UK borrowing posts first annual decline since pandemic began


British pound banknotes are seen in a box at the headquarters of Money Service Austria in Vienna, Austria, November 16, 2017.REUTERS / Leonhard Foeger

Britain’s massive public borrowing began to decline last month for the first time since the start of the COVID-19 pandemic, bolstered by an improving economic outlook that pointed to a potentially faster improvement in public finances.

Net public sector borrowing in April totaled £ 31.7bn ($ 44.9bn), official figures showed on Tuesday, from a record £ 47.3bn a year earlier when public finances fell. felt the greatest impact of the pandemic.

The UK government has spent heavily over the past year on health measures to limit the impact of COVID-19 as well as wage guarantees to prevent unemployment from rising significantly during the deepest economic recession in more than 300 years.

Borrowing in fiscal year 2020/21 stood at £ 300.3 billion, or 14.3% of annual economic output, the highest share of this measure since the end of World War II but slightly below an initial estimate a month ago.

UK government forecasters predicted in early March that borrowing would drop to 10.3% of GDP this fiscal year.

However, growth prospects have since improved thanks to a rapid rollout of COVID vaccines, and monthly borrowing is lower than the government forecast, prompting some economists to see faster improvement in public finances.

“The government’s financial position is not as bad as what the Office of Fiscal Responsibility predicted just two months ago, reinforcing our view that the tax hikes and spending cuts most fear may be avoided, ”said Ruth Gregory, UK economist at Capital Economics.

Public sector net debt as a percentage of GDP is at its highest level since 1962 at 98.5%, equivalent to 2.171 trillion pounds and up from around 1.8 trillion pounds before the pandemic.

But unlike in previous decades, interest rates are much lower, reducing both debt servicing costs and the urgency to reduce debt levels felt by previous governments.

After the data, Finance Minister Rishi Sunak reiterated his plan to “keep public finances on a sustainable basis by containing medium-term debt”, while supporting short-term growth.

Accounting firm KPMG said corporate tax revenues fell to their lowest in a year in April, which it linked to a temporary “ super-deduction ” designed to boost revenue. growth by granting companies tax credits equivalent to 130% of new investments in plant and machinery.

(1 USD = 0.7055 pounds)

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