Taxpayers are expected to fork out more than £700billion in debt-interest payments over the next six years to pay for the Government’s borrowing binge, official forecasts show.
The Office for Budget Responsibility (OBR) revealed the huge sum as it warned that the state of the public finances was ‘very challenging’ and ‘vulnerable to shocks’.
The enormous debt pile is set to top £3 trillion for the first time in the next year, and remains at ‘elevated’ and ‘unusually high levels’, said OBR co-chairman David Miles.
And the national debt is forecast to surge to more than £3.5 trillion by 2031, meaning it would have risen more than tenfold in the past three decades.
The OBR noted that plans to cut borrowing and stabilise debt have been a common feature of forecasts since the pandemic – ‘but have not yet materialised’ in reality.
It has pencilled in a debt interest bill of £110billion this year, rising to £137billion by 2031, bringing the total to a colossal £734billion.
Debt burden: The Office for Budget Responsibility warned that the state of UK public finances was ‘very challenging’ and ‘vulnerable to shocks’
The sum, which includes losses incurred as the Bank of England unwinds its controversial electronic money-printing programme, means around £1 in every £10 the Government spends is on servicing debt.
It also dwarfs the £66billion spent on defence last year.
The OBR said: ‘UK public sector debt as a share of GDP has nearly tripled’ in two decades.
‘The cost of servicing this debt has increased sharply,’ it added, rising from £39billion (or 1.7 per cent GDP) in 2019-20 to £106billion (3.6 per cent of GDP) last year.
Government borrowing costs have also risen sharply, with the yield – or interest rate – on ten-year bonds the highest in the G7 group of biggest economies, the OBR said.
Borrowing – the gap between what the Government spends on public services like health and education and raises in taxes – is forecast to fall this year to 4.3 per cent of GDP.
That is some £6billion lower than the OBR forecast in November. Borrowing estimates for the final four years of the forecast were also trimmed, including by £4billion in 2029-30 and £8billion in 2030-31, due to higher-than-forecast tax receipts.
This means the Government needs to issue fewer bonds to fund the deficit.
Its Debt Management Office yesterday said it will sell £252billion of bonds in the next fiscal year starting in April, down from the current year’s £304billion.
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