{"id":95946,"date":"2026-09-25T07:02:30","date_gmt":"2026-09-25T06:02:30","guid":{"rendered":"https:\/\/www.taxresearch.org.uk\/Blog\/?p=95946"},"modified":"2026-09-25T07:02:30","modified_gmt":"2026-09-25T06:02:30","slug":"britains-real-interest-crisis","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2026\/09\/25\/britains-real-interest-crisis\/","title":{"rendered":"Britain\u2019s real interest crisis"},"content":{"rendered":"<p>Is the UK facing a government debt interest crisis? More than \u00a3100 billion a year is now being spent on debt interest, and this is frequently presented as a threat to the government\u2019s finances. In this video, I argue that this misses the real issue.<\/p>\n<p>The UK government cannot involuntarily run out of pounds with which to meet sterling-denominated payments. The important question is therefore not whether the interest can be paid, but who receives that money and what those payments do to the distribution of income and wealth.<\/p>\n<p>Government interest payments become somebody else\u2019s income. They flow to the owners of government bonds and other savings, including pension funds, investment funds, banks and other financial institutions. But because financial wealth is distributed very unevenly in the UK, the benefits of those payments are also unevenly distributed.<\/p>\n<p>I argue that this means higher government interest payments can contribute to wealth inequality. Those who already own substantial financial assets receive additional income, while households with little or no financial wealth receive very little direct benefit.<\/p>\n<p>That raises an important question when politicians simultaneously argue that spending on pensions, health, education and other public services must be constrained. Why is austerity discussed for those services while the scale of interest payments to asset owners receives much less attention? Is this a case of austerity for the poor and interest for the rich?<\/p>\n<p>The real interest crisis, in my view, is therefore not government solvency, or even the cost being paid. It is the distributional impact of transferring such large amounts of income to the owners of financial wealth while claiming that spending elsewhere must be restricted.<\/p>\n<p><iframe loading=\"lazy\" width=\"560\" height=\"315\" src=\"https:\/\/www.youtube.com\/embed\/CfCCyQezwI8?si=rl53eFQ8bYCqyFrS\" title=\"YouTube video player\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/p>\n<p>This is the audio version:<\/p>\n<p><iframe title=\"Britain\u2019s real interest crisis\" allowtransparency=\"true\" height=\"150\" width=\"100%\" style=\"border: none; min-width: min(100%, 430px);height:150px;\" scrolling=\"no\" data-name=\"pb-iframe-player\" src=\"https:\/\/www.podbean.com\/player-v2\/?i=2hm7m-1b69d85-pb&from=pb6admin&share=1&download=1&rtl=0&fonts=Arial&skin=f6f6f6&font-color=auto&logo_link=episode_page&btn-skin=c73a3a\" loading=\"lazy\"><\/iframe><\/p>\n<p>This is the transcript:<\/p>\n<hr \/>\n<p>Has the UK got an interest crisis? More particularly, has the UK government got a debt interest crisis as a consequence of the interest that is being paid on the UK\u2019s so-called national debt? That interest is now costing more than \u00a3100 billion a year, and some people are claiming that this is totally unaffordable and will effectively bring our government\u2019s finances down.<\/p>\n<p>Now, I don\u2019t believe that. It\u2019s completely untrue. The UK government can always settle its debts because it creates the money to make the payments. So there is no government debt crisis, but there are still questions to ask about such an extraordinary level of interest payments. And the real question to ask is who gets this money and what are the consequences?<\/p>\n<p>Let\u2019s just put the figure in context. The latest estimate for debt interest payments was that, in the last financial year, the UK government paid \u00a3110 billion of interest, and the figure will, of course, be more this year, and it is expected to reach \u00a3137 billion in 2030. That is more than \u00a330 billion greater than the cost in 2024. And the monetary scale of this transfer is then increasing.<\/p>\n<p>And at the same time, interest is taking a bigger share of government spending. Debt interest was around 8% of total government spending in 2024-25, and that is expected to rise over the next few years, although not exceptionally, because, of course, the economy will grow as well. But that doesn\u2019t mean that this isn\u2019t an issue.<\/p>\n<p>There is money being paid, but it\u2019s not lost as a consequence, as you would think is true when you hear some politicians talk about this. The fact is that this money isn\u2019t poured into a black hole. It becomes somebody else\u2019s income, and so it might become somebody else\u2019s wealth. And the important question is, who gets this money? And that matters because the total level of debt interest paid now exceeds 3% of the whole UK economy, and that figure might be rising to 4% by 2030.<\/p>\n<p>So this is a question about distribution and not about government solvency. It\u2019s a question of who bears a public cost, and why should we continue to put up with that level of transfer of wealth from the public purse into the hands of private individuals.<\/p>\n<p>And I stress yet again, this is not about government solvency. The UK government can afford to pay its debts. In fact, it doesn\u2019t have a problem with paying interest on this money because all this money represents is money saved with it by wealthy people, by banks, by pension funds, by foreign governments, and even by the Bank of England. And it cannot involuntarily run out of pounds with which to make the payments due with regard to the interest.