The Government paid more interest on its debt than any November on record last month as the impact of inflation fed through to its bond payments.
The interest payable on UK debt hit £7.7bn, which was the highest November total since monthly records began in April 1997. It was also £100m higher than the same month in 2022.
It comes after large increases in inflation since 2021 impacted its index-linked gilts. Many bonds are tied to the outdated retail prices index measure of inflation, which recorded its largest three months on record in 2022 and 2023.
The rise in debt repayments were behind the larger than expected public sector borrowing in November, which stood at £14.3bn.
However, the dramatic falls in inflation in recent months, from 6.7pc in September to 3.9pc in November, will significantly reduce debt interest repayments on index-linked gilts next year.
Divya Sridhar, economist at PwC UK, said: “Due to lagged index-linked gilts, the fiscal benefits of this fall in inflation rates will be reflected in borrowing figures early next year.
“Looking ahead to the new year, falling inflation will provide some relief to public spending through both debt interest payments and inflation-linked social benefits expenditure.”
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2023-12-21 07:39:00Z
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