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The national debt is one of the most politically charged topics in economics. Understanding its causes, consequences, and the debate over austerity is essential for A-Level Economics. This lesson examines the UK's experience with national debt, the 2010-2019 austerity programme, and the theoretical arguments around crowding out and Ricardian equivalence.
Key Definition: The national debt (or public sector net debt) is the total accumulated stock of government borrowing over time — the sum of all past budget deficits minus any surpluses. It is distinct from the annual budget deficit, which is a flow.
The UK national debt has fluctuated dramatically over history:
| Period | Debt as % of GDP | Key Cause |
|---|---|---|
| Post-WWII (1945) | ~250% | War expenditure |
| 1990s | ~30% | Long period of growth, privatisation receipts |
| 2007 (pre-crisis) | ~37% | Sustained growth, moderate deficits |
| 2010 (post-crisis) | ~75% | Bank bailouts, fiscal stimulus, automatic stabilisers |
| 2020 (COVID) | ~100% | Furlough scheme, business support, NHS spending |
| 2023 | ~100% | Persistent post-COVID borrowing |
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