The UK Treasury has blamed "unsustainable" levels of spending by the last Labour government for public debt rising above £1 trillion for the first time.
Public sector net debt excluding financial interventions, such as bank bail-outs, rose to £1.004 trillion in December, as the Government borrowed nearly £14bn last month despite its continued austerity drive.
The £1 trillion figure was the highest since records began in 1993, and represents 64pc of GDP. The Treasury has not recorded an annual surplus since 2001/02, when it repaid £243m into the nation's coffers.
The Government has forecast that servicing Britain's debt will cost £47.6bn in the current financial year, rising to £65.5bn in 2016/17.
A Treasury spokesman said: "That our national debt has reached more than £1 trillion simply shows the unsustainable level of spending this country built up over the past few years, and shows why it is critical for our nation's future that we deal decisively with the deficit."
The Office for National Statistics (ONS) said it expected the figure to ease back in January due to tax inflows, but to rise again in February.
However, borrowing in December came in lower than expected, putting Chancellor George Osborne further ahead of a target set by the Office for Budget Responsibility (OBR) to bring borrowing down by £10bn to £127bn this financial year.
The ONS said that public sector net borrowing, excluding financial interventions fell to £13.7bn in December, down from £15.9bn in the same period in 2010.
David Gauke, Exchequer Secretary to the Treasury, said: "It’s important that we get the public finances under control. The good news today is that borrowing is 10pc lower than it was last year.
"Nonetheless we’ve got a long way to go. Borrowing is still too high, debt is continuing to increase, and it’s important hat we take action to get borrowing down."
Markets were largely muted on a day when investors were more concerned with developments in Greece . The UK's benchmark FTSE 100 (Euronext: VFTSE.NX - news) index fell 0.8pc to 5,737.09 in mid-afternoon trade.
Vicky Redwood, senior economist at Capital Economics, said that the £1 trillion figure was "a reminder of the enormity of the challenge that still lies ahead to get the public finances back on a sustainable footing."
She (SNP: ^SHEY - news) added: "We expect weaker growth than the OBR is forecasting to make its future borrowing forecasts much harder to meet. Indeed, so far, it has been weaker spending growth helping borrowing to fall, whereas tax receipts are falling short of the fiscal forecasts."
Stalling growth saw the Chancellor revise the UK's borrowing forecasts in last year's Autumn Statement. Borrowing is now expected to be £5bn more this financial year than originally forecast, £19bn higher next year and £30bn higher in 2013-14.
The OBR also said in November (Stuttgart: A0Z24E - news) that downward revisions to its growth forecasts meant that the deficit would also shrink less quickly over the next five years.
Howard Archer at IHS Global Insight, said: "There remains a very real danger that the Chancellor will before long face the difficult decision of accepting further slippage in his fiscal targets or imposing more fiscal tightening on a struggling economy."
Most economists expect official GDP figures released on Wednesday to show the UK economy contracted during the final quarter of 2011.
Growth is expected to have fallen 0.1pc in the three months to December according to a Bloomberg poll, compared with a 0.6pc rise during the third quarter.
The International Labour Organisation (ILO) warned on Monday that Britain risks falling back into recession because of an "unabated" weakening of the jobs market, while the Ernst & Young ITEM Club and the Centre for Economics and Business Research believe that the UK is already in recession.
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