UK’s Public Sector Finances Show Wider Health Than Headline Debt Figures Suggest

Understanding the difference between financial measures

The Office for National Statistics has released figures showing that public sector net financial liabilities (PSNFL) reached 82.4% of gross domestic product at the end of January 2026. Whilst this figure might sound familiar to those following the debt debate, it tells a significantly different story from the more frequently cited public sector net debt figure of 92.9% of GDP for the same period.

The 10.5 percentage point difference between these two measures is not merely technical jargon—it reflects a more comprehensive assessment of the UK’s financial position and deserves closer scrutiny from households and businesses trying to understand the nation’s economic health.

To understand why these figures diverge, it is important to grasp what each measure captures. Public sector net debt is the traditional measure that counts the money the government owes to the private sector and overseas institutions, minus any liquid assets it holds. It is the figure most often cited in political debates and media headlines. Public sector net financial liabilities, by contrast, cast a wider net. They include the broader range of financial assets and liabilities beyond simple borrowing, such as student loan assets, pension obligations, and other financial commitments.

The PSNFL measure therefore presents a more complete picture of the government’s true financial position, accounting for assets that can help offset liabilities. This explains why it sits lower than the headline net debt figure—the additional financial assets counted in PSNFL reduce the apparent burden when measured this way.

January’s record surplus provides context

The release of these figures comes alongside more positive news from January’s public finances. The public sector recorded a £30.4 billion surplus that month, the largest monthly surplus since records began in 1993. This remarkable turnaround occurred partly due to the timing of tax payments; January traditionally sees elevated receipts from self-assessed income and capital gains tax returns.

However, the scale of this surplus was amplified by a specific factor: companies and individuals brought forward asset sales ahead of planned tax increases, generating substantial capital gains tax revenues. This one-off boost illustrates an important truth about public finances—monthly figures can be heavily influenced by timing effects and temporary factors rather than underlying trends.

For the financial year running from April to January, public sector net borrowing totalled £112.1 billion. The Office for Budget Responsibility had forecast borrowing of £120.4 billion for this period, meaning the outturn came in £8.3 billion better than expected. Nonetheless, this remains the fifth-highest April to January borrowing total on record, underscoring that even with a better-than-forecast performance, the government is still borrowing at elevated levels by historical standards.

The current budget shows improvement

One element of the January finances that warrants attention is the current budget, which measures borrowing for day-to-day public sector activities excluding investment. The current budget showed a surplus of £40.9 billion in January, bringing the ten-month current budget deficit to £55.9 billion. This represents a 24.3% improvement compared to the same period a year earlier, suggesting that the government’s day-to-day spending position is tightening relative to revenues.

This improvement reflects a combination of factors: tax revenues have strengthened due partly to economic growth and the timing effects mentioned above, while public spending growth has been constrained. Interest payments on government debt fell in January compared to the previous year, providing some relief, though this is partly offset by higher benefit costs and public service spending.

Putting the figures in perspective

At 82.4% of GDP, public sector net financial liabilities remain elevated by long-term standards, though the Office for Budget Responsibility projects this measure will fall to 82.2% of GDP by 2030-31. The organisation expects PSNFL to stabilise around the 83% mark in the near term as a share of the economy.

The distinction between the 92.9% net debt figure and the 82.4% financial liabilities figure is worth understanding because it shows that the government’s balance sheet includes assets, not merely liabilities. Whilst net debt paints a picture of gross borrowing, net financial liabilities acknowledge that the state holds financial assets—primarily student loan portfolios—that partially offset this borrowing burden.

Nevertheless, both measures point to a government balance sheet that remains stretched. The historical comparison is sobering; net debt at 92.9% of GDP matches levels not seen since the early 1960s, reflecting the legacy of pandemic-era spending and subsequent economic headwinds.

What This Means for Kent Residents

For people living and working in Kent, these figures matter in practical ways. Elevated public sector debt constrains the government’s fiscal flexibility, potentially limiting investment in public services that matter locally—from the NHS in Dover and Canterbury to schools and transport infrastructure. The £112.1 billion borrowing total for the April-January period represents money the government must eventually service through interest payments, reducing resources available for public investment.

However, the better-than-expected borrowing outturn and the improvement in the current budget deficit suggest the public finances trajectory is improving. If sustained, this could eventually create more room for government investment in regional priorities, including transport links like HS1 and infrastructure supporting Kent’s ports and cross-Channel trade. For households managing mortgages and other borrowing, a government working to stabilise its finances may eventually support lower interest rates, though this remains dependent on broader economic conditions and Bank of England policy.

Key Takeaways

• Public sector net financial liabilities reached 82.4% of GDP in January 2026, a broader measure than the commonly cited net debt figure of 92.9% of GDP
• The £30.4 billion surplus in January was the largest since 1993, driven partly by one-off capital gains tax inflows from brought-forward asset sales
• For the financial year to January, borrowing totalled £112.1 billion, better than the Office for Budget Responsibility’s £120.4 billion forecast
• The current budget deficit has improved significantly compared to a year ago, suggesting tighter day-to-day government finances relative to revenues