UK Borrowing Costs Hit Highest in G7 as Debt Servicing Surpasses £100 Billion Annually
Nov, 28 2025
The Her Majesty's Treasury has revealed that the United Kingdom is paying more to service its national debt than any other G7 nation — a staggering £104 billion in 2024-25, with £1 in every £10 of public spending going not to hospitals, schools, or roads, but to interest payments on past borrowing. The shocking figures, laid bare in Budget 2025: Building a Better Britain and presented to Parliament on March 26, 2025, in the Palace of Westminster, show that the UK’s borrowing costs are so high they could fund the entire NHS nursing workforce in England, Wales, Scotland, and Northern Ireland — four times over. And here’s the twist: this isn’t a temporary spike. It’s the new normal.
Why the UK Pays More Than Anyone Else
It’s not that the UK is borrowing more than Japan or the U.S. — in fact, its debt-to-GDP ratio ranks third among G7 nations. The real problem? Yield. The UK’s government bonds are carrying higher interest rates than any other G7 country. According to footnote 39 in the budget document, if UK borrowing costs matched the G7 average, the country would save £60 billion in interest payments over the next five years. That’s more than the entire annual budget of the Department for Education. Why? Investors see the UK as riskier — partly due to persistent deficits, political uncertainty, and slower growth compared to Germany or Canada. The result? Higher rates. And higher rates mean higher bills.
The £100 Billion Burden
For two years running — 2023-24 and 2024-25 — debt interest has exceeded £100 billion. That’s £150,000 per minute, every day, year-round. The Office for Budget Responsibility (OBR), the independent fiscal watchdog based at 1 Horse Guards Road in London, confirmed that public sector net borrowing (PSNB) remained at 5% of GDP in 2024-25, totaling £150 billion. That’s roughly the size of the UK’s entire defense budget. But here’s what’s most alarming: for every £1,000 the government borrows today, it will pay £150 more in interest every year for the next 30 years. That’s not just fiscal mismanagement — it’s intergenerational theft.
Chancellor Reeves’ Plan: Borrow Less, Spend Smarter
Rachel Reeves, Chancellor of the Exchequer and MP for Leeds West and Pudsey, didn’t just present the problem — she offered a path out. The budget outlines the most aggressive debt reduction plan in the G7 between 2025-26 and 2029-30. The goal? Cut borrowing faster than Canada, France, or even Germany. The strategy? Protect capital spending — £120 billion more over five years for infrastructure, schools, and housing — while trimming current expenditure. No tax hikes on working families. No cuts to frontline services. Just smarter, slower spending. The OBR’s own analysis suggests this could reduce debt interest by £22.1 billion over the forecast period compared to the baseline. That’s not just savings — it’s a lifeline for public services.
What This Means for You
Imagine your local hospital waiting list. Or your child’s classroom. Or the potholes on your commute. All of these are being starved of funding because £100 billion a year is vanishing into the pockets of bondholders. The NHS spends £25 billion annually on nurses. Debt interest is four times that. The government’s own documents admit: “Every pound borrowed today means less tomorrow.” This isn’t abstract economics. It’s the difference between a GP appointment within two weeks — or six months.
What’s Next? The October 2025 Test
The real test comes in October 2025, when the OBR releases its Autumn Statement forecast. Will borrowing fall below 4% of GDP? Will yields start to ease? Will markets respond to the government’s credibility? If not, the pressure will mount — not just from economists, but from voters who see their schools, hospitals, and public transport crumbling while billions pour into debt interest. The OBR’s March 2025 Fiscal Risks report warned of a “sustainability gap” that could widen if borrowing doesn’t drop. The Treasury’s response? A concrete, five-year plan. Now, it’s up to the markets — and the public — to judge whether it’s enough.
Background: How We Got Here
The UK’s debt problem didn’t start in 2025. It began in 2020, when pandemic spending pushed borrowing to 5% of GDP — a level it’s held ever since. Unlike Germany, which cut spending quickly after 2021, or Japan, which relies on domestic bond buyers, the UK has relied on foreign investors who demand higher returns. The G7, formed in 1975 and headquartered in Paris, has long been the benchmark for economic health. But the UK is now the outlier — the one paying the most to borrow. And the longer it waits, the more it costs.
Frequently Asked Questions
How does the UK’s debt interest compare to NHS spending?
Debt interest costs £104 billion in 2024-25, while the NHS spends £25 billion annually on nurses across the UK. That means interest payments are over four times the entire nursing budget. If you added the costs of doctors, paramedics, and hospital staff, the gap widens even further — debt interest now exceeds total NHS operational spending in England alone.
Why are UK bond yields higher than other G7 countries?
Investors see the UK as riskier due to slower economic growth, political volatility, and persistent budget deficits. While Germany and Japan have strong domestic demand for bonds, the UK relies more on foreign buyers who demand higher returns. The OBR notes that UK yields are 0.8 percentage points above the G7 average — a small gap, but one that multiplies into tens of billions over time.
What’s the long-term impact of today’s borrowing?
Every £1 billion borrowed today adds £150 million in annual interest payments 30 years from now. That means the £150 billion borrowed in 2024-25 will cost future taxpayers £22.5 billion per year in 2055 — money that could have gone to pensions, care for the elderly, or climate adaptation. The Treasury calls this the "intergenerational tax" — and it’s growing.
Is the UK the only G7 country with high debt costs?
No — Italy also struggles with high debt servicing, but its borrowing costs are lower than the UK’s. The U.S. has a larger total debt, but its interest rates are lower due to the dollar’s global dominance. Japan’s debt is over 260% of GDP, but nearly all of it is held domestically at near-zero rates. The UK’s unique problem is high yields on foreign-held debt — making it the most expensive to borrow in the group.
What happens if the UK doesn’t reduce borrowing?
If borrowing stays at 5% of GDP, debt interest will hit £120 billion by 2030. That could force cuts to defense, local government, or benefits — or trigger a market crisis if investors lose confidence. The OBR warns that sustained high borrowing could push the UK into a debt spiral, where higher interest leads to more borrowing, which leads to even higher interest. Breaking that cycle is the core challenge of Budget 2025.
When will we know if the government’s plan is working?
The next official OBR forecast comes in October 2025 as part of the Autumn Statement. That’s when we’ll see if borrowing has dropped below 4% of GDP and whether bond yields are falling. If the numbers don’t improve, pressure will grow for faster action — possibly including tax increases or spending cuts that could affect everyday life.