Pandemic pushes UK state borrowing to peacetime record

LONDON: Emergency pandemic support measures sent UK annual borrowing rocketing to the highest level since World War II, official data showed on Friday. Public sector net borrowing — the state’s preferred measure of the deficit — ballooned to a record £303.1 billion ($420.8 billion) in the year to March, the Office for National Statistics said in a statement. And it was equivalent to 14.5 per cent of gross domestic product (GDP) — the highest proportion since 1946 when it stood at 15.2 per cent. Borrowing sky-rocketed in the 2020-2021 financial year as the UK government rushed to cushion the economic blow of Covid. And it contrasted sharply with borrowing of just £57.1 billion in 2019-2020. “The coronavirus pandemic has had a substantial impact on the economy and subsequently on public sector borrowing and debt,” the ONS said. In March alone, borrowing hit £28 billion as taxation receipts and national insurance contributions tumbled. Total state debt now stands at £2.141 trillion or 97.7 per cent of GDP — the biggest proportion since the early 1960s. Britain is one of the hardest hit countries in the world by the coronavirus pandemic, with a death toll at present of 127,345 people. Prime Minister Boris Johnson’s government has spent £352 billion in emergency measures, particularly for a furlough scheme that has paid the lion’s share of private sector wages for millions of Britons. The pandemic sparked a “meteoric rise” in government borrowing, said KPMG senior economist Michal Stelmach. “Rising debt is largely an unfortunate consequence of the government’s focus on shielding the economy as much as possible from the impact of Covid-19,” he added. “However, doing otherwise could have created long-lasting scars which would be far worse for fiscal sustainability.” In a separate release, the ONS revealed that long-suffering British retailers experienced an improving picture last month ahead of the partial lifting of virus restrictions. Johnson’s Conservative administration is targeting a phased reopening on the back of a successful vaccine drive, with non-essential retailers reopening for business last week. Retail sales by volume rose 5.4 per cent in March from February, the ONS said Friday. Sales had also risen in February after slumping in January on the back of England’s third round of virus curbs. — AFP