Burnham ally Jim O’Neill: Debt costs are ‘increasingly crazy’ and triple lock must go
The cost to taxpayers of paying off the interest on UK government debt is “increasingly crazy”, according to a top economist who advised Andy Burnham.
Lord Jim O’Neill, the former Goldman Sachs executive who advised Burnham in his run-up to Downing Street, told LBC that debit interest payments far outweighing the defence budget were “increasingly crazy” as he sent the Prime Minister a warning on high borrowing levels.
City AM analysis showed the UK government has paid more than £200bn in debt interest costs since Labour were elected in 2024.
After he was asked whether figures showing that the government borrowed about £77bn since April was sustainable, O’Neill said “it’s not”.
“Western governments undertook a lot of largesse back in 2008, dramatically more on the back of COVID and there’s been very little done to try and correct it,” he said.
“There’s no free lunch.”
The government is projected to spend about £110bn this year on debt interest costs. The bill will rise to £137bn within years although forecasts could be lifted after medium-term gilt yields rose to two-decade highs earlier this year.
O’Neill said debt servicing costs were “increasingly crazy” and demanded that Burnham looked to scrap the triple lock pension, which ensures that the state pension rises by whichever is higher out of inflation, wage growth or 2.5 per cent.
He argued that it would be “pretty difficult” for the Conservatives to oppose an announcement for the end of the triple lock as he accused policymakers of “playing this game” in winning over voters with big policies “at the expense of everybody else”.
Debt needs to come down, IMF says
International Monetary Fund managing director Kristalina Georgieva also warned governments of the need to bring down steep levels of debt after a market rout sent bond yields soaring.
In an interview with the BBC, Georgieva said it was “impossible to stress strongly enough how critical it is to get the courage to take the steps that are necessary.
“These are politically tough steps to take, but necessary steps to take,” she said.
O’Neill, who was a Treasury minister duing the Cameron government, said he also opposed a capital gain tax hike given it was “risky business” that could stifle investment in start-ups.
In a separate interview on Tuesday, the top economist also hit out at Burnham’s “growth in every postcode” slogan he claimed could lead to waste in taxpayers’ money.
“I am not a huge fan of ‘growth in every postcode’,” O’Neill said at the beginning of the conversation.
“The best way of getting growth in every postcode is to get 10-year UK gilt yields down by 150 basis points, which would be reflected in, obviously, mortgage rates.”