National debt interest exceeds £100bn a year as a result of Labor budget overborrowing

Britain will spend more than half a trillion pounds servicing the national debt between now and the end of the decade, Budget documents reveal.

The Office for Budget Responsibility said interest payments on debt would total £672 billion between 2024-25 and 2029-30, or more than £100 billion a year. t

The annual bill dwarfs the defense budget, which is due to reach £83bn next year.

The projected cost of debt servicing has soared as a result of this week’s Budget in which Rachel Reeves embarked on a dramatic over-borrowing spree to fund her spending plans.

The Chancellor will have borrowed another £536 billion by the end of the decade, pushing the national debt to more than £3 trillion for the first time.

Instead of borrowing falling from £87bn this year to £39bn in 2028-29, as planned by previous chancellor Jeremy Hunt, the deficit under Reeves will hit £127bn this year and only fall to £70 billion in 2029-30.

The Office for Budget Responsibility described the Budget as “one of the largest fiscal easings of any fiscal event in recent decades”.

The national debt stood at around £350bn at the start of the millennium but has soared since then, partly due to a series of crises, including the financial crisis and the Covid-19 pandemic.

While it took three centuries of borrowing for the debt to reach £350bn, Reeves will be borrowing the same again in just over three years.

Excess borrowing has created jitters in bond markets, with the 10-year bond yield yesterday rising above 4.5 percent for the first time in a year.

According to the Institute for Fiscal Studies, rising debt interest payments mean the Government will need to raise substantially more in taxes than it spends on public services.

IFS director Paul Johnson said: “We need to achieve substantial primary surpluses to stop debt running away.”

‘That means the Government needs to take more from us in taxes and other revenue than it gives back to us in anything other than interest payments on the debt.

“That’s not a happy place, it’s not a place we’ve been in for a long time, but the Government has no choice in the matter.”