Public sector borrowing shows first year-on-year fall since start of pandemic
Public sector borrowing is estimated to have been £31.7bn in April, £15.6bn less than in the same month last year when public finances first fell the full impact of the pandemic.
The fall in borrowing in April compared with a year earlier is the first annual decline since the start of the pandemic, but last month’s borrowing remains huge by normal standards.
Public sector net debt was £2.17tn at the end of April 2021 or around 98.5 per cent of GDP, the highest ratio since March 1962.
“At the Budget, I 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,” finance minister Rishi Sunak said after the data.
“But we also need to focus on driving a strong economy recovery from the pandemic.”
Provisional April 2021 estimates of central government receipts were up seven per cent year-on-year to £58bn, according to new figures from the Office for National Statistics.
Central government bodies spent £95.9bn, down 11.9 per cent from April 2020 when Covid-19 was sweeping through the UK.
Public sector borrowing in the year ended March 2021 is estimated to have been more than £300bn, the highest since records began in 1946.
As a ratio of GDP, borrowing was up 14.3 per cent and remains the highest ratio since the end of World War Two.
The pandemic has had a huge impact on the economy and subsequently on public sector borrowing and debt.
Government support for individuals and businesses during the crisis contributed to a 27.6 per cent rise in central government day-to-day spending to £942.7bn.
Michal Stelmach, senior economist at KPMG put the UK corpoation tax dive down to the super deduction coming into force.
“Preliminary data show that corporation tax receipts fell in April to its lowest level in a year as the super deduction allowed companies to offset the cost of plan and machinery against tax. Nonetheless, corporation tax receipts came in £300m above the OBR’s forecast for April, suggