Elon Musk's '1,000%' Bankruptcy Warning: Why the UK Already Spends More on Debt Interest Than on Defence

Tesla boss Elon Musk said America is '1000% going to go bankrupt as a country' without artificial intelligence (AI) and robots. He said US debt interest now tops military spending. Britain is already past that point, with the Office for Budget Responsibility (OBR) putting net debt interest at $146 billion (about £110 billion) in 2025-26.

Defence costs less, at $82 billion (about £62 billion), the House of Commons Library says. On 7 September, Chancellor John Healey said debt interest, as a department, would be 'bigger than Defence, the Home Office and Justice put together.' Part of the bill moves with inflation because some bonds track prices.

Musk's Numbers Next to Britain's

Musk made the claim on the Dwarkesh Podcast, which aired on 5 February and appears below. By his figures, which put the US military budget at $1 trillion (about £756 billion), the two American bills are roughly level. Britain's interest bill is about 1.8 times its defence spending, past what historian Niall Ferguson calls the 'Ferguson limit'. His 2025 Hoover Institution paper warns that a great power beyond it 'risks ceasing to be a great power.'

In Britain, central government's debt interest reached $11.6 billion (about £8.8 billion) in August 2026, the Office for National Statistics (ONS) reported on 22 September. That was the biggest August sum on ONS records, which start in 1997, before adjusting for inflation. Of the total, $2.8 billion (about £2.1 billion) reflected inflation uplifts on index-linked gilts, bonds whose payouts track the Retail Prices Index (RPI). Even so, August's bill was still lower than in April, May, or June.

Borrowing Tops the Official Forecast

The public sector borrowed $24.2 billion (about £18.3 billion) in August, $4.6 billion (about £3.5 billion) more than the OBR had forecast. The Institute for Fiscal Studies (IFS) said interest explained part of that overshoot. Spending grew faster than government income, the ONS said. Borrowing from April to August reached $102.3 billion (about £77.3 billion), $2.9 billion (about £2.2 billion) lower than a year earlier but $10.7 billion (about £8.1 billion) above the forecast. Net debt was a provisional $3.95 trillion (about £2.985 trillion) in August, equal to 93.8% of gross domestic product (GDP), the value of all UK output.

Emma Reynolds, the chief secretary to the Treasury, said on 22 September that 'debt interest costs billions of pounds that could otherwise be spent on improving lives.' She said the government would stick to its borrowing rules with a safety margin against uncertainty. Andrew Griffith, the Conservative shadow chancellor, accused the government of losing control of the public finances. IFS research economist Nick Ridpath called debt interest spending a 'worryingly large share of overall government spending.'

The Budget on 28 October

Healey presents his first autumn Budget on Wednesday 28 October, alongside new OBR forecasts. Broadcaster LBC quoted Thomas Pugh, chief economist at the advisory firm RSM UK, who said, 'Another round of tax rises in October now looks inevitable.' Pugh puts Healey's spare room, or headroom, under his borrowing rules at between $13 billion to $20 billion (about £10 billion to £15 billion).

Historian Niall Ferguson's paper says debt costs squeezed British military power in the 1920s, before Britain got back under the limit and rearmed. The OBR's March 2026 forecast shows the UK's national debt peaking at 96.3% of GDP in 2028-29 and falling to 95.1% by 2030-31. The next ONS borrowing figures, covering September, are due on Wednesday 21 October.