PARTNER INSIGHT
The Chart of the Week highlights the UK government’s debt as a percentage of GDP, and on the right, you can see the average maturity of this debt. So, what’s all the fuss about? The market is concerned that the UK government won’t be able to pay its bills (debt). This is because the UK government announced several cuts to personal tax last week, which means they will take in less money from taxpayers and will need to issue government bonds (debt) to pay for these tax initiatives.
This included:
- Abolishment of the higher rate (45%) of income tax for earnings over £150,000
- Cutting of the basic rate of income tax by 1% from April 2023, from 20% to 19%
- The increase in the stamp duty threshold to £250,000
Should we be concerned?
Well, even after you consider the new planned spending (the red diamond in the chart above indicates the level of debt-to-GDP in 2023/2024), the debt profile for the UK does not change all that much. In fact, the UK remains below levels of debt when compared with other countries in the G7 (a group of seven of the world’s largest and most advanced economies). And the UK does not have to pay its debt back for longer than any other country in the G7.
Takeaway: Don’t let the truth get in the way of a good story. It’s important to get information from different sources to get to the facts.
Did you know:
Bank of England launches £65bn move to calm markets. Click here.
Source: Marlborough Multi-Asset Investment Team, Goldman Sachs, Financial Times.
