UK’s huge public borrowing falls in June to 22.8 billion pounds By Reuters

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© Reuters. FILE PHOTO: Some of the artwork details are seen on a large scale sample of the new twenty pound note during the launch event at the Turner Contemporary gallery in Margate, Britain, October 10, 2019. Leon Neal/Pool via REUTERS

LONDON (Reuters) – British public sector net borrowing fell to 22.8 billion pounds ($30.95 billion) in June, 5.5 billion pounds less than a year earlier when the public finances were feeling the full force of the coronavirus pandemic, official data showed on Wednesday.

Economists polled by Reuters had forecast that public sector net borrowing, excluding public sector banks, would drop to 21.6 billion pounds.

Public borrowing for the first three months of the financial year totalled 69.5 billion pounds, down more than 40% from the three months to June 2020, when Britain recorded its heaviest-ever borrowing in cash terms due to its COVID spending surge.

During the financial year to the end of March 2021, Britain’s budget deficit leapt to 14.2% of gross domestic product, its highest share of GDP since World War Two.

The Institute for Fiscal Studies, a think tank, said in a report with economists from Citi that borrowing in the 2021/22 financial year would drop to 9.3% of GDP. This is 30 billion pounds less than the government’s forecasters expected in March but would still be the third-highest on record.

Although borrowing costs remain very low by historic standards, finance minister Rishi Sunak wants to start putting the public finances on what he calls a more sustainable footing.

Public debt as a share of GDP, excluding public sector banks, was 2.218 trillion pounds or 99.7% of GDP in June, its highest since March 1961.

Sunak’s support for furloughed workers and a tax break on property purchases are being phased out, while a temporary increase in the main benefit for the unemployed and low-earners will stop on Oct. 1. Overseas aid spending has also been cut.

Sunak is due to hold a review of government spending before the end of the year.

The IFS think tank said that although the short-run outlook for the public finances was better than in March – giving scope for one-off giveaways – the long-term prospects pointed to spending cuts for some government ministries unless taxes rise.

($1 = 0.7351 pounds)

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