Surging inflation pushes cost of servicing govt debt to December record of £8.1bn

Interest payments on government debt hit a record £8.1bn for the month of December because of surging inflation, according to official figures.

The Office for National Statistics (ONS) said the cost of servicing the country's £2trn+ debt pile was almost 200%, or £5.4bn, up on December 2020.

It is because half a trillion pounds worth of government bonds are linked to the Retail Prices Index (RPI) measure of inflation which stood at 8.4% in December - its highest level since 1991.

In December, the RPI uplift on index-linked gilts was calculated at £5.5bn.

"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 report said.

The wider ONS figures showed that the government borrowed less than economists had expected last month.

Public sector net borrowing, excluding the effects of bank bailouts during the financial crisis, totalled £16.8bn.

It took the amount from April to December to £146.8bn - £129bn less than at the same point in the 2020/21 financial year when the COVID-19 crisis demanded an unprecedented rise in peacetime spending to support the economy and health services.

The ONS said the year-to-date total included a £6bn downward revision to borrowing up until November.

Corporate tax revenues hit £5.5bn in December - a record at current prices - and largely explained by large companies paying their tax bills quarterly.