UK government debt reaches £3tn for the first time as inflation rises

The UK’s total government debt has reached £3tn for the first time, official figures show. Debt as a share of the economy nevertheless fell to 94%, from 95% a year earlier.

The public-sector deficit was £24.5bn in September, up from £17bn in August and £1.9bn above the Office for Budget Responsibility’s forecast. Net borrowing for the financial year so far stands at £97.8bn.

Debt interest reaches September record

The government paid £10.9bn in debt interest, the highest September figure since records began. The Office for National Statistics said higher inflation added about £4bn to the cost because some government bonds are linked to the retail prices index.

Inflation adds to fiscal pressure

Annual inflation rose from 3.1% to 3.5% in September, above the 3.4% forecast. Fuel costs were the main reported driver; the source links higher oil and gas prices to the war launched by the US and Israel against Iran at the end of February.

Higher inflation has also increased government borrowing costs. Henning Diederichs of the Institute of Chartered Accountants in England and Wales said the government faced sharper pressure to support households with energy bills while balancing spending against its fiscal rules.

John Healey has stressed his commitment to those rules. He is widely expected to have less headroom before next week’s budget than the £24bn available at the time of the spring forecast.