Government borrowing reached £62.1 billion in April – the highest monthly figure since records began in 1993, and as much as the whole of last year (£62.7bn between April 2019-March 2020) – highlighting the stark fiscal cost of the coronavirus crisis, the Resolution Foundation said today (Friday 22nd May) in response to the latest ONS public finance figures.
The £62.1bn of borrowing in April is nearly three times the previous monthly borrowing record of £22bn in April 2012. The fiscal costs of the first full month of lockdown were split between a £17 billion (24 per cent) fall in receipts, and a £36.5 billion (57 per cent) rise in spending compared to the same month last year.
Particularly dramatic falls in VAT (down 40 per cent), PAYE (40 per cent) and NICs (37 per cent) highlight the collapse in consumption and incomes resulting from the lockdown. The large increase in transfers to local government (doubling) and other current expenditure (94 per cent) partly capture the ramping up of support to local authorities, to the NHS, and to firms and workers through the Job Retention Scheme and business grants.
Despite these extraordinary demands being placed on the public finances, there are as yet no signs that the Treasury is struggling to finance the yawning gap between revenues and expenditures.
The Debt Management Office has successful raised over £89bn since mid-March from gilt auctions marked by strong demand and historically low yields – including the first gilt issued at a negative yield on Wednesday.
Previous Resolution Foundation analysis has shown that, thanks to falling interest rates, the Government’s higher debt burden should still remain manageable even if the lockdown were to be extended.
Charlie McCurdy, Researcher at the Resolution Foundation, said:
“The latest borrowing figures offer a stark illustration of the fiscal costs of coronavirus and the lockdown measures required to contain it, with the Government borrowing as much last month as it during the whole of last year.
“But while there is significant pressure on the public finances, there are no signs that the Government is struggling to find the cash. Record low interest rates mean the UK’s higher debt burden should remain more than manageable.
“It would therefore be wrong to reduce coronavirus support measures prematurely. Government must continue to support workers and firms, not only during the lockdown phase, but also to deliver the strong recovery that needs to follow.”