Coronavirus: April-June borrowing more than double level for whole of previous year

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The public finance shortfall for the first three months of 2020/21 surged to £127.9bn as tax receipts slumped and spending rose.

    Government borrowing for April-June was more than double that for the whole of the previous fiscal year thanks to the “unprecedented impact” of the COVID-19 pandemic, official figures show.

    The deficit of £127.9bn for the three-month period compares with a £55.4bn shortfall for the year to the end of March, the Office for National Statistics (ONS) said.

    For June alone, the government borrowed £35.5bn, about five times more than in the same month last year and the third highest monthly figure on record.

    
Coronavirus: April-June borrowing more than double level for whole of previous year

    But it was lower than expected by economists and less than in May.

    The ONS said: “The substantial increases in borrowing in recent months reflect the emerging effects of government coronavirus policies.”

    However, the report also carried a warning that the figures were subject to greater than usual uncertainty due to the pandemic.

    The figures come as Chancellor Rishi Sunak announces inflation-beating pay rises for doctors, teachers, police officers and other public sector employees.

    The government has already announced extra spending and tax cuts worth around £192bn for the current financial year, including a £30bn “plan for jobs” revealed earlier this month.

    Responding to the borrowing data, Mr Sunak said: “It’s clear that coronavirus has had a significant impact on our public finances, but we know without our response things would have been far worse.

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    “The best approach to ensure our public finances are sustainable in the medium-term is to minimise the economic scarring caused by the pandemic.”

    The ONS figures showed that Britain’s debt pile grew to £1.98trn in June, representing 99.6% of gross domestic product (GDP) – the highest level since 1961.

    But that was lower than the 100.9% previously pencilled in for May after the ONS updated its estimate of GDP.

    Meanwhile, the ONS revised down its previous figure for borrowing in May by £9.8bn to £45.5bn, mainly because tax receipts were stronger than had been estimated.

    Governments have to borrow each month when expenditure is higher than receipts.

    Borrowing is expected to reach £322bn in the current fiscal year to the end of March 2021, according to the central scenario outlined by the Office for Budget Responsibility (OBR) – or 16% of GDP, its highest level since the Second World War.

    
Coronavirus: April-June borrowing more than double level for whole of previous year

    In June, receipts were 16.5% lower than in the same month last year at £49.4bn as tax revenues plummeted – notably VAT, which fell 45.1%.

    Meanwhile, spending was up 24.8% year-on-year to £80.5bn, with £9.7bn of the extra outlay spent on furlough schemes subsidising temporarily laid-off workers.

    Separately, latest figures from the Treasury on Tuesday showed its total spending on the schemes – including those covering both employees and the self-employed – had reached £36.5bn so far.

    Reacting to the borrowing figures, Jeremy Thomson-Cook, chief economist at Equals Money, said: “The good news is that June’s number is £10bn lower than May’s revised figure, the bad news remains the obvious increase in the UK’s debt burden.

    “In the short term however, the latter really does not matter; if your house is on fire you do not tell the fire brigade to only use a certain amount of water.”

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