UK government borrowing fell in June as the economy continued to recover from the shock of the pandemic … but interest payments on the national debt were increased by rising inflation.
The figures published by the National Statistics Offices this morning shows that public sector net borrowing (excluding cost of public sector banks) fell to £ 22.8 billion last month.
That’s £ 5.5 billion less than in June 2020, but remains the second highest June borrowing since monthly records began in 1993.
The ONS reports that tax revenues were stronger in June than a year ago, following parts of the economy reopening earlier this year:
Central government revenue in June 2021 was estimated at £ 62.2 billion, an increase of £ 9.5 billion (or 18.0%) from June 2020. Of this revenue, Tax revenues increased by £ 8.1bn (or 21.7%) to reach £ 45.5bn. .
Public spending has increased, in part because of the cost of fighting the pandemic, according to the ONS:
Central government departments spent £ 31.1bn on goods and services in June 2021, an increase of £ 1.7bn (or 5.7%), of which £ 17.7bn for purchases and £ 12.8 billion for wages.
This cost includes the expenses of the Ministry of Health and Social Affairs (DHSC), decentralized administrations and other departments in response to the coronavirus pandemic, including the NHS Test and Trace program and the cost of vaccines.
Borrowings to date of this fiscal year are also lower than those of the first wave of Covid-19.
Since April, the government has borrowed around £ 69.5bn to balance the books, £ 49.8bn less than at the same time last year (but again, the second loan from highest April to June on record).
Last year’s record borrowing was also scaled back -om £ 1.5bn to an unprecedented £ 297.7bn (the highest borrowing since record breaking began). exercise in 1946).
This means that the national debt now stands at £ 2,218.2 billion, or about 99.7% of UK GDP, the highest ratio since the 102.5% recorded in March 1961.
The report also shows that interest payments on central government debt stood at £ 8.7bn in June 2021, the highest monthly payment on record (since April 1997) – down from just 2.7 billion pounds sterling in June 2020.
Much of this was due to an increase in the Retail Price Index (RPI), a measure of inflation, to which indexed gilts (government bonds) are pegged.
The ONS explains:
Interest on the £ 470.7 billion indexed gilts in circulation (at redemption value) increased by £ 6.0 billion in June 2021 compared to June 2020, mainly due to the sharp increase in the RPI between March and April 2021 impacting on the rise in indexed gilts delayed by three months.
Public finance statistician Fraser Munro has more details:
Reaction to follow….
European stock markets are set for a slightly higher open, after a small rally yesterday after Monday’s drop.
- 7am BST: UK public finances for June
- Noon BST: Weekly US Mortgage Approvals
- 2:30 p.m. BST: Treasury committee hearing on the Office for Budget Responsibility report on budgetary risks
- 3:30 p.m. BST: Weekly figures for US oil stocks from IEA