On July 22, 2025, the Office for National Statistics (ONS) released alarming figures revealing that the UK’s public sector net debt (PSND) reached £2.85 trillion in June 2025, equivalent to 97.2% of GDP—the highest debt-to-GDP ratio since the early 1960s. Public sector net borrowing for June alone hit £20.7 billion, £3.2 billion above economists’ estimates of £17.5 billion and £6.6 billion more than June 2024, marking the second-highest June borrowing since records began in 1993. Once again, economists’ forecasts have missed the mark, raising questions about their reliability. With debt interest payments now six times higher than in 2020, the UK is hurtling toward a fiscal crisis that threatens economic stability, public services, and future generations.
A Debt Burden at Unprecedented Levels
The June 2025 figures underscore a grim reality: the UK’s debt-to-GDP ratio has climbed from 95.9% in June 2024 to 97.2%, driven by persistent deficits and economic stagnation. Borrowing for the financial year to June 2025 reached £58.4 billion, £7.5 billion higher than the same period last year and £17.8 billion above the Office for Budget Responsibility’s (OBR) March 2025 forecast of £40.6 billion. The OBR’s projections have been consistently off, underestimating borrowing by £14.6 billion for the full 2024/25 financial year, which ended at £151.9 billion.
Debt interest payments have surged to £105.2 billion annually, six times the £17.5 billion paid in 2020, driven by inflation-linked gilts tied to the Retail Prices Index (RPI). In June 2025, interest payments alone cost £16.4 billion, nearly double the previous year’s figure, reflecting a 3.4% RPI increase. This escalation is crowding out spending on essential services like healthcare and education, with debt interest now rivalling major departmental budgets.
Economists’ Forecasts: Consistently Wrong
Economists and the OBR have once again been caught flat-footed. The OBR’s March 2025 forecast underestimated June’s borrowing by £3.2 billion, part of a broader pattern of miscalculations. Historically, forecasts failed to predict the scale of borrowing during the 2008 financial crisis, the Covid-19 pandemic, and the 2022 energy price shock. The OBR’s own “ready reckoners” admit that forecasts become outdated as economic conditions shift, yet policymakers rely heavily on these flawed projections.
Why are economists so often wrong? Their models struggle to account for rapid changes in inflation, interest rates, and global risks like geopolitical tensions or supply chain disruptions. Posts on X highlight frustration with this disconnect, with users like @asentance calling the deficit “totally unsustainable” and criticising the OBR’s £50 billion forecasting error. Overreliance on short-term data ignores structural challenges like an ageing population and declining tax revenues from decarbonisation, which the OBR itself flags as long-term debt drivers. This persistent failure undermines confidence in economic planning and leaves the government ill-prepared for fiscal shocks.
Why This Debt is Bad for the UK
The UK’s spiralling debt poses severe risks to its economy and society:
1. **Crowding Out Public Services**: At £105.2 billion annually, debt interest payments consume a massive share of the budget, surpassing spending on defence and rivalling education and health. This squeezes funding for hospitals, schools, and infrastructure, exacerbating the strain on public services already weakened by years of austerity.
2. **Vulnerability to Interest Rate Shocks**: Around 25% of UK debt consists of index-linked gilts, which are highly sensitive to inflation. A 1% rise in gilt yields could add £30 billion to annual interest costs. With 10-year gilt yields reaching 4.64% in January 2025—the highest since 2008—the cost of borrowing is climbing, and market confidence is faltering. A loss of investor trust could trigger a gilt sell-off, further driving up yields.
3. **Risk of a Fiscal Crisis**: The OBR warns that without policy changes, debt could hit 270% of GDP by 2070, with June’s figures suggesting an even faster trajectory. Borrowing at 5.5-6% of GDP in 2025/26, as projected by some analysts, is “totally unsustainable,” risking a crisis akin to the 1976 IMF bailout. Such a crisis could force tax hikes, spending cuts, or external bailouts, devastating living standards. X users like @darwin_friend1 warn that this debt burden will “haunt future generations.”
4. **Intergenerational Burden**: An ageing population and shrinking workforce will struggle to support rising pension and healthcare costs, leaving future generations to foot the bill through higher taxes or reduced services. Declining fuel duty revenues as the economy decarbonises further limit fiscal options.
5. **Eroding Market Confidence**: With 31% of gilts held by overseas investors, rising yields and a weakening pound signal growing market unease. A sudden loss of confidence could lead to a liquidity crisis, forcing the government to seek external support, as seen in 1976.
The Path to a Fiscal Crisis
A fiscal crisis occurs when a government cannot meet its obligations without extreme measures like default, bailouts, or severe austerity. June’s £20.7 billion borrowing, combined with a £170 billion annual deficit projection, signals a dangerous trajectory. The OBR’s Richard Hughes has noted that the government’s £9.9 billion fiscal headroom is “not very much” given risks like climate change costs or global economic shocks. A single event—such as a cyberattack or a global interest rate spike—could push borrowing beyond sustainable levels, leading to a plummeting pound, soaring yields, and a potential loss of market access. This would force draconian measures, deepening inequality and eroding public trust.
Conclusion: A Critical Juncture
The UK’s public debt, now at 97.2% of GDP, is a crisis in the making. June 2025’s £20.7 billion borrowing figure, far exceeding forecasts, underscores the failure of economists to predict fiscal realities. With interest payments six times higher than in 2020, the government is trapped in a cycle of borrowing to service debt, leaving little room for public services or economic growth. Urgent action—through spending restraint, revenue increases, or productivity-enhancing reforms—is needed to avert a 1976-style fiscal collapse. The UK stands at a critical juncture; ignoring today’s figures risks catastrophic consequences for the economy and future generations.
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