UK spending nearly twice as much on debt interest as defence

The UK government's borrowing costs have risen higher than they were in the immediate aftermath of the disastrous Liz Truss mini-budget of 2022.

They’ve been driven up by anxiety about the potential inflationary impact of new US tariffs promised by Donald Trump – but also by slack UK growth feeding a lack of confidence in the economy.

Ten-year gilt yields last night were at 4.8 per cent compared with 3.7 for Italy, 3.4 for France, 3.2 for Spain and 2.5 for Germany. Bond prices move inversely to yields and are falling in London as investors look elsewhere for robust long-term returns.

Chancellor Rachel Reeves has an “iron grip” on the economy, the Treasury says. Translation: if necessary she’ll cut spending rather than raise taxes again. One thing she can’t cut except by raising growth and lowering rates is debt service costs.

Last year, at £104 billion, they amounted to nearly double the defence budget.