Interest payments on UK government debt reached a record high in June as a result of rising inflation.
The amount of interest that the government paid last month was £19.4 billion.
It increased public borrowing for the month to the second-highest level for June since records began in 1993.
The Office for National Statistics reported that borrowing, which is defined as the shortfall between spending and tax revenue, was £22.9 billion for the month, up £4.1 billion from the previous year.
The interest payments exceeded the previous monthly record set in June 2021 by more than double.
Chancellor Nadhim Zahawi acknowledged threats to the state budget, especially those posed by skyrocketing inflation, in response to the data.
Because of this, the government has taken steps to bolster the public finances, and according to the Office for Budget Responsibility’s (OBR) most recent prediction, we are on schedule to reduce our debt.
The Office for National Statistics (ONS) asserts that increased inflation is substantially to blame for the recent high levels of debt interest payments.
This is because interest on government bonds has been growing in step with the retail price index, which reached 11.8 percent in June.
The figures will present a significant challenge to whoever becomes the new leader and prime minister of the Conservative Party because interest payments are likely to stay high well past June as inflation increases.
The two surviving candidates in the contest to succeed Boris Johnson have major differences in how they would balance taxes and spending.
Foreign Secretary Liz Truss has promised to cut taxes right away, but Rishi Sunak, a former chancellor, claims that this could lead to inflation.
According to Hoa Duong, an economist at PwC, the numbers point to a “tough balancing act.”
Financial analyst at AJ Bell, Danni Hewson, stated that fiscal policy currently demands “an ability to balance on a tight rope.”
She advised families to be aware that the Treasury is engaged in its own struggle with inflation if they want the government to do more to assist them in managing their tight budgets.