The UK government borrowed £ 35.9 billion in August as the fight against the economic fallout from the pandemic wreaked havoc on public finances, official figures show.
The figure – the difference between spending and tax revenue – was £ 30.5 billion more than he had borrowed in August last year.
This increase means that the amount of borrowing reached its highest amount in August since the record began in 1993.
Borrowing between April and August totaled £ 173.7 billion – a record too.
August’s monthly borrowing amount was, however, lower than economists had predicted at £ 38 billion, according to Pantheon Macroeconomics.
The Office for National Statistics (ONS) also downgraded its estimate of UK borrowing in July from over £ 11bn to £ 15.4bn, demonstrating just how much it can be difficult to keep up with the economy during the pandemic.
He also said the UK’s total debt surpassed £ 2 trillion for the first time in history in August, rather than July, as previously believed.
In August, debt reached 2.024 billion pounds, up 249.5 billion pounds from the same period in 2019.
This figure now exceeds the size of the UK economy, the highest level of debt since the 1960s.
Andrew Wishart, a British economist at Capital Economics, said the rise in borrowing was due to the government absorbing “much of the cost of the Covid-19 crisis”.
The government has been forced to cover a wide range of costs related to the coronavirus – from the holiday program and bailouts for rail companies to business rate vacations and VAT cuts for hotels and tourism.
He also set aside £ 500million to cover the cost of the ‘Eat Out to Help Out’ program, where diners got a 50% discount on meals and non-alcoholic drinks for up to £ 10. £ each Monday, Tuesday and Wednesday in August. .
But “the big picture is that budget support will wane in the fall, leading to a lot of job losses,” Wishart added.
The latest figures from the ONS show that while billions have been injected to support the economy, tax revenues have fallen sharply.
The amount collected by the central government in the form of taxes fell to £ 37.3 billion in August, down £ 7.5 billion from a year earlier.
The amount of VAT, corporation tax and income tax collected has “fallen considerably,” the ONS said.
It was another month of big government borrowing – though many economists thought it would be even more.
As always, the outlook will depend on specific spending and fiscal measures and the strength of the economy.
The main headline of the Chancellor’s announcement yesterday was the upcoming replacement of the holiday program by the less generous employment support program.
This will reduce expenses compared to the extension of the leave program, although it is almost certain that this will lead to substantial job losses.
Another of its measures – extending the VAT reduction for hotels and tourism – will reduce tax revenues.
The resurgence of Covid cases and renewed restrictions intended to contain the pandemic risk casting a shadow over the economic recovery.
Some economists expect the economy to stagnate for the rest of the year. To the extent that this happens, it will weaken tax revenues.
The new figures came the day after Chancellor Rishi Sunak announced a series of extensions to existing coronavirus programs, including a replacement for the leave program, which is expected to end in late October.
Under the new “top-up” system, if bosses bring back part-time workers, the government will help them increase their wages to at least three-quarters of their full-time wages.
Philip Shaw, chief economist at Investec Bank, said the government borrowing figures could “partially correct” next year as a number of the Chancellor’s measures expire.
Mr. Shaw, however, underlined that in order to reduce the debt, the Chancellor “will have to make difficult decisions on fiscal policy”.
But “with the current emphasis on trying to sustain the recovery, now is not the time,” he added.
Looking ahead, the ONS has said the Chancellor is likely to borrow around £ 370 billion in fiscal 2020.