Britain is set to spend £155 billion on debt interest in 2027-28, exceeding the education budget of £153 billion for the first time, according to documents released with last week's Budget. The milestone reflects what critics describe as a stark picture of fiscal mismanagement, with debt servicing costs now outstripping every government department except health and welfare. The interest bill is more than half as much again as the £98 billion allocated to defence.
The surge in borrowing costs reflects global market pressures. Britain now pays more than every other major developed G7 nation to borrow on international bond markets. The yield on ten-year gilts, a key measure of government borrowing costs, stands just below last month's 19-year high at 5.5 per cent, while 30-year gilt yields have reached their highest level since 1998. Global borrowing costs have risen sharply since the start of the US-Iran war as investors expect interest rates to rise to combat inflation driven by higher oil and gas prices. The Bank of England is expected to raise rates to 4 per cent on Thursday.
Shadow Chancellor Andrew Griffith said: 'Under this Government of spending addicts, interest on the Government debt is spiralling out of control. A country that pays more to its lenders than it does on education is one with a bleak future.' John O'Connell, head of the TaxPayers' Alliance, called it 'a graphic illustration of fiscal failure', adding: 'Instead of investing in our children's futures, taxpayers are being forced to cough up tens of billions of pounds just to service the interest on Whitehall's mountain of debt.'
The deterioration has been rapid. Five years ago, in the March 2021 Budget, £124 billion was allocated to education against debt interest of just £45 billion. The national debt has swelled from £1 trillion in 2010 to £2 trillion in 2020 and £3 trillion in 2026. Under Office for Budget Responsibility forecasts, debt will climb to £3.7 trillion by 2031-32. The Chancellor has also outlined plans to borrow nearly £70 billion more than was expected in March, pushing the national debt ever higher.
The cash shortage leaves limited room for other priorities. With welfare cuts ruled out, the Chancellor has turned to tax increases on banks, bookies, savers and landlords. For UK savers, borrowers and business owners, the rising debt interest bill means less public money available for spending on services and infrastructure, potentially requiring either higher taxes or reduced public investment to manage the debt burden.
Reform UK Treasury spokesman Robert Jenrick said the party had 'identified £40 billion of emergency cuts so we can cut debt interest and put taxpayers' money in schools, hospitals and cutting people's bills.' Julian Jessop at the Institute of Economic Affairs said: 'The Government needs to free the economy to grow faster.'