Borrowing overshoots target as Covid-19 action to send deficit soaring
Chancellor Rishi Sunak overshot the Government’s full-year borrowing target after the highest March figure for four years as Britain braces for ballooning public debt from mammoth coronavirus emergency measures.
The Office for National Statistics (ONS) said public sector borrowing – excluding banks owned by the state – jumped £9.3 billion to a higher-than-forecast £48.7 billion in the financial year to March 31.
Borrowing surged to its highest March level since 2016 last month, at £3.1 billion – £3.9 billion higher than a year earlier, it said.
The March hike saw borrowing for the full year come in higher than the £47.4 billion forecast by the independent fiscal watchdog, the Office for Budget Responsibility (OBR).
But the ONS cautioned the figures do not yet take into account the expected “significant” impact of Covid-19 Government action launched late last month, and said the March figure will likely be revised higher in the coming months.
It comes after the OBR last week said the budget deficit could soar by £218 billion this financial year to £273 billion, or 14% of gross domestic product (GDP) – the largest single-year deficit since the Second World War.
The ONS said: “The coronavirus (Covid-19) pandemic is expected to have a significant impact on the UK public sector finances.
“These effects will arise from both the introduction of public health measures and from new Government policies to support businesses and individuals.”
It added: “The full effects of Covid-19 on the public finances will become clearer in the coming months.”
The latest borrowing figures do not yet show the extra healthcare spending figures, while the Covid-19 support measures are not yet factored in as they were only launched in late March as Britain was placed in lockdown, while other policies did not come into effect until this month.
The ONS data showed debt – excluding state-controlled banks – rose to £1.8 trillion or 79.7% of GDP as at the end of March, up £30.5 billion on a year earlier.
The UK current budget deficit was in surplus by £900 million in the financial year, which was £3.9 billion less of a surplus than in the previous year.
The deficit stood at £3.05 billion alone in March.