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UK government borrows £62bn on COVID-19 shutdown

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UK government borrows £62bn on COVID-19 shutdown

The Independent Office for Budget Responsibility believes borrowing will reach a peacetime record of £300bn for 2020-21 as a whole.

British PM, Boris Johnson

UK government was forced to borrow a record 62 billion pound sterling to balance its books in April as the public finances felt the strain from a shutdown of the economy and an unprecedented 18 per cent drop in high-street spending.

Figures from the Office for National Statistics (ONS) highlighted the dramatic impact of the Covid-19 restrictions introduced in late March on activity, with public borrowing up by more than 50 billion pounds on the same month a year earlier and spending in clothes stores down by 50 per cent.

The Guardian stated that ONS said there had been a sharp drop in the state’s main sources of revenue coupled with a marked increase in spending.

With the economy at a virtual standstill, the government borrowed as much last month as in the whole of the previous financial year; it was the highest monthly total since comparable records began in 1993.

Although ministers expect April’s figures to take the biggest hit from Covid-19, a senior official at the Bank of England warned that recovery was likely to be slower than previously anticipated.

The ONS said the full effects of the pandemic on the public finances would only be felt over the coming months and as a result the April data was likely to be substantially revised.

The Independent Office for Budget Responsibility believes borrowing will reach a peacetime record of £300bn for 2020-21 as a whole.

In April, tax receipts were down by 26.5 per cent on the same month a year earlier, with income tax receipts down by 30.3 per cent, corporation tax down by 14.1 per cent and VAT down by 43.6 per cent.

The cost of the Treasury’s furloughing scheme, together with higher spending on the NHS, contributed to a 56.6 per cent annual increase in government spending.

The chancellor, Rishi Sunak, said he had no alternative but to borrow more.

“Our top priority is to support people, jobs and businesses through this crisis and ensure our economic recovery is as strong and as swift as possible.

“That’s why we’ve taken unprecedented steps to provide lifelines to people and businesses with our furlough scheme, grants, loans and tax cuts.

“If we hadn’t provided this support, more livelihoods would be at risk, and the economic and financial cost would have been much worse,” Sunak said.

Separate ONS data for retail sales volumes showed that the 5.2 per cent drop in March was dwarfed by an 18.1 per cent decline in April – the first full month of the lockdown.

The declines in the past two months have wiped out 15 years of growth, taking sales back to their level in 2005. The ONS said 15 per cent of stores reported zero turnover last month.

All sectors of the retail industry were affected apart from purchases made from online retailers – which were up 18 per cent – and sales of alcoholic drinks – which rose by 2.3 per cent.

With consumers confined to their homes, petrol sales were down 52 per cent while sales of clothing halved last month, following a drop of more than a third the previous month.

Jonathan Athow, deputy national statistician for economic statistics at ONS, said: “The effects of Covid-19 have contributed to a record monthly fall in retail sales of nearly a fifth.

Fuel and clothing sales fell significantly while spending on food also dropped after the surge from the panic buying seen last month.

Off-licence sales, however, continued to increase.

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