Domesday Live

What is the difference between the debt and the deficit?

The deficit is how much more the government spends than it collects in one year. The debt is the total it owes after adding up all the years of borrowing. A deficit makes the debt bigger. Only a surplus, collecting more than it spends, would make it smaller.

Why it happens

• Like a bath. Think of the debt as the water in the bath, and the deficit as the tap running in each year. The debt can only go down if the tap is turned off and the plug pulled with a surplus.
• Two ways to measure the deficit. 'Borrowing' counts all spending against all income. The 'current budget deficit' leaves out investment, such as roads and hospitals.
• A falling share is not a falling debt. Debt can rise in pounds while falling as a share of the economy if the economy grows faster than the debt.