It means that around ten percent of the government debt is linked to the rate of inflation, so if inflation increases the return payments on the debt will increase which could cause the interest payments on the government debt to spiral out of control. The Floating Rate Notes are only around 2-3% of the overall government debt, they are linked to the base rate of interest so if the interest rate rises it would cause higher government debt interest payments.
The greater the number of inflation linked government debt products there are the more expensive government borrowing becomes if inflation increases so inflation has to be controlled to stop the return from rocketing. The other problem is if the interest rate rises and the government has to borrow to pay its existing debts back, the interest payment has to compete with a higher base rate making it more expensive to pay the government debt back.
"Debt" servicing seems to be a legitimate long-term concern. Because debt servicing represents non-discretionary spending, and if that grows too large relative to discretionary spending then there may be inadequate room for discretionary spending without risking unacceptable inflation. That's something the U.S., at least, needn't worry about any time soon. However consider that nations with deep sovereignty over their money can at least in principle eliminate as much of their outstanding debt as they like whenever they want, by simply buying it back by, in effect, converting it to reserve account deposits. This consideration suggests that concern over "debt" servicing may be overblown.
One thing I believe you don't have quite right is your concept of government debt. Your concern that governments might have to borrow at higher rates to pay on existing debt I don't think is a legitimate worry. At least not because of a high interest rate. Governments can, and will, if they deem it necessary, simply print the money needed to retire debt. Most of the time, however, when they retire debt, they do it when the central bank buys treasury bonds from the private sector. When that happens, as in QE for example, the central bank credits private sector reserve accounts with the proceeds and transfers the bonds to their own balance sheet. What's not obvious, is that the money in this operation is, in effect, the same money that the treasury, via deficit spending, previously caused to be printed and spent into the economy. Later when the treasury auctioned bonds in the amount of the newly printed and spent money that money moved back to the government side of the ledger.
It is not easy to understand the net result here because the internal, government accounting is obscured. All one needs to consider, however, is that this overall process simple involves the interchange of bonds and equivalent "printed" money between the private sector and the government. In other words, the government does not borrow even though it issues bonds and sells them into the private sector. Instead, it
always prints* any additional money it needs beyond its tax receipts and then later sells bonds in amounts equivalent to what it has already printed.
For governments like the U.S. government, which enjoys a very high degree of sovereignty over the "money" it "prints", the traditional concept of debt does not exist. The U.S. always "prints" the money it spends into the economy and only later issues debt instruments, in the amount of the money already "printed" and spent. The U.S. government never, ever borrows before it spends. In fact it doesn't borrow at all; it only appears to be borrowing. What this means in practice is that when U.S. sells bonds to the private sector it is simply exchanging the new money already "printed" and spent into the economy for another type of interest paying "money", i.e., a treasury security of some kind.
Nations with high sovereignty over the money they issue could retire all of their "debt" if the need arose, however the effect on the economy of doing is a matter of debate among economists. (Japan, not too long ago retired roughly ~50% of their debt when their central bank bought back ~50 % of outstanding JGBs.)
Deficits are real, "debt" servicing is real but the "debt" itself is not; not anyway for nations with a very high degree of sovereignty over their money. Such nations do not borrow, they only appear to be borrowing. This is why they can not go bankrupt and there is zero risk of default on any of their so-called debt instruments. The idea of a bond rating agency considering default risk for securities issued by these governments is absurd, but it is reasonable for them to consider inflation risk.
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*The "printing" step takes place when the government has a net overdraft in its account at the central bank, and the central bank credits the treasury account in the amount of the overdraft.
