UK debt hit new high.

The cost of government borrowing set new records in November as soaring inflation and cost of living payments pushed up government costs while tax revenues dropped. The government paid £7.3 billion in interest on its debt last month, up from £4.9 billion in the same month the previous year. It is the highest November figure since comparable monthly records began in April 1997. The retail prices index, to which the gilts are linked, reached 14 per cent in November, down from a 42-year high of 14.2 per cent the previous month.

It fell from 11.1 per cent in October to 10.7 per cent in November, driven by slowing price growth in petrol and diesel. Public sector net borrowing rose to £22 billion, up from £8.3 billion in November 2021, to record the highest level of November borrowing since monthly records began in 1993. Economists had expected borrowing to hit £21 billion. Government interventions to ease the burden of energy bills on households added to lending as the second batch of cost of living grants were paid to families in November.

As a percentage of gross domestic product, total debt — £2.47 trillion — now stands at 98.7 per cent.

This represents a fall of 0.3 percentage points since November 2021 but an increase of £125.9 billion because of the rise in GDP. Granted, we think that the bank rate will peak at 4 per cent next year, below the 4.5 per cent priced-in by investors, and expect the MPC to reduce it gradually to 2 per cent between early 2024 and early 2026, with gilt yields falling commensurately. "This implies interest payments will be about £10 billion below the OBR's forecast in 2023/24 and £30 billion below its forecast in five years.

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