London Daily

Focus on the big picture.
Friday, May 09, 2025

Pound falls to 37-year low as cost of servicing government debt hits August record

Pound falls to 37-year low as cost of servicing government debt hits August record

The chancellor responds to the latest borrowing figures by insisting it is "absolutely right" that the government takes action to help families and businesses bear down the cost of living crisis.

The pound has fallen to a 37-year low against the dollar after figures showed that the cost of servicing UK government debt last month hit a record high for August - before Liz Truss came to power with promises to splash the cash.

The Office for National Statistics said that interest payments were £8.2bn last month. That was £1.5bn more than a year earlier and the highest August figure since monthly records began in 1997 as it included the effect of rising inflation.

Many government bonds are linked to the Retail Prices Index measure, which was 12.3% that month.

The payments meant that public sector borrowing was £11.82bn, far more than the £8.5bn forecast by economists.

There is concern that taxpayer-funded energy aid for households and businesses, coupled with the promise of tax cuts to spur growth, is damaging investor confidence.

A Reuters poll of bond strategists and economists, carried out last week, suggested that 55% believed there was a high risk that confidence in British assets, including government bonds, would deteriorate sharply in the next three months.

The pound has lost 7% of its value against the dollar in the past three months. Sterling was trading at its lowest level against the dollar since 1985 early on Tuesday at $1.1349.

Most of the decline this year can be explained by the global rush towards the dollar in times of uncertainty, but Ms Truss's plan to subsidise energy bills is tipped to come in at about £150bn.

Bas Van Geffen, a strategist at Rabobank, said: "Trust is fleeting... and Truss would be wise to reassure markets that she has a plan to pay for these expenditures."

Kwasi Kwarteng, the chancellor, who is expected to outline a mini-budget called "The Growth Plan" on Friday, has insisted that Britain has more room to borrow than other countries as they have a bigger share of public debt to economic output.

The government believes that kick-starting growth is the best way to get stronger tax revenues.

Mr Kwarteng said in reaction to the public borrowing figures: "Our priority is to grow the economy and improve living standards for everyone - with strong economic growth and sustainable public finances going hand in hand.

"As chancellor, I have pledged to get debt down in the medium term. However, in the face of a major economic shock, it is absolutely right that the government takes action now to help families and businesses, just as we did during the pandemic."

Newsletter

Related Articles

0:00
0:00
Close
Historic Papal Conclave Set to Commence in Rome
Huge Copper, Gold, and Silver Discovery in Argentina and Chile — But the Profits Go Abroad
Prince Harry is pleading for reconciliation — but the royals are just as sick of his victimhood as everyone else
The Road to Freedom: She Protested Putin, Escaped House Arrest, and Survived a 2,800-Kilometer Journey
OpenAI's Flip-Flop: No Longer Going Commercial, Back to Nonprofit, After Musk Lawsuit and Backlash
“Trump Supporter” Aims to Bring a MAGA-Style Shift to Romania
First From China: Zhao Xintong Wins the Snooker World Championship
Nvidia Faces Billion-Dollar Losses – Warns: China Is on Its Way to Becoming an AI Superpower
Trump Rules Out Third Term, Names JD Vance and Marco Rubio as Potential Successors
Mexico Says ‘No’ to U.S. Troops: President Sheinbaum Rejects Trump’s Offer to Fight Cartels
Nigel Farage’s Reform UK Storms the Map, Wrecking the Two-Party Monopoly
DOGE: Reimagining Government Operations with AI
Common Sense Returns to Britain's Legal System: UK Supreme Court Declares a Woman Is… a Woman
Beijing Says U.S. Is ‘Reaching Out’ for Tariff Talks Amid Soaring Trade Tensions
U.K. Court Rejects Prince Harry’s Final Appeal Over Police Security
Prince Harry’s Heartfelt Outburst Rocks the Royal Family
Trump Shares AI-Generated Image of Himself as… Pope, Prompting Outrage Reaction
Transgender Swimmer Secures Five Gold Medals at U.S. Masters Championship
Prince Harry: “I Want Reconciliation with My Family”
Germany's Alternative für Deutschland (AfD) party has now been officially labeled “right-wing extremist” by the federal office for the so-called “protection of the constitution.”
Amazon Launches Satellite Internet Service Amidst Competition with SpaceX
Transformative Changes in Women's Wrestling: The Rise of WWE Superstars
The Rush to the White Gold: Global Investment Surge in Natural Hydrogen Exploration
This is a day in Spain without electricity and internet
Reform UK Surprises in British Elections, Challenging Traditional Two-Party System
180-Year-Old Christian University in South Carolina Announces Closure Due to Unmet $6 Million Fundraising Goal
Brazilian Woman Jailed for Fourteen Years for Writing “You Lost, Idiot” on Statue During Protest
Trump Administration Removes National Security Adviser Mike Waltz Amid Signal Chat Controversy
Dutch Politician Eva Vlaardingerbroek Receives Spyware Threat Alert from Apple
Paramount Board Considers Settlement in Trump’s $20 Billion Lawsuit Over "60 Minutes" Interview
U.S. Economy Shrink in Trump’s First Quarter as Tariff Policy Raises Questions
Deadline Looms for RTS Meter Replacement: Hundreds of Thousands at Risk of Heating Disruption
Sweden Grapples with Deadly Gun Violence: Suspect Arrested After Three Young Men Killed in Uppsala Hair Salon
Walz Reveals Why Harris Chose Him as Her Running Mate and Reflects on Democratic Losses
Spain Restores Power After Unprecedented Nationwide Blackout
Carney Secures Liberal Mandate in Canada’s Federal Election
Death Penalty Sought as Luigi Manion Pleads Not Guilty in CEO Murder Case
President Trump contacts Jeff Bezos after reports of Amazon considering listing tariff surcharges; company clarifies no such plan for main platform
Spain and Portugal Recover from Massive Blackout
Liverpool Clinches Record-Equalling 20th English League Title Under Arne Slot
Singapore Politicians Warn Against Foreign Interference in Election
Driver Ploughs into Vancouver Festival Crowd, Killing Nine
Depression, Fear of Defamation, and a Tragic End: New Details on Virginia Giuffre’s Suicide
“Sharia for UK, Allah Akbar!”
Massive Explosion at Iran's Bandar Abbas Port Linked to Suspicious Chemical Shipments
Incident Reflection: A Harsh Reality Check
Pakistani migrants to Danish man: “ “We have 5 children while you have 1 or 2. In 10 years, there will be more Pakistanis than Danes here.“
Clashes Erupt in London as Tensions Rise Between Indian and Pakistani Communities
Specialized anti-drone weapons deployed among security personnel Ahead of Papal Funeral
How do you fix this culture?
×