Effects of Borrowing and Public Debt on Money Management
Growing National Debt: In 2023, the UK's public sector debt is about £2.2 trillion. This amount is around 94% of the country's total economy, called GDP.
Interest Payments: When a lot of money is borrowed, it means more money has to be paid back in interest. In 2022, interest payments made up about 6% of all the money the government spent.
Crowding Out: When the government borrows more money, it can make it harder for businesses to invest. This is because higher borrowing can lead to higher interest rates, which may stop companies from growing.
Less Flexibility in Money Management: When debt levels are high, the government might not be able to spend more money during tough economic times. This means they have less freedom to help boost the economy.
Risk of Austerity: To deal with high debt, governments might need to cut back on spending, which is called austerity. This can hurt public services and slow down economic growth.
Effects of Borrowing and Public Debt on Money Management
Growing National Debt: In 2023, the UK's public sector debt is about £2.2 trillion. This amount is around 94% of the country's total economy, called GDP.
Interest Payments: When a lot of money is borrowed, it means more money has to be paid back in interest. In 2022, interest payments made up about 6% of all the money the government spent.
Crowding Out: When the government borrows more money, it can make it harder for businesses to invest. This is because higher borrowing can lead to higher interest rates, which may stop companies from growing.
Less Flexibility in Money Management: When debt levels are high, the government might not be able to spend more money during tough economic times. This means they have less freedom to help boost the economy.
Risk of Austerity: To deal with high debt, governments might need to cut back on spending, which is called austerity. This can hurt public services and slow down economic growth.