Commons Sense

House of Commons · Ministers' Questions

Servicing Government Debt

Tuesday 21 January 2025 · 6 questions

Summarised by AI from the official record, so it can contain mistakes.

Read the full transcript on Parliament.uk

At a glance

Key points

  • The annual cost to the public purse of a 0.1% increase in the cost of servicing Government debt was not quantified directly.
  • The UK Government has made assessments of recent trends in the level of interest on Government debt and their implications for policies.
  • The potential impact of the autumn Budget 2024 on levels of debt interest spending has been assessed, with the Office for Budget Responsibility set to update forecasts.

Topics (select to filter)

Questions & Answers

Q1 Richard Holden Con Basildon and Billericay
Economy
Context

MP asked about the financial impact on public purse due to rising borrowing costs.

Question

What is the annual cost to the public purse of a 0.1% increase in the cost of servicing Government debt?

Answer from The Chancellor of the Exchequer (Rachel Reeves)

When we entered office, debt was at highs not seen since the 1960s. My commitment to the fiscal rules is non-negotiable, and we will drive debt down to a sustainable level. There have been movements in global financial markets, and the UK is not immune. The Office for Budget Responsibility will produce a forecast in the usual way, and I will respond with a statement to Parliament on 26 March.

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Q2 Luke Evans Con Hinckley and Bosworth
Economy
Context

MP raised concerns about the cost of servicing government debt and its impact on people and businesses.

Question

What assessment has she made of the implications for her policies of recent trends in the level of interest on Government debt?

Answer from The Chancellor of the Exchequer (Rachel Reeves)

We inherited a high amount of debt from the previous Government, and we have to pay interest costs on that debt. The forecast I set out in the Budget in October showed that debt falling to a sustainable level. As I said, the OBR forecast will be published on 26 March, and I will make a statement at that time.

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Q3 Desmond Swayne Con New Forest West
Economy
Context

MP inquired about the impact of government borrowing and its effects on private investment.

Question

What assessment has she made of the potential impact of the autumn Budget 2024 on levels of debt interest spending?

Answer from The Chancellor of the Exchequer (Rachel Reeves)

There have undoubtedly been moves in global financial markets this year, and the UK is not immune to those movements. The OBR has not yet started its forecast. It will update that in due course, and I will make a statement on 26 March.

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Q4 Ashley Fox Con Bridgwater
Economy
Context

MP questioned the impact of recent policy decisions on economic confidence and borrowing costs.

Question

What assessment has she made of the potential impact of the autumn Budget 2024 on levels of debt interest spending?

Answer from The Chancellor of the Exchequer (Rachel Reeves)

I do not think the borrowing costs in every major country in the world can be explained by the decisions made by this Government. As I said to the hon. Member for Hinckley and Bosworth last week, the hon. Gentleman has to get real. There have been global movements in financial markets that have affected the United Kingdom.

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Q5 Mark Garnier Con Wyre Forest
Economy Taxation
Context

MP questioned the relevance of PWC report in light of recent budget impacts.

Question

The Chancellor makes reference to the PWC report, but half of the survey in that report was done before the Budget. She has already been asked questions about the fact that the fiscal headroom is only £10 billion and the increase in the cost of borrowing is now going to go through the roof so, at some point, she will have to raise taxes, cut investment or increase debt. Which will it be?

Answer from The Chancellor of the Exchequer (Rachel Reeves)

The headroom in our Budget was larger than the headroom that we inherited from the previous Government, so we have put aside more money for changes in economic prospects. The OBR has not yet done its forecast, which will take a whole variety of factors into account, and we will make decisions based on that.

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Q6 Daisy Cooper Lib Dem St Albans
Economy Housing Business & Trade
Context

MP asked about the impact of higher borrowing costs on households and small businesses.

Question

The rising cost of borrowing will bring more misery to mortgage holders, with reports suggesting that some mortgage holders could pay an extra £500 a year. Given that potential global trade tensions could further affect the UK’s financial stability, what assurances will the Government provide that UK lenders remain in a strong position to support households and small businesses?

Answer from The Chancellor of the Exchequer (Rachel Reeves)

Labour and Liberal Democrat Members are mindful of the last Government’s impact on mortgage borrowing costs for many of our constituents, and we are determined to tackle the cost of living crisis. As the hon. Member knows, I have written to financial regulators, including the Financial Conduct Authority, about regulating for growth, not just for risk, so that we can help more people get on the housing ladder and help grow our economy.

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