Britain stumped up a record £8.7bn in interest payments on central government debt last month, according to figures from the Office for National Statistics.
The official figures show that the amount was £6bn higher than at the same time last year. This was down to the nearly half a trillion pounds worth of government bonds rising.
The jump in debt interest payments to a record £8.7bn last month won’t derail the deficit reduction, says Michal Stelmach, senior economist at KPMG UK.
“Public sector net borrowing was £22.8bn in June, down compared with the previous year but still significantly higher than the pre-pandemic June average of £6bn.
“Debt interest spending rose by £6bn on the previous year to its highest level on record. It reflected a surge in RPI inflation in April, which feeds through to payments on index-linked gilts with a two-month lag. The volatility of debt interest spending underscores its sensitivity not just to inflation but also to interest rates, which can rapidly change the path of fiscal sustainability.
“We still expect borrowing to undershoot the OBR’s latest forecast for this year. But we are not out of the woods yet, with the recent surge in Covid-19 cases putting some parts of the economy at risk of further restrictions later in the year and the uncertainty around the impact of phasing out the furlough scheme on unemployment.”