The Treasury is on track to spend £110billion on debt curiosity in 2023, in accordance with a brand new forecast by New York-based ratings agency Fitch.

This is predicted to equal 10.4 p.c of income for the yr – the best share of any high-income nation, placing the UK on high of the desk for the primary time since comparable information started in 1995.

While inflation has eased significantly overseas, it stays persistently excessive at dwelling. Almost 1 / 4 of the nation’s borrowing comes from so-called index-linked bonds, the funds for which fluctuate according to the Retail Price Index (RPI). 

In a blow to Chancellor Jeremy Hunt’s dream of tax cuts earlier than subsequent yr’s basic election, Government debt surpassed the dimensions of the economic system in May for the primary time since 1961, other than a quick spike throughout the pandemic.

Public sector web debt continued to develop in June, hitting £2.6trillion – 100.8 p.c of the nation’s gross home product (GDP).

With the RPI nonetheless above ten p.c, the UK’s debt-interest ratio has elevated dramatically over the previous yr, up from a mean of 6.2 p.c between 2017 and 2021, the Financial Times reports.

Ed Parker, international head of analysis for sovereigns and supranationals at Fitch, mentioned: “We’ve had a very large inflation shock which is adversely affecting the public finances and that is obviously a key driver of the sovereign credit rating.”

Back in October, the scores company – one of many “big three” alongside Moody’s and Standard & Poor’s – downgraded the credit standing for British Government debt from “stable” to “negative” within the wake of then-Prime Minister Liz Truss’s disastrous mini-budget.

In June Fitch reiterated this gloomy outlook, citing “the UK’s rising government debt and uncertain prospects for fiscal consolidation”.

The Government added £18.5billion to its debt pile in June, £1.5billion lower than in May and £400 under the identical month final yr, according to the Office for National Statistics (ONS).

Reacting to the month-to-month figures, the Chancellor mentioned: “Now more than ever we need to maintain discipline with the public finances.” 

He hailed the autumn within the Consumer Price Index (CPI) from 8.7 p.c in April and May to 7.9 p.c yearly in June as an indication that the economic system was recovering after a tough interval of rising costs and falling disposable incomes.

Mr Hunt added: “As this week’s fall in inflation showed, we will start to see results if we stick to our plan to halve inflation, grow the economy and get debt falling.”