The interest payable on UK central government debt in June 2022 was £19.4 billion — by far the highest since monthly records began in April 1997.
The £19.4 billion debt interest was £10.3 billion more than the previous monthly record set in June 2021.
The Office for National Statistics (ONS) said the rise was “largely because of the effect of Retail Price Index (RPI) rises on index-linked gilts.”
The Office for Budget Responsibility (OBR) estimates that the debt interest payable on the UK central government outstanding debt will be £87.2 billion for the current financial year.
The ONS said UK public sector net borrowing excluding public sector banks (PSNB ex) was £55.4 billion in the financial year to June 2022. This was £5.7 billion less than in the same period last year — but £32.1 billion more than in the financial year to June 2019.
The ONS said UK public sector net debt excluding public sector banks (PSND ex) was £2.387 trillion at the end of June 2022, or around 96.1% of gross domestic product (GDP) — an increase of £183 billion compared with June 2021.
It said public sector net borrowing excluding public sector banks (PSNB ex) was £22.9 billion in June 2022, the second-highest June borrowing since monthly records began in 1993 and £4.1 billion more than in June 2021.
“Since mid-2021, the cost of servicing central government debt has increased considerably,” said the ONS.
“These rising costs do not principally reflect recent increases in the level of government debt, nor is the change in servicing costs driven by large increases in the interest – or coupon – payments by government.
“Instead the recent high levels of debt interest payable are largely a result of higher inflation, with the interest payable on index-linked gilts rising in line with the Retail Prices Index (RPI).
“This month the interest payable on central government debt was £19.4 billion, £10.3 billion more than the previous monthly record set in June 2021, with £16.7 billion of this £19.4 billion cost reflecting the impact of the RPI.”
AJ Bell financial analyst Danni Hewson said: “Families wondering why the government isn’t doing more to help them deal with their strained finances need to understand that the treasury’s fighting its own battle with inflation.
“Despite the fact that most covid support measures are now firmly in the rear-view mirror the government still borrowed more this June than it did the year before and covering the increased interest on all the debt it’s run up has played a major part.
“In fact, the debt interest paid out last month was the highest figure since records began in 1997 and with inflation still running hot things are only going to get more expensive particularly as some of that debt rolls over and refinancing is going be substantially more expensive.
“At the moment inflation is playing a dual role because it’s also boosting the government’s tax take.
“When things cost more people have to pay more in taxes like VAT, but it also means the government is having to pay more and the bill for things like wages is going up.
“And of course, if people don’t have money to spend, they simply won’t buy stuff and that will bring its own consequences.
“At the moment fiscal policy demands an ability to balance on a tight rope, spend too much and debt becomes insurmountable spend too little and the economy will simply grind to a halt.
“There is some good news in the figures, a booming labour market is helping pad out government coffers with tax receipts up by more than £5bn compared to the same time last year and despite the uptick in borrowing in June borrowing since the start of the financial year is almost £6n less than the same period in 2021.
“But it’s clear there is not a huge amount of wiggle room for the pair hoping to jump into the hot seat at Number 10.
“And as temperatures drop and energy prices deliver yet another unwelcome shock in the autumn there will be increased pressure to do more to help households.
“Giveaways will be popular with voters and party members alike, but they’ll need to be carefully costed. Today’s figures will focus minds and colour debates, promises will need to be more than piecrust.”