrows money primarily through Treasury bills and gilt-edged securities—bonds that pay fixed coupons every six months—the ownership of these debts is complex.

A notable nuance in the UK's balance sheet is the impact of the Bank of England's quantitative easing programme. Because the Bank is part of the public sector, it owns approximately 8% of the national debt. This means that when the government pays interest on those specific bonds, the money stays within the public sector rather than flowing out to private investors. The net cost to the taxpayer depends on the difference between the coupon income the Bank receives and the interest paid on the reserves used to fund its purchases.

The debt's health is also subject to constant scrutiny by credit rating agencies. The UK lost its AAA status in 2013, with Moody's downgrading it to Aa1 and Fitch to AA+. Subsequent years saw further downgrades following the 2016 EU referendum and the COVID-19 pandemic. While these ratings fluctuate based on fiscal policy decisions and political uncertainty, they reflect the ongoing challenge of balancing public spending against a rising debt stock that continues to grow as long as annual expenditures exceed revenues.

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