Sunak says ‘things could have been far worse’ as UK reports highest debt since 1960

Chancellor Rishi Sunak (Photo: Chris J Ratcliffe/Getty Images).
Chancellor Rishi Sunak (Photo: Chris J Ratcliffe/Getty Images).

BRITAIN’s government borrowing in the first half of the financial year was more than six times higher than before the Covid pandemic, official figures showed on Wednesday(21), taking public debt to its highest since 1960.

Responding to this, finance minister Rishi Sunak said that things could have been far worse had the government not acted to protect livelihoods.

Public borrowing in September alone totalled  £36.101 billion($46.90 billion), although August’s figure was revised down by more than  £5 bn to  £30.113bn.

“It’s clear that the coronavirus pandemic has had a significant impact on our public finances, things would have been far worse had we not acted in the way we did to protect millions of livelihoods,” Sunak said.

“Over time and as the economy recovers, the government will take the necessary steps to ensure the long-term health of the public finances.”

The increased borrowing took total public debt further above the £2 trillion mark to £2.060 trillion or 103.5 per cent of GDP, its highest on this measure since 1960, the Office for National Statistics said.

Driven by a surge in coronavirus-related spending and a fall in tax revenue after the biggest economic hit since at least the 1920s, borrowing from April to September totalled  £208.5bn, over six times more than for the same time in 2019.

Britain’s Office for Budget Responsibility predicted in August that borrowing would reach a record  £372bn by the end of this financial year, equivalent to 18.9 per cent of gross domestic product, the most since World War Two.

Borrowing to date is below what the OBR pencilled in for this point in the tax year, though the ONS data does not yet include the cost of defaults on government-backed Covid loans which the OBR has factored in.

Spending risks rising again in the second half of the financial year as lockdown restrictions return to much of the UK, pressuring the government to offer extra support to closed businesses and their workers.

“The OBR’s forecast for public borrowing of 372 billion still looks about right,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

Ratings agency Moody’s downgraded Britain’s sovereign credit rating on Friday(16) to the same level as Belgium’s and the Czech Republic’s, warning that Britain “effectively has no fiscal anchor”.

Economists expect the Bank of England to launch a further  £100bn of bond purchases next month, adding to the £300bn announced since March.

Britain’s government had aimed to set out a three-year plan for public spending next month, but said on Wednesday this would only cover one year due to Covid uncertainty, with exceptions for schools, healthcare and some infrastructure.

Separately, the Office for National Statistics said annual consumer price inflation in September rose to 0.5 per cent in September from 0.2 per cent in August, when it had been reduced by a temporary scheme to promote dining in restaurants.