UK government borrowing hits highest level on record in December | Government borrowing

UK government borrowing hit its highest ever December level as spending soared in response to the coronavirus pandemic coupled with a sharp drop in tax revenue.

The Office for National Statistics said borrowing hit £34.1billion last month, around £28billion more than the same month a year ago.

The increase took the government’s budget deficit – the gap between spending and tax revenue plus other revenue – to nearly £271billion for the first nine months of the financial year, an increase of more than £212billion compared to the same period last year, as the Covid-19 pandemic far outweighed the damage caused by the 2008 financial crisis.

The Office for Budget Responsibility (OBR), the independent forecasting unit, estimated that borrowing would reach £394bn by the end of the financial year in March.

The latest increase in borrowing comes as government spending increased in response to the second wave of the pandemic. The bill for coronavirus employment support schemes, including the furlough scheme, in December was £10billion. There was also a £9bn bill for vaccines, tests and PPE. Total expenditure was £86bn.

December’s borrowing pushed the national debt – the sum total of each deficit – to £2.1tn at the end of December, or around 99.4% of gross domestic product (GDP), the highest debt ratio since 1962.

Analysts said the furlough scheme alone cost the government £4.7billion in December, a figure that will rise significantly in January after the launch of tougher lockdown controls. However, the cost of inaction would have been mass unemployment and lasting scars on the economy that would have caused longer term damage to public finances.

Charlie McCurdy, researcher at the Resolution Foundation, said: ‘This level of spending may be extremely high, but it is absolutely necessary to both fight the virus and protect families and businesses from the crisis.

Pressure is mounting on the Chancellor to increase financial support for businesses and workers during the latest restrictions, as the pandemic pushes Britain’s economy closer to a double-dip recession.

The Guardian revealed on Thursday that ministers are considering paying £500 to anyone in England who tests positive for Covid-19, as part of a radical overhaul of the self-isolation scheme and amid persistently high infection rates . If adopted universally, this level of payments would cost more than £450million a week.

Despite record borrowing, economists, including those at organizations such as the International Monetary Fund, have argued that cutting government spending and raising taxes to cut the deficit will derail Britain’s recovery. The cost to government of soaring national debt has also fallen to its lowest level since the 1690s, helped by historically low interest rates and the government’s quantitative easing bond-buying program. several billion pounds from the Bank of England.

Chancellor Rishi Sunak said the government had invested more than £280bn in protecting jobs and livelihoods since the start of the pandemic. “It was clearly the financially responsible thing to do. But, as I have said before, once our economy begins to recover, we should seek to put public finances back on a more sustainable footing.

This article was amended on January 19, 2021 to clarify the definition of budget deficit to include other revenue.

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