Lord Jim O’Neill, the former Goldman Sachs executive who advised Andy Burnham ahead of the Labour leadership contest, has warned that UK debt interest costs have become ‘increasingly crazy’ and called on the Prime Minister to scrap the triple lock pension guarantee. Speaking on LBC, O’Neill argued that allowing debt servicing bills to dwarf defence spending was unsustainable, and that Burnham would face little serious opposition from the Conservatives if he moved to end the triple lock.
UK debt interest costs close to a 50-year high
The government is projected to spend about £110bn this year on debt interest alone. That figure is, according to UK-Debt.info, among the highest in 50 years as a share of public spending. Separately, Statista puts public sector debt interest spending for 2025/26 at £130.3bn, up from £126.5bn the previous year. The bill is projected to rise to £137bn within years, a forecast that could move higher still after medium-term gilt yields rose to two-decade highs earlier this year.
City AM analysis showed the UK government has paid more than £200bn in debt interest costs since Labour were elected in 2024. When O’Neill was asked on LBC whether the government borrowing about £77bn since April was sustainable, he said flatly: ‘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.’
Triple lock and capital gains tax in O’Neill’s sights
O’Neill’s prescription was pointed. He called for the triple lock to be scrapped, arguing that it would be ‘pretty difficult’ for the Conservatives to oppose such an announcement, accusing policymakers of ‘playing this game’ in winning over voters with expensive commitments ‘at the expense of everybody else’. The triple lock guarantees that the state pension rises each year by whichever is highest: inflation, wage growth, or 2.5 per cent.
The former Goldman Sachs executive, who served as a Treasury minister during the Cameron government, also came out against a capital gains tax increase. He called it ‘risky business’ that could stifle investment in start-ups.
In a separate interview on Tuesday, O’Neill turned his attention to Burnham’s ‘growth in every postcode’ slogan, saying he was ‘not a huge fan’ of it and warning it could lead to waste in taxpayers’ money. ‘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,’ he said.
IMF adds its voice to the debt warning
O’Neill was not alone in sounding the alarm. Kristalina Georgieva, managing director of the International Monetary Fund, warned governments in a BBC interview that they needed to bring down steep levels of debt following a market rout that sent bond yields soaring.
‘It is impossible to stress strongly enough how critical it is to get the courage to take the steps that are necessary,’ Georgieva said. ‘These are politically tough steps to take, but necessary steps to take.’
The longer-run picture is starker still. Research by the Institute for Public Policy Research, reported by City AM, found that in the most-likely scenario, UK debt interest payments could reach nearly 21.3 per cent of government revenue by 2075. That would leave roughly one pound in every five of tax receipts committed to servicing debt before a penny is spent on public services.
Whether Burnham heeds O’Neill’s counsel on the triple lock remains to be seen, but the political arithmetic O’Neill outlined is plain: with the cost of LBC-style headline-grabbing commitments now priced into the gilt market, the room for further spending promises is narrowing fast. The projected rise to £137bn in annual debt interest payments will sharpen that pressure considerably.