<\/p>\n<p>So, the question is very much about who benefits and not about whether this payment is affordable. And the reality is that whenever the UK government spends, the payment made becomes somebody else\u2019s income. It\u2019s vital to remember that. Most people don\u2019t. But every transaction has two sides. So when the government pays interest on a bond, or a gilt, as they\u2019re commonly called, the owner will receive it. When the government pays interest on an NS&amp;I savings account, with that bank being run by the government, the person who has saved in that way gets the interest.<\/p>\n<p>And let\u2019s not forget that the Bank of England also earns a significant amount from these interest payments because around one quarter of all government bonds are still owned by it. But the reality is that most of these payments go to pension funds, investment funds, and banks located in the UK, but some also abroad and some of the interest gets paid to foreign governments as well.<\/p>\n<p>Don\u2019t worry about the foreign dimension of this. It really doesn\u2019t matter because we earn matching interest from abroad. That just represents the fact that savings are spread outside the country where they originate. That\u2019s normal, appropriate and balanced. So there is no foreign concern about this. All the payments are made in sterling. The UK government can afford to make them. They do not prejudice the well-being of our country.<\/p>\n<p>But the point is, who owns the pension funds, the investment funds, and the banks, and even the companies that receive these interest payments? And what we can see from data is that wealth is very unevenly owned within the UK economy. This chart shows that. It is prepared on the basis of data produced by the UK Office for National Statistics, and the figures along the bottom of the UK population split into 10 equal groups by size.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-large wp-image-95947\" src=\"https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2026\/09\/Screenshot-2026-09-23-at-09.42.33-550x454.png\" alt=\"\" width=\"550\" height=\"454\" srcset=\"https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2026\/09\/Screenshot-2026-09-23-at-09.42.33-550x454.png 550w, https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2026\/09\/Screenshot-2026-09-23-at-09.42.33-363x300.png 363w, https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2026\/09\/Screenshot-2026-09-23-at-09.42.33-768x634.png 768w, https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2026\/09\/Screenshot-2026-09-23-at-09.42.33-485x400.png 485w, https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2026\/09\/Screenshot-2026-09-23-at-09.42.33.png 986w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/p>\n<p>If you are in the poorest group, you are in decile one as shown on this chart. If you are in the richest 10% in the UK, you are in the group called Number 10, and you can see that that group owns almost half of all UK wealth between them. In fact, the top 1% of wealth owners in the UK own more than all the wealth owned by the bottom 50% of people in the UK as a whole, so unevenly shared is UK wealth.<\/p>\n<p>And this is important because what those wealth owners actually own are the pension funds, the investment funds, the banks, or shares in them, and shares in large companies that also benefit from the interest payments. The poorest households in the UK have very little wealth capable of generating any financial returns. Those in the top 10% or so of the UK population generate a lot of returns either directly to themselves or indirectly through their pension funds and other assets. And they therefore benefit from these interest payments by the government because these funds in which they have a stake are the people who own the UK government\u2019s bonds. That matters.<\/p>\n<p>What we are seeing is that the UK government is paying out substantial amounts of money for people who are already rich. And, as a consequence, their income goes up. But so too does their wealth because, of course, if you have enough money to be able to save already, any income that you earn on your investments will probably simply accumulate as greater wealth from then on.<\/p>\n<p>The fact is, as a consequence, that the UK government is increasing wealth inequality in the UK, and things like the subsidies that the UK government provides to pension fund contributions only exacerbate this trend by providing an extra subsidy to those who are already being paid large amounts of interest by the UK government.<\/p>\n<p>We are seeing the inequality that we know our economy suffers from increase as a result, and this does then matter. What we are seeing is interest rate policy creating a distributional problem in the UK, and to me that is an issue which requires attention.<\/p>\n<p>And so what we need to do in that case is to raise the question about why is the benefit of this payment so unevenly distributed and should we as a result be asking questions about it?<\/p>\n<p>And let\u2019s put this in proportion. The wealthiest 10% or so in the UK economy are picking up over \u00a350 billion a year as a consequence of these payments. And that\u2019s equivalent to around one third of the total old age pensions paid in this country each year as well.<\/p>\n<p>Now old age pensions are paid to prevent poverty and to support those who have no other way of keeping themselves going. But these payments of interest are going to those who are already wealthy, and yet nobody\u2019s talking about this.