UK government borrows by half as economy rebounds from lockdowns

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UK government borrowing more than halved in the 2021-22 financial year ending in March as the economy rebounded from the pandemic, giving the chancellor more leeway to deal with the cost of housing crisis. life.

The Office for National Statistics’ initial estimate of public sector net borrowing for 2021-22 was £151.8bn in 2021-22, down more than 50% from £317.6bn. pounds in 2020-21 when the coronavirus crisis was at its worst.

That provisional data was worse than the £128.8billion the government’s budget watchdog, the Office for Budget Responsibility, predicted in its March forecast for the financial year. But with strong tax revenues, economists said the final official figure was likely to improve significantly as new spending data came in from government departments.

Representing around 6.4% of national income, the level of government borrowing was lower than the five-year total following the 2007-2008 global financial crisis, indicating a much faster economic recovery from the virus.

Economists said the figures were better than expected and the ONS would soon revise borrowing estimates down in 2021-22.

Michal Stelmach, senior economist at KPMG UK, said the £24billion difference between the OBR forecast and the ONS figures stemmed from an assumption made by the fiscal watchdog that many ministries would not have spent their entire budget in 2021-22.

“The main difference comes from [the OBR’s] judgments that do not yet appear in the published data, in particular in relation to higher departmental under-spending, lower local authority investment and an expected downward revision to the cost of Covid-19 loan guarantee schemes. 19,” Stelmach said.

Samuel Tombs, UK economist at Pantheon Macroeconomics, noted that “early borrowing estimates have recently been revised down significantly as more data has been gathered.” He said tax revenue was higher than the OBR had forecast for the full year and government spending figures were often revised down significantly.

The sound state of public finances has given Chancellor Rishi Sunak room to cushion the effects of the cost of living crisis, according to James Smith, research director at the think tank Resolution Foundation.

A “revenue-rich” recovery, Smith said, meant that “the Chancellor can have no reason not to provide much-needed policy support to families as they face the rising inflation and energy bills that are now hitting their finances”.

Sunak, however, gave no indication he was considering any other imminent action to help households. In a statement after the figures were released, the Chancellor highlighted the support he said he had already offered.

“We must manage public finances in a sustainable way to avoid putting future generations in debt,” he added.

The interim data was, however, worse than what the government’s fiscal watchdog, the Office for Budget Responsibility, predicted in its March forecast alongside Chancellor Rishi Sunak’s spring statement. He expected borrowing in the financial year to fall to £127.8bn.

The gap is likely to close somewhat as the ONS receives more accurate tax revenue and government spending data over the past few months. The large gap, however, suggests that tax revenues are slowing as households face a cost-of-living crisis that squeezes their incomes.

The borrowing in March of £18.1billion was the second highest on record, the ONS said.

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