Britain will have the biggest borrowing burden of any major economy as the cost of servicing government debt hits its highest level since World War II
Britain will have the biggest borrowing burden of any major economy as the cost of servicing the government’s gargantuan debt hits its highest level since just after World War Two.
In last week’s budget, Chancellor Jeremy Hunt said he would stick to his budget rule that debt would shrink in proportion to the size of the economy in five years’ time – with £6.5billion to spare.
Tightening the purse strings: The total cost of paying the £2.5trillion national debt is set to reach £548bn by 2028
But the total cost of paying the £2.5trillion national debt is expected to reach £548bn by 2028 – enough to fund the next three years of healthcare.
The interest bill is expected to peak this year at £115bn, or more than £1,700 per person, according to the Office for Budget Responsibility (OBR).
Analysts say the reason the UK’s debt bill is so high is that more than a fifth of it is linked to inflation – far higher than other major economies.
The staggering sum is £5bn lower than the OBR forecast in November. But it is still equal to 4.5% of annual output or 11.2% of revenue – in either case, the highest since the late 1940s.
This means that the amount spent on debt service will exceed that of Italy, Europe’s most indebted country, and will be much higher than that of the United States or Japan, according to recent data from the European Commission. .
“It’s a surprisingly high number,” said Stefan Koopman, senior macroeconomic strategist at investment bank Rabobank. “Having to shell out so much to pay off existing debt costs will crowd out a lot of utility and investment spending.”