UK govt borrowing soars further on virus support

Marco Green
January 23, 2021

For 2020 as a whole, retail sales were down 1.9% - the biggest calendar-year fall since these records began in 1996 - and clothing sales slumped by more than a quarter. The bill for coronavirus job support schemes, including the furlough scheme, in December was £10bn.

The government borrowed £270bn between April and December 2020 and the state's cash requirements a year ago were almost double the previous record total.

Richard Hunter, head of markets at Interactive Investor, said the borrowing figure "underscores the inevitability of tax hikes in the March budget".

Data showed that in the first nine months of 2020/21 financial year (April to December 2020), the UK's public sector net debt excluding public sector banks (PSND ex) rose by £333.5 billion ($455.7 billion), to reach over £2.13 trillion ($2.91 trillion), or around 99.4 percent of projected GDP, the highest debt to GDP ratio since the financial year ending 1962 (100 percent).

Government borrowing in the nine months to the end of December was £270.8bn, up £212.7bn from a year earlier and the highest figure for that period on record.

Government borrowing has soared since the onset of the COVID-19 pandemic.

"It was not a happy Christmas for the retail sector with a strong bounceback following November's lockdown failing to materialise", said Jeremy Thomson-Cook, chief economist at payments company Equals Group. Chancellor Rishi Sunak has repeatedly signalled a desire to begin bringing United Kingdom finances back towards a more sustainable footing as soon as possible and repeated that call on Friday.

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"Since the start of the pandemic we've invested over £280 billion to protect jobs and livelihoods across the United Kingdom, and support our economy and public services", finance minister Rishi Sunak said in response to Friday's data.

Sunak reiterated a promise to put the public finances on "a more sustainable footing" once the economy begins to recover, and the government hopes a rapid vaccine roll-out will allow a rapid rebound from the impact of Europe's heaviest Covid-19 death toll.

Economists were divided over how soon Britons could see tax rises as part of the government's response. Several support programmes - such as furlough and government-backed business loans - are due to remain in place until the spring but businesses want support to be extended even further given the uncertainty around lockdown.

During the same period, government spending to support individuals and businesses affected by restriction measures to control the CCP virus pandemic contributed to an increase of £169.3 billion ($231.3 billion) in central government day-to-day spending, or a 30.7 percent increase.

"But the Treasury will not tolerate a 10% deficit indefinitely and the timing of the next general election in 2024 suggests that Mr Sunak will not wait until the economy has fully recovered before actively tightening fiscal policy".

Other reports by Click Lancashire

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