Three Centuries of the National Debt
The National Debt was made possible shortly after the Glorious Revolution, when William III arranged to sell
debt securities through a syndicate of London merchants. The syndicate became the Bank of England, and the securities
founded the National Debt.
Chart 4.01:
National Debt 1900-2020
Chart 4.02:
National Debt 1692-2020
When charted in pounds sterling, in Chart 4.01, the National Debt looks huge. Looking back over the last century, the
debt back in 1900 doesn’t really register. But by charting debt as a percent of gross domestic
product (GDP) in Chart 2, you get a look at government debt compared to the size of the economy at the time.
Chart 4.02 tells, in stark detail, the story of the British Empire. It was built on the National Debt. Throughout the
18th century the National Debt grew and grew, from nothing at the end of the 17th century to about 60 percent of GDP by the
end of the War of Spanish Succession in 1715.
In mid-century the Carnatic Wars in India, the Seven Years War against France and the American War of Independence caused another ratchet in National Debt up to 156 percent of GDP in 1784.
But that was just the beginning. The Revolution in France and the subsequent Napoleonic Wars led to another
explosion in military spending and the National Debt rose to 237 percent of GDP in 1816 after the battle of Waterloo. The rest of the 19th century was spent in drawing the debt down, to a low of 25 percent of GDP in 1914. That was just before
the outbreak of the Great War in Europe.
National Debt since 1900
In the 20th century the UK government has increased the National Debt to fight wars and to mitigate economic troubles.
Chart 4.03:
National Debt 1900-2020
At the beginning of the 20th century in 1900 the National Debt stood at a very manageable 30 percent of GDP and dipped to 25 percent of GDP by 1914 despite the intervening Boer War. But the Great War, World War I, caused an explosion in the
National Debt up to 135 percent of GDP in 1919. Then, in the economic troubles of the 1920s it rose to 181 percent in 1923
and stayed above 150 percent of GDP until 1937. The National Debt dipped to 110 percent of GDP in 1940 before soaring
to 238 percent of GDP after the close of World War II in 1947.
After World War II the National Debt was exponentially reduced, year by year, geting down as low as 25 percent of GDP in 1992. Thereafter
it fluctuated in the 30s and 40s until the financial crisis of 2008. The National Debt reached almost 85 percent of GDP in the aftermath of the crisis,
drifted lower to 81 percent of GDP by 2020 before sharply increasing to 105 percent GDP in the COVID year of 2021.
A Century of Interest Payments
Chart 4.04:
Interest on National Debt 1692-2020
The real risk from government debt is the burden of interest payments. Experts say that
when interest payments reach about 12% of GDP then a government will likely default on its
debt. Chart 5 shows that the UK is a long way from that risk. The peak period for government
interest payments, including central government and local authorities, was in the 1920s and 1930s right after World
War I.
In the post WWII period, the cost of servicing the national debt stayed around 4 percent of GDP except for a blip
up to 5 erpcent in the early 1980s during the Thatcher fight against inflation. By the 2000s interest on the National
Debt had come down to 2 percent of GDP. In the aftermath of the financial crisis of 2008 interest payments
increased to 3 percent of GDP in 2011, but are forecast to decline towards 2.4 percent of GDP by 2020.
