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Summary
- The Office for National Statistics says the UK's public sector net debt stands at £2,131.7 billion, accounting for almost 99.4 per cent of country’s GDP
- The figures might pose complication for the UK Chancellor Rishi Sunak in preparing the budget to be announced on 3 March
The latest figures posted by the Office for National Statistics reveal that the public sector net borrowing has hit a new record of £34.1 billion in December 2020. The monthly borrowing level is the highest for the month and third highest in any month since the measure began with the monthly records in 1993.
The figure indicated that £28.9 billion more money was borrowed compared to December 2019 (£5.2 billion).
Public sector net borrowing is estimated to have been £270.8 billion in the first nine months of FY 2021 (April - December 2020), recording the highest in any April to December period since 1993.
Public sector net debt
The figures for the first nine months of the financial year 2021 surged to £333.5 billion, driven by the extra funding required to support the UK government’s coronavirus support schemes. The public sector net debt reached £2,131.7 billion at the end of December, equivalent to 99.4 per cent of GDP. However, it was £325.7 billion more when compared to the December 2019 value.
Other reasons that drove the net debt to record levels were reduced cash receipts and a fall in the national output, pushing the debt to GDP ratio to record its highest value since 1962.
How has the Covid-19 pandemic affected the public finances?
The dreaded coronavirus health crisis has adversely affected the economy, thereby impacting the public sector borrowings and government debt.
On the one hand, there was a fall of £39.6 billion (by 7.8 per cent) witnessed by the combined central government tax and national insurance receipts in the nine months to December, as compared to the same period a year ago. On the other, government support for individuals and businesses during the pandemic contributed to an increase of £169.3 billion (by 30.7 per cent) for the same period.
The UK government and the devolved administrations have announced a total of at least 50 schemes in order to support individuals and businesses during the pandemic that have been struggling to survive. Some of them include- Bounce Back Loan Scheme; Covid-19 Corporate Financing Facility; Coronavirus Job Retention Scheme (CJRS); Eat Out to Help Out Scheme; Job Support Scheme (JSS) and the latest Lockdown Grants (January 2021).
Most of the economic indicators have disclosed falling figures that represent the year 2020 as a gloomy year and experts are estimating that these statistics could likely result in a “double-dip” recession.
