UK government borrowing shot up in August as tax receipts slipped and spending on coronavirus stimulus grew, the latest figures have shown.
Public sector net borrowing jumped to £35.9bn, the third-highest monthly total and the highest August total on record, the Office for National Statistics (ONS) said. It compared with borrowing of £5.4bn in August 2019.
July’s borrowing figure was revised down to £15.4bn from £26.7bn, giving a sense of the high levels of uncertainty caused by the pandemic.
The jump in borrowing came as the government stepped up its coronavirus stimulus. The VAT cut for the hospitality and tourism sectors contributed to VAT receipts falling by £3.7bn year on year, the ONS said.
The Eat Out to Help Out scheme, which lured people to the high street with government-subsidised meals, cost £500m. And the government paid £4.7bn to help self-employed workers.
Government borrowing in the first five months of the 2020-21 financial year was around £174bn, the ONS said. That is £147bn higher than in the same period last year, and is the highest level of borrowing since records began in 1993.
Government borrowing set to ‘decline sharply’
The figures came the day after chancellor Rishi Sunak unveiled a new package of economic support.
The furlough scheme – which has so far cost the government around £40bn – will end on 31 October, Sunak confirmed.
It will be replaced by a much cheaper scheme under which the government will subsidise employees for working part time. The maximum the government can pay is 22 per cent of a worker’s wages. That compares to 80 per cent under the furlough scheme.
Andrew Wishart, UK economist at Capital Economics, said: “While the chancellor announced some modest further support yesterday, the big picture is that fiscal support will fade over the autumn causing many more job losses to be realised.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said borrowing was set to “decline sharply” over the coming months.
He said the new job support scheme “is markedly less generous than the previous job retention scheme”.
Nonetheless, the levels of government borrowing this year will be huge. The chancellor is likely to borrow in the region of £370bn in 2020/21.
That would push up the public debt to GDP ratio from around 88 per cent last year to more than 100 per cent this year.