What about interest rates and debt servicing costs?

Concerns about debt servicing often assume that interest rates are set by markets and will rise as debt increases. Both assumptions are questionable.

Interest rates are policy variables

Central banks set the base rate. They can also influence longer-term rates through bond purchases and forward guidance. Japan has maintained near-zero rates with debt-to-GDP over 260%.

Government can always pay

Interest payments on sterling-denominated debt are made by crediting bank accounts. The UK government cannot run out of sterling. The constraint is not ability to pay but potential inflation from the spending.

Debt structure matters

The UK can choose to issue short or long-term debt, or not issue debt at all beyond what is needed for monetary policy purposes. Debt issuance is a policy choice about interest rate management, not a necessity for funding spending.

Interest payments are income for the private sector

Government interest payments flow to pension funds, savers, and financial institutions. They are not “lost” but redistributed. The distributional effects matter but are not a solvency issue.

The relevant questions are about the real economy: Is unemployment too high? Is inflation too high? Are public services adequate? Are we investing in future capacity? These determine appropriate policy, not debt arithmetic.