Where does the UK government borrow money from?

The UK national debt has topped £2 trillion (Credits: Getty Images)

The UK’s national debt has topped £2,000,000,000,000 (£2 trillion), the Office for National Statistics revealed on Friday.

Public sector debt has soared as the government pumps money into the economy to keep businesses afloat amid the coronavirus pandemic.

The financial support for businesses comes in many forms such as self-employment grants and furlough schemes.

But where does the government borrow this money from, and can we possibly pay it back?

Where does the UK government borrow money from?

Government borrowing hit £26.7 billion in July – £28.3 billion more than the same time last year.

The government borrows in the financial markets, by selling bonds.

Rishi Sunak is the Chancellor of the Exchequer, meaning he is in charge of government spending (Picture: Leon Neal/Getty Images)

A bond is a promise to make payments on certain dates to whoever holds it. There is a large payment on the final date.

The repayment date varies from one day to 55 years.

Interest is also paid to whoever owns the bond.

The buyers of these bonds are mainly financial institutions, such as banks and insurance companies. Private savers can also buy some.

The UK is typically a safe bet for investors, as it has been historically good at paying off its debts on time.

Is it possible to pay off the debt?

Debt is the total amount of money owed by the government that has built up over years.

UK debt is currently higher than it’s been since the 1960s.

It is very unlikely that the government will be able to reduce this debt, at least not any time soon.

To do so, taxes would need to dramatically increase, which would worsen the recession we are currently in. Or, they would have to cut spending, which would then run the risk of businesses going bust during the pandemic.

MORE: Furlough scheme replaced with ‘job support scheme’ to top-up workers’ wages

MORE: Second national lockdown ‘would lead to permanent scarring in the economy’

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