The government’s interest payments on its debt reached a record £8.1bn in the month of December due to soaring inflation, the Office for National Statistics (ONS) said.
The country, which had debt of £2.22tn in July 2021 according to the ONS, saw its interest charge surge by nearly 200% last month compared to December 2020.
This comes despite ONS figures highlighting that the government borrowed less than leading economists anticipated last month.
This is because approximately £500bn of government bonds are linked to the Retail Price Index (RPI), which hit its highest level in almost 30 years in December 2021.
The RPI measure of inflation was 7.5% last month, so the index-linked gilts cost the UK’s government an extra £5.5bn relative to the prior year.
"The recent high levels of debt interest payments are largely a result of movements in the RPI to which index-linked gilts are pegged", the ONS report said.
The leading consumer price index reached its highest levels since 1991 largely due to skyrocketing energy prices because of rising wholesale gas prices (read more).
Increasing food and retail prices in the latter end of 2021 also played a part in the highest inflation seen this century (read more).
The extra interest bill is a problem the Chancellor did not need given the pressure the government is under, with a planned National Insurance tax spike in April to fund social care amid already growing household and corporate bills.
"Risks to the public finances, including from inflation, make it even more important that we avoid burdening future generations with high debt repayments,” Rishi Sunak, the Chancellor of the Exchequer, said.