Glossary

Plain-English definitions of the terms used across this site.

Austerity: A policy of reducing the deficit through spending cuts or tax rises. Often used to describe UK policy after the 2008 financial crisis.
Bank Rate: The Bank of England's main interest rate. It influences the cost of government borrowing, as well as mortgages and savings.
Borrowing: The cash the government raises to cover a deficit, mostly by selling gilts. Public sector net borrowing is the standard monthly measure.
Current budget deficit: Borrowing for day-to-day spending only, excluding investment. A narrower measure than total borrowing.
Debt interest: The cost of servicing debt. It depends on both how much is owed and the interest rate paid, and includes inflation uplift on index-linked gilts.
Debt Management Office (DMO): The agency that sells gilts and manages government borrowing on behalf of HM Treasury.
Debt-to-GDP ratio: Debt measured as a percentage of GDP. It shows the scale of debt relative to the economy that supports it, which matters more than the cash total alone.
Deficit: The amount by which government spending exceeds its income in a period. A deficit adds to debt; a surplus reduces it.
Fiscal drag: When tax thresholds are frozen while incomes rise, pulling more people into paying tax, or higher rates, without the rates themselves changing.
Fiscal rules: Targets a government sets itself for borrowing or debt, such as having debt falling as a share of GDP within a set number of years.
Fiscal year: The government's financial year, running from 1 April to 31 March. Also called the financial year.
GDP: Gross domestic product, the total value of goods and services the economy produces. Used as the yardstick for the size of debt and borrowing.
Gilt yield: The return an investor gets on a gilt. When yields rise, new government borrowing costs more.
Gilts: UK government bonds. The government sells them to investors and repays the value at a set date, paying interest in the meantime. Some are index-linked to inflation.
Gross debt: Total government liabilities without subtracting any assets. It is higher than the UK's headline net debt, and is the measure used for international comparisons because countries report it consistently.
HM Treasury: His Majesty's Treasury, the UK government's economic and finance ministry. It controls public spending and sets tax policy.
IMF: The International Monetary Fund, an international body that monitors the world economy and lends to countries in financial difficulty. Its data is used here to compare countries on a consistent basis.
Index-linked gilts: Gilts whose value and interest rise with inflation. Around a quarter of UK gilts are index-linked, which is why debt interest jumps when inflation is high.
Inflation: The rate at which prices rise over time. The main measure is the Consumer Prices Index (CPI). High inflation raises the cost of index-linked debt.
Liquid assets: Things the government can quickly turn into cash, such as foreign currency reserves and short-term deposits. Net debt is total debt minus these, which is why it is lower than gross debt.
National Insurance: A tax on earnings paid by workers and employers, funding the state pension and some benefits. One of the largest sources of government revenue.
OBR: The Office for Budget Responsibility, the independent body that produces the UK's official economic and fiscal forecasts.
ONS: The Office for National Statistics, the UK's official producer of statistics including the monthly public finances.
Primary balance: Government borrowing excluding debt interest. It shows whether day-to-day choices add to debt before interest is counted.
Productivity: How much is produced for each hour worked. Weak productivity growth limits how fast the economy, and tax revenue, can rise without adding to inflation.
Public sector net debt: The UK government's preferred debt measure: total liabilities of the public sector, less its liquid assets. The headline version excludes public sector banks and is the main measure used in monthly statistics.
Public spending: Total government spending, including services, benefits, investment, and debt interest.
Quantitative easing (QE): The Bank of England creating money to buy gilts, used to support the economy. Reversing it later also affects the public finances.
Real terms: Figures adjusted for inflation, so they reflect actual buying power rather than cash amounts. The opposite is 'nominal' or 'cash' terms.
Recession: A sustained fall in the size of the economy, usually defined as two quarters in a row of negative growth. Recessions cut tax revenue and raise borrowing.
Structural deficit: The part of the deficit that would remain even if the economy were running normally, rather than the part caused by a temporary downturn.
Tax burden: Total taxes measured as a share of GDP. It shows how much of the economy is taken in tax, and is close to a multi-decade high in the UK.
Tax receipts: The money the government collects in taxes, such as income tax, National Insurance, VAT, and corporation tax.