Paying interest on UK’s debt will cost £83bn in one year… equal to £1,235 for every person living here, financial report predicts
- The UK will have to pay a record £83billion just to service the national debt
- Rishi Sunak said he has had make ‘difficult decisions’ with public finances
- The national debt has grown from £354billion in 2000 to nearly £2.5trillion
The Treasury will spend more servicing Britain’s ballooning national debt in the coming year than it will on almost every other government department.
In a report that underlined the staggering cost of the UK’s debt pile of nearly £2.5trillion, the financial watchdog said debt interest payments will hit a record £83billion in 2022-23 – amounting to around £1,235 for every person in the UK.
It is also £31billion more than the Office for Budget Responsibility (OBR) predicted last October, almost twice the defence budget and close to the £83.3billion due to be spent on education. Only the NHS and education will receive more money.
Last year, the interest bill totalled just £23.6billion.
Chancellor of the Exchequer Rishi Sunak (pictured) said there would have to be ‘difficult decisions with the public finances’ as the UK’s debt has ballooned to nearly £2.5trillion
At the start of the century the total national debt was £354billion, now interest payments will hit a record £83billion just for 2022-23
The OBR said it now expects the Treasury to pay £274.5billion in debt repayments over the next four years.
Debt interest payments have been driven higher by rising inflation. This is because some £500billion of debt is index-linked, which means it is pegged to the retail prices index (RPI). Official figures yesterday showed RPI hit 8.2 per cent in February – the highest level in three decades.
The Bank of England has raised interest rates three times in three months – from 0.1 per cent to 0.75 per cent – to contain rising prices. But this will also bump up the Government’s borrowing costs, as interest rates climb.
Matt Kilcoyne, of the Adam Smith Institute, said: ‘It’s pretty grim, and the worry is it could be high for a long period.
‘The spending on this is now higher than on most governmental departments. That in itself is quite a statistic. We are going to be paying the price for our borrowing.’
Director General at the Institute of Economic Affairs, Mark Littlewood (pictured), has said the new plan is not ‘paying back the debt’, but ‘just servicing the debt’
Delivering his Spring Statement yesterday, Mr Sunak said: ‘In the next financial year, we’re forecast to spend £83billion on debt interest – the highest on record. And almost four times the amount we spent last year. ‘That’s why… we have already taken difficult decisions with the public finances. And that’s why we will continue to weigh carefully calls for additional public spending. More borrowing is not cost or risk free.’
The national debt has ballooned this century – from £354billion in 2000 to £2.3trillion today – after Labour lost control of the public finances in the financial crisis and spending spiralled during the pandemic.
The debt burden now represents 96 per cent of gross domestic product – the highest level since 1963.
Mark Littlewood, director at the Institute of Economic Affairs, said: ‘This is not paying back the debt, this is just servicing the debt. We can’t go on like this forever. We have been living beyond our means.’
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