Britain is continuing to chuck billions onto our mounting pile of debt. Figures just released by the Office for National Statistics (ONS) show that last month the state had to borrow just under £21 billion. That was £6.6 billion more than in June last year and the second-highest June borrowing total since records began 32 years ago.
The ONS confirmed the surge in borrowing was a continuation of the fiscal doom loop this country now finds itself in. ‘The rising costs of providing public services and a jump in the debt interest we have to pay on inflation-linked gilts outweighed increased revenue brought in from tax hikes.
Interest due on our debt hit £16.4 billion in June, which was £8.4 billion more than June last year and again the second highest figure since records began. We’re reaping the results of what might prove to be a financially fatal decision by the treasury to issue billions of ‘index-linked gilts’ when borrowing costs were so low. Now that inflation has returned, that borrowing has become cripplingly expensive and is why we’re paying Greek levels of debt interest on Canadian levels of debt.
We’re paying Greek levels of debt interest on Canadian levels of debt
This morning’s news is yet more evidence that the Chancellor’s wafer-thin headroom against her ‘ironclad’ fiscal rules has been more than wiped out. The borrowing figure for June was £3.5 billion more than the Office for Budget Responsibility had assumed in their forecasts. Their overall forecast for the year is more on track but economists expect that to slip as we approach the budget in Autumn.
It does not seem at all sustainable that we can tolerate debt interest doubling in the space of a year. Yet this is the mess the Treasury created by issuing so many inflation-linked gilts with little foresight – and one the Bank of England, as I wrote in last week’s cover, helped entrench with its addiction to cheap money and painfully slow response to rising prices. Now that inflation has returned, the bill is coming due.
Britain is no longer borrowing to invest and grow. It is borrowing simply to stand still. We’re chasing our tail to service past decisions, patch up public services, and cover the interest on our own excess. We’re broke and we should be angry about it.
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