UK Chancellor of the Exchequer Rishi Sunak on Friday expressed the hope that Britain is poised to kickstart its economic recovery from the adverse impact of the coronavirus pandemic lockdown as latest statistics revealed that the country’s debt had overtaken GDP for the first time in 57 years.
The Office for National Statistics (ONS) figures revealed that the UK’s total level of debt hit £1.95 trillion, or 100.9 per cent of gross domestic product (GDP), meaning that debt is now worth more than the UK economy after record borrowing in the month of May, mainly to shore up several government-backed coronavirus support measures.
“Today’s figures confirm that coronavirus is having a severe impact on our public finances. The best way to restore our public finances to a more sustainable footing is to safely reopen our economy so people can return to work,” said Sunak.
“We’ve set out our plan to do this in a gradual and safe fashion, including reopening high streets across the country this week, as we kickstart our economic recovery,” the finance minister said.
The government borrowing was necessitated to fund the government’s health response to pandemic and the huge programme of economic support, even as business rate and VAT holidays meant the UK Treasury was receiving much less than usual.
Income from tax, National Insurance and VAT all registered a sharp decline in May amid the coronavirus lockdown as spending on support measures to save jobs and businesses, such as the Coronavirus Job Retention Scheme and loan schemes, marked a sharp upswing.
The job retention scheme supported the furloughing, or forced leave, of 8.7 million workers in May at a cost of £17.5 billion, with a further £7.6 billion spent on supporting 2.5 million self-employed.
In May, the government borrowed £55.2 billion, the highest monthly borrowing since records began in 1993 and nine times more than the 5.6 billion pounds required last May.
This is the first time that UK debt has been larger than the size of the economy since 1963, but lower than the post-war peak of 258 per cent in 1946-47.
Experts highlight that with interest rates at record low levels, the high level of borrowing is not entirely unaffordable.
Scott Bessent