According to data, rising inflation caused government interest payments to reach a new high in January.
Interest payments were £6.1 billion in January, the largest monthly total since records began in April 1997 and up from £4.5 billion the previous year.
The payments are based on inflation as measured by the Retail Prices Index (RPI), which was 7.8% in January.
Interest payments in January were, however, lower than the all-time high of £9 billion set on June of last year.
Despite the UK debt levels being at their highest in 60 years, Paul Johnson, head of the Institute for Fiscal Studies, told reporters that “total interest payments by the government are still at relatively low levels.”
“Year after year, interest payments have fallen short of projections, giving the chancellor more leeway,” he added.
The Office for National Statistics (ONS) reported a £2.9 billion surplus in government finances last month as the economy recovered from the shutdown and tax collections increased.
The balance compared to a £2.5 billion loss in January 2021, when coronavirus support measures were more expensive.
However, the current surplus is still £7 billion less than it was in January 2020, before the epidemic.
As self-assessment income tax collections arrive in January, UK finances are usually in better shape. Last month, self-assessed tax revenues totaled £18.4 billion, up £2 billion from the previous year.
Borrowing reached £138.5 billion from the end of March to the beginning of January, the second highest level since records began in 1993.
The data, Mr Johnson told reporters, indicated “We’re still spending a lot more money. We are now poorer than we were previously.”
But, in the big picture, he said, the deficit – the difference between spending and tax receipts – was rapidly shrinking. He said that certain significant tax increases this year will result in the government borrowing less.
The government, according to Chancellor Rishi Sunak, has “given extraordinary support” throughout the epidemic.
“However, our debt has grown significantly, and the public finances are under greater strain, notably from growing inflation,” he warned.
“It is critical to keep the public finances on a sustainable path so that we can continue to assist the British people when they are in need without burdening future generations with hefty debt repayments.”
According to the ONS, overall public sector debt reached £2.32 trillion at the end of the month, accounting for 94.9 percent of GDP.