National debt to soar above £3trillion as Labour embarks on borrowing binge
Britain's debt mountain currently stands at £2.93trillion, having been just £350billion at the turn of the century.
By HUGO DUNCAN
Updated: 09:18 GMT, 2 January 2026
The national debt is set to top £3trillion for the first time this year as Labour embarks on a massive borrowing binge.
Britain’s debt mountain currently stands at £2.93trillion, having been just £350billion at the turn of the century.
And forecasts from the Office for Budget Responsibility (OBR) suggest it will reach £3trillion in 2026 before surging above £3.5trillion by 2030-31. That would mean it has risen tenfold in 30 years.
And the cost of servicing the debt is soaring, with taxpayers expected to fork out more than £600billion in interest payments over the next five years.
The Treasury has pencilled in a debt interest bill of £135billion for 2026-27 – dwarfing the £90billion it expects to spend on defence and close to the £145billion earmarked for education.
With spending set to reach £1.4trillion, around £1 in every £10 the Government spends is on servicing debt. The 2008 financial crisis, Covid pandemic and energy price shock have driven the debt towards 100 per cent of national income.
More borrowing: The national debt is set to top £3trillion for the first time this year as Labour embarks on a massive borrowing binge
But the Government has faced criticism over the figures, with the OBR noting that ‘planned spending reductions have been abandoned’ as it has watered down welfare reforms and lifted the two-child benefit cap.
Tory business spokesman Andrew Griffith said: ‘The Government is testing the limits with an unparalleled level of national debt. Young people face a struggle to even get a job, yet stand to inherit the worst-ever level of national debt.’
Rachel Reeves has announced tax rises worth £75billion a year – more than any other Chancellor in at least six decades.
But with welfare spending set to soar from £333billion this year to over £400billion in 2030-31, she plans to borrow more than £430billion over the next five years to plug a hole in finances.
A Reform UK spokesman said: ‘Thanks to successive Tory and Labour governments, Britain spends almost as much on servicing debt as it does on education.’
The sharp rise in taxes and borrowing to pay for Labour’s spending spree comes as the economy flounders under Reeves.
It has ground to a halt since the summer as households and businesses reel from the rising tax burden, while unemployment has jumped from 4.1 per cent to 5.1 per cent since Labour came to power.
Borrowing costs also remain elevated, with UK bond yields among the highest in the developed world as investors demand a premium to lend to the Government, despite a string of interest rate cuts by the Bank of England.
The yield on ten-year gilts, a key measure of how much it costs the Government to borrow, stands at around 4.5 per cent, having been close to 4 per cent when Labour came to power.
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