<\/p>\n<p>We hear talk about cutting the pension triple lock, but we don\u2019t hear talk about how we can cut the amount of interest paid to those who are already wealthy and yet we could. We could cut the interest rate, for example. The fact is, though, we don\u2019t do that. So there is austerity for some and interest for others.<\/p>\n<p>That\u2019s wrong. When people are being told the government has to be constrained with regard to its spending on education, on health, on pensions, on crime, on defence, on justice, then we should instead be asking why we are still spending to make the rich richer?<\/p>\n<p>This is the contradiction which is at the heart of the UK political debate and which isn\u2019t being talked about. And this, in my opinion, is the real interest crisis we face in the UK.<\/p>\n<p>The problem is not that the UK government might be unable to pay its debts. It can. It will. There is no question about that. The problem is what these enormous payments do to the distribution of income and wealth in the UK, and why they leave the most vulnerable even more vulnerable still, because the government claims it has to deliver austerity as a consequence of making the rich even richer in this country. The government is providing a substantial income to the owners of financial assets in the UK, but why isn\u2019t it instead making it a priority to increase the well-being of those who are most vulnerable?<\/p>\n<p>Who gets money is a question that always matters. The government can create the pounds to pay its debts. The economic consequences of those payments should not be ignored.<\/p>\n<p>Those interest payments are the problem. And the result is that we have an issue which we should be talking about in the UK economy. I believe we need to tackle the imbalance that these interest payments give rise to, but you might disagree.<\/p>\n<p>There\u2019s a poll down below. You have the opportunity to leave your comments as well. Please do take part. Please do like and share this video. Please do subscribe to our channel. And please hit that bell button because that means you will then be told when we make another video, although, let\u2019s be honest, that tends to be every day. And if you like what we are doing and support the work that we\u2019re trying to undertake so that people better understand the way in which our economy works and the way in which politicians should be talking about it, please do make a donation. There\u2019s a button down below for that as well. It\u2019s called Ko-fi, or coffee, and that helps buy some more of this, and I promise coffee helps make these things.<\/p>\n<hr \/>\n<p>Poll<\/p>\n<div id=\"polls-536\" class=\"wp-polls\">\n\t<form id=\"polls_form_536\" class=\"wp-polls-form\" action=\"\/Blog\/index.php\" method=\"post\">\n\t\t<p style=\"display: none;\"><input type=\"hidden\" id=\"poll_536_nonce\" name=\"wp-polls-nonce\" value=\"53a7167c09\" \/><\/p>\n\t\t<p style=\"display: none;\"><input type=\"hidden\" name=\"poll_id\" value=\"536\" \/><\/p>\n\t\t<p style=\"text-align: center\"><strong>What concerns you most about the UK\u2019s rising debt interest bill?<\/strong><\/p><div id=\"polls-536-ans\" class=\"wp-polls-ans\"><ul class=\"wp-polls-ul\">\n\t\t<li><input type=\"radio\" id=\"poll-answer-2319\" name=\"poll_536\" value=\"2319\" \/> <label for=\"poll-answer-2319\">The amount being paid<\/label><\/li>\n\t\t<li><input type=\"radio\" id=\"poll-answer-2320\" name=\"poll_536\" value=\"2320\" \/> <label for=\"poll-answer-2320\">Who receives the money<\/label><\/li>\n\t\t<li><input type=\"radio\" id=\"poll-answer-2321\" name=\"poll_536\" value=\"2321\" \/> <label for=\"poll-answer-2321\">Its effect on inequality<\/label><\/li>\n\t\t<li><input type=\"radio\" id=\"poll-answer-2322\" name=\"poll_536\" value=\"2322\" \/> <label for=\"poll-answer-2322\">I\u2019m not concerned by it<\/label><\/li>\n\t\t<\/ul><p style=\"text-align: center\"><input type=\"button\" name=\"vote\" value=\"   Vote   \" class=\"Buttons\" data-poll-id=\"536\" data-poll-action=\"vote\" \/><\/p><p style=\"text-align: center\"><a href=\"#ViewPollResults\" data-poll-id=\"536\" data-poll-action=\"result\" title=\"View Results Of This Poll\">View Results<\/a><\/p><\/div>\n\t<\/form>\n<\/div>\n<div id=\"polls-536-loading\" class=\"wp-polls wp-polls-loading\"><span class=\"wp-polls-spinner\" aria-hidden=\"true\"><\/span> Loading ...<\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>Is the UK facing a government debt interest crisis? More than \u00a3100 billion a year is now being spent on debt interest, and this is<br \/><a class=\"moretag\" href=\"https:\/\/www.taxresearch.org.uk\/Blog\/2026\/09\/25\/britains-real-interest-crisis\/\"><em> Read the full article&#8230;<\/em><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[70,136,204,35,16,147,174,224,29,106,223],"tags":[],"class_list":["post-95946","post","type-post","status-publish","format-standard","hentry","category-banking","category-city-of-london","category-economic-justice","category-economics","category-ethics","category-inequality","category-modern-monetary-theory","category-neoliberalism","category-pensions","category-politics","category-politics-of-care"],"_links":{"self":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/95946","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/comments?post=95946"}],"version-history":[{"count":5,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/95946\/revisions"}],"predecessor-version":[{"id":95961,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/95946\/revisions\/95961"}],"wp:attachment":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/media?parent=95946"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/categories?post=95946"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/tags?post=95946"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}