Who does the government borrow money from and how indebted is the UK?
The iz Truss government is cutting taxes instead of raising them, which is expected to cost billions.
Industry estimates suggest the bill could be between £130bn and £150bn, although the government has yet to release a total figure.
It is understood that the government will borrow to pay for the new measures.
The total amount the government borrows is called the national debt, because the money must be repaid eventually – with interest.
This means that taxpayers end up paying.
Who does the government borrow money from?
The government borrows money by selling bonds.
A government bond, better known as a gilt, allows the government to lend money in exchange for an agreed interest rate.
Gilts are mainly purchased by financial institutions, such as pension funds, investment funds, banks and insurance companies, from the UK and overseas.
The higher the national debt, the more interest the government has to pay on all the bonds it has sold.
Until recently, the government could borrow money at rates below 1%. However, both interest rates and government interest charges have increased.
This rise in inflation caused interest payments on the national debt to hit a new high of £8.2tn in August.
Debt interest payments are expected to top £100bn, not including the most recent efforts to limit rising energy prices, which are expected to make matters worse.
Is the government heavily in debt?
According to the latest available figures, the government has a debt of £2.4 billion, which is almost equivalent to the annual value of all goods and services generated in the UK.
During the pandemic, the government took out large loans during the pandemic to pay for programs like furlough.
According to the National Audit Office, £376billion has been spent fighting Covid.