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Government debt rises to £47,000 per household

Government debt has continued to grow since the financial crisis, the National Audit Office has today reported.

The Whole of Government Accounts (WGA) found net liabilities of £1,986bn in 2015-16, of which £1,261bn was debt from borrowing, equating to around £47,000 per UK household.

This borrowing has increased by 61% since WGA first published its figures in 2009-10, and interest on the debt has cost £222bn.

The Office for Budget Responsibility has forecast that inflation could increase debt interest costs by £26bn between 2016-17 and 2020-21.

The main method of government borrowing is through issuing government gilts through the Debt Management Office (DMO) and encouraging savers to invest in National Savings & Investment (NS&I) retail products.

However, the government faces challenges in managing its asset portfolio and predicting the timing of cash raised from sales.

Since the financial crisis managing public finances has become more difficult, with the government managing an increased range of assets and liabilities, alongside its spending commitments.

The Treasury has started to take a stronger stance on analysing the government’s accounts and evaluating risk.

As the UK prepares for Brexit, and the Bank of England prepares for the eventual winding down of its quantitive easing programme, the future of public finances is unclear and will require mitigation of the risk of disrupting gilt market conditions.

Additional risks to public finances could also arise from inflation as a result of the rising proportion of index-linked gilts.

Amyas Morse, head of the National Audit Office, said: “Put simply, public and private borrowing are high, kept affordable by record low interest rates, and quantitative easing continues ten years after the crisis it responded to.

“There are significant risks to the public finances and any unexpected developments, potentially including consequences of leaving the EU could exacerbate them.

“In these circumstances, the Treasury needs to constantly monitor these risks and be ready to react quickly and flexibly.

“It has taken steps to increase its capacity to respond.”

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