High inflation could cost the British Government tens of billions of pounds in extra interest payments because so much of its debt is index-linked.

More than one-third of gilts – excluding those bought by the Bank of England – are linked to the retail price index measure of inflation.

As a result, if inflation is one percentage point higher over the next five years, payments on those bonds will rise by £26bn, the National Audit Office has warned.

RPI inflation has risen rapidly in the past two years, from a low of 0.9pc in mid-2015 to 3.9pc now.

The Bank of England – which targets the lower consumer price index – believes this pressure will slowly slide in the coming months and years, but still expects prices rises will be above its target for the next three years.