Chief Secretary to the Treasury warns of mounting debt interest bill
The Chief Secretary to the Treasury, Simon Clarke MP, has this afternoon warned of the increasing cost of government debt repayments in the face of rising interest rates.
Speaking to a gathering at the free market think tank, the Institute of Economic Affairs, Clarke confirmed that government debt will this year pass £2.3 trillion, reaching 95.6% of GDP, the highest level as a percentage of GDP since the 1960s.
Clarke confirmed that where the government had spent £1.6 billion on servicing the national debt in January 2021, by January 2022 this figure had risen to £6.1 billion.
Government spending on debt interest is now set to rise 80% this year, with the government spending £83 billion on debt interest – the highest figure on record.
Warning of the dangers that mounting government debt can cause, the Middlesbrough South MP said, “A sustained one percentage point increase in both inflation and interest rates would increase spending on debt interest by £21.1billion in 2026-27. Our sensitivity to debt interest spending is almost twice as much as in 2014”.
Justifying the government’s current approach to public spending, and the recent increases in both corporate and personal taxation, Clarke said, “The British public gets rid of those governments who lose their grip – or are perceived to lose their grip – on the public purse. And they’re right to do so”.
Referencing the covid pandemic and the ongoing war in Ukraine, he said, “The fact we’ve experienced two big shocks in such quick succession – wholly exogenous shocks – only goes to show that we could face another shock at any time… meaning, in turn, that we must be diligent in the way we manage the public finances”.
In 2021/22 the UK government spent £54 billion on debt interest, more than double the year before, and a figure that is in excess of government spending on education.
