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Summary
- According to the institute for fiscal studies, after reaching a record high level of debt due to economic shock after the pandemic, the borrowings have begun to fall.
- The total debt still remains high, with a debt-to-GDP ratio of 98.5 per cent.
- April 2021 has been recorded as the second highest April of borrowings by the UK government till date.
The Covid19 pandemic exposed economies all over the world to serious challenges, which led to restrictions and lockdowns and had a huge negative impact on the global economy. According to the recent estimates, the economy of the UK has started getting back on track and the process of restoration, post the pandemic, is moving hand in hand with the easing of lockdown restrictions.
UK government borrowing
The borrowings of the UK government increased at a very high rate post the pandemic struck the economy. However, the borrowings fell in April 2021 as the restrictions started to ease and the market started opening after the vaccine rollout. Even though the borrowings have fallen, yet the level of debt still remains quite high.
According to the office for National Statistics (ONS), the borrowings of the UK government were £31.7 billion in April 2021, which is the second-highest amount of borrowings in April recorded till date, whereas the Tax and National Insurance contributions in March stood at £670 billion, and it came down from last year by £32.7 billion.
Also Read: UK Economy Recovered from Pandemic Lows in March, Claims New ONS Data
In the same month last year, the net borrowings were £15.6 billion less than the present, with £58 billion as receipts of the central government– up £3.8 billion in April 2020. £95.9 billion was spent by the central government in 2020, which came down by £12.9 billion.
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The estimates for the total deficit of last year have also been revised by the ONS. The borrowings went down from £303.1 billion to £300.3 billion, which is the level of borrowing that hasn’t ever been recorded post World War 2, as it adds up to a significant 14.3 per cent of GDP (Gross domestic product).
As of April 2021, the total debt of the UK government is £2.17 trillion, which adds up to approximately 98.5 per cent of GDP. The highest debt-to-GDP ratio in the UK had been recorded in March 1962, which was 99.5 per cent.
Apart from the fiscal borrowing, a very significant part of the government’s additional spending requirements was met by a wide range of support schemes for businesses and workers. This led to a great increase in the spending by £204.1 billion to £942.7 billion.
The borrowings of the government in April stands at £31.7 billion, while the total government debt stands at £2.17 trillion.
Way forward
The current aim of the UK government is to build back a strong economy and follow the path of economic recovery post the pandemic. But, bringing public debt under control using sustainable financing methods is also a key priority of the government to achieve medium and long-term growth. It is important for the government to channelise the borrowings towards supporting businesses and workers for increased productivity and growth of the economy.
