Sujet : UK borrowing leads to record interest payments

UK borrowing leads to record interest payments

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The UK government spent SLOTXO a record £8.7bn in interest on repaying its debts last month, official figures show.

The figure was more than three times as much as the £2.7bn in interest payments seen in June 2020.

The reason was a surge in inflation, which raised the value of index-linked government bonds.

Overall borrowing - the difference between spending and tax income - was £22.8bn, which was £5.5bn lower than June last year.

However, the figure was the second-highest for June since records began.

Borrowing has been hitting record levels, with billions being spent on measures such as furlough payments.

But the cost of servicing all that borrowing has been rising too. Government gilts, for instance, are uprated in line with Retail Price Index inflation, which is higher than the headline consumer inflation rate.

However, analysts stressed that despite the record payment, debt servicing costs as a share of GDP remain low by historic standards.

Ruth Gregory, senior UK economist at Capital Economics, said: "While debt servicing costs will stay higher than the [Office for Budget Responsibility] expects over the next few years, the public finances should reap the benefits of a fuller recovery in GDP than the OBR expects, meaning that the deficit will still fall faster."