The UK central government paid interest on its debt of £7.6 billion in May — the third highest debt interest payment made by central government in any single month and the highest payment made in any May on record.
The £7.6 billion debt interest was up 70% on May of 2021.
The UK’s Office For National Statistics (ONS) said the UK’s public sector net borrowing excluding public sector banks (PSNB ex) was £14 billion in May 2022, the third-highest May borrowing since monthly records began in 1993. This was £4 billion less than in May 2021 but £8.5 billion more than in May 2019.
Public sector net debt excluding public sector banks (PSND ex) was £2.363 trillion at the end of May 2022, or around 95.8% of gross domestic product (GDP), an increase of £170.1 billion or 0.5 percentage points of GDP compared with May 2021.
“The recent high levels of debt interest payments are largely a result of higher inflation, as the interest paid on index-linked gilts rises with increases in the Retail Prices Index (RPI),” said the ONS.
“In May 2022, central government debt interest was £7.6 billion, of which the RPI uplift on index-linked gilts contributed £5.0 billion over and above the accrued coupon payments and other components of debt interest.
“On an accrued basis, this month saw the third highest debt interest payment made by central government in any single month and the highest payment made in any May on record.
“To estimate the RPI uplift for three-month lagged index-linked gilts in May 2022, we reference the RPI movement between February and March 2022.
“RPI increases in the most recent months will be reflected in our interest estimates in due course.”
The Office for Budget Responsibility (OBR) said: “The budget deficit continued to fall in May, with year-to-date borrowing of £35.9 billion down £6.4 billion on last year.
“But it was £6.4 billion above our most recent forecast profile. This overshoot reflects both lower receipts and higher spending – with debt interest spending in the year to date a fifth higher than forecast thanks to the jump in RPI inflation.
“With the Bank of England now expecting CPI inflation to reach 11 per cent later this year, debt interest can be expected to continue to overshoot our forecast.”