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\t\tThe Bank of England\u2019s former Governor has raised alarm at the UK\u2019s high levels of debt.\t<\/p>\n\t\t\tWednesday 10 September 2025 11:55 am
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\t\t\tWednesday 10 September 2025 11:56 am\n\t<\/p>\n
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\t\tThe Bank of England\u2019s former Governor has raised alarm at the UK\u2019s high levels of debt.\t<\/p>\n
The UK\u2019s national debt load is \u201cnot in a comfortable position\u201d and the government faces a \u201creal challenge\u201d in managing fiscal policy, the former Governor of the Bank of England has said.\u00a0<\/p>\n
Speaking to Lords at a committee hearing on Wednesday, Mervyn King said the UK was in a \u201cmuch stronger position\u201d before the financial crisis in 2008 and warned that most of the world\u2019s largest economies were in a \u201cmess\u201d.\u00a0<\/p>\n
King said the financial system was still ready to deal with any incoming crisis though he warned the pressures on the economy posed a greater risk given the high costs of government interventions in crises.\u00a0<\/p>\n
He also hinted that the government should make reducing the national debt a higher priority as the Autumn Budget <\/a>approaches.\u00a0<\/p>\n \u201cAll G7 countries ought to be very concerned about the high level of national debt relative to GDP,\u201d King said.\u00a0<\/p>\n \u201cIt would certainly make it more difficult and more costly to engage in the interventions that we saw both in covid and in the financial crisis, where the whole point of bringing down debt to GDP before the financial crisis was to enable it to jump up if necessary in the event of a crisis.\u00a0<\/p>\n \u201cSome people have drawn comfort from the fact that the recent rise in long term interest rates<\/a> has been true across the G7. But that simply means that we are all in the same mess, rather than just the UK.\u201d<\/p>\n King<\/a> pointed out successive Tory and Labour governments had \u201cnot managed to achieve\u201d pledges to reduce the national debt as a share of GDP, making the UK less likely to protect Brits from another economic crisis.\u00a0<\/p>\n He also said that the UK, along with other Western countries, faced problems that only developing economies receiving emergency IMF loans previously had.<\/p>\n \t\t\t\t\tRead more<\/p>\n \t\t\tRachel Reeves tells creditors to resolve Thames Water crisis<\/a><\/p>\n While King said he believes the UK could \u201ccope\u201d in the case of future hits, he said: \u201cI think we are not in a comfortable position.\u201d<\/p>\n UK paying \u00a3105bn to service debt this year<\/p>\n The UK\u2019s national debt as a percentage of GDP is estimated to be 96.1 per cent, having fallen slightly under the previous Tory government before climbing since March.\u00a0<\/p>\n The government is also set to pay more than \u00a3105bn on servicing its debt this year, which is just short of the total budget for education.\u00a0<\/p>\n Fresh data on the state of public finances is expected to be released next week.\u00a0<\/p>\n Chancellor Rachel Reeves is widely expected to raise at least \u00a325bn in taxes to plug a hole in public finances but Wall Street analysts<\/a> are warning that raising small revenue-raisers, such as sin taxes and levies on pension pots, could keep interest rates higher and fail to keep the public purse in check.\u00a0<\/p>\n \u201cThe historical record shows that growth tends to hold up better following spending cuts than revenue increases,\u201d Goldman Sachs\u2019 Sven Jari Stehn said.\u00a0<\/p>\n \u00a0A number of government bond traders have also called on the government to prioritise spending cuts over tax hikes, which could persuade markets that Labour was stabilising borrowing levels and maintaining credibility.\u00a0<\/p>\n King also took aim at market money-makers operating at banks, claiming he didn\u2019t find it \u201cparticularly attractive\u201d for bankers to focus on trading a source of profit rather than focusing on lending or other \u201cbasic banking activities\u201d.<\/p>\n