The UK government continued to borrow heavily in April as it supported workers on furlough and implemented measures to boost the economic recovery.
Public sector net borrowing, excluding public sector banks, was estimated at £31.7bn last month, data from the Office for National Statistics showed on Tuesday.
The monthly figure, the first for the 2021/2022 fiscal year, was the second highest for April borrowing since such records began in 1993, but £15.6bn less than in the same month last year when the economy was in its strictest lockdown. It was higher than the £30.9bn forecast by economists polled by Reuters, but undershot the £39bn estimate from the Office for Budget Responsibility, the fiscal watchdog.
Public borrowing for the fiscal year ending March 2021 was revised down by £2.8bn to £300.3bn, but remained the highest since the second world war, laying bare the cost of the government support to the economy during the pandemic.
Chancellor Rishi Sunak said in response to the data that his focus was “on driving a strong economic recovery from the pandemic”. But he added that in the Budget he had set out “the steps we are taking to keep the public finances on a sustainable footing by bringing debt under control over the medium term”.
The ONS data showed that central government bodies spent an estimated £96bn on day-to-day activities in April. That included £3.2bn on the furlough scheme that still protects millions of jobs. However, the scheme cost £2bn less than in April last year, reflecting that some workers had rejoined the labour market as the economy reopened.
With the economy recovering, government support shifted from supporting incomes to boosting growth. This was visible in an £800m drop in corporation tax receipts compared with the same month last year because of the introduction of the “super deduction,” a measure that allows companies to offset the cost of plant and machinery against tax.
But Michal Stelmach, senior economist at advisory firm KPMG, noted that the corporation tax receipts came in above the OBR’s forecast for April, “suggesting that the take-up of the relief in its inaugural month was somewhat lower than expected”.
Central government tax receipts were estimated at £58bn, up from April last year and above the OBR’s forecasts, but still well below pre-pandemic levels.
The figure includes higher than anticipated tax receipts from employees, which points to the resilience of the labour market.
Samuel Tombs, chief UK economist at consultancy Pantheon Macroeconomics, said that “public borrowing should continue to undershoot the OBR’s Budget forecast, given that GDP looks set to rise by about 7 per cent year over year in 2021, easily beating the OBR’s 4 per cent forecast”.
Ruth Gregory, senior UK economist at consultancy Capital Economics, said the rapid economic growth should mean the outlook for the public finances improves rapidly, so “the chancellor may be spared having to implement his proposed tax hikes/spending cuts before the 2024 general election”.
Source: Economy - ft.com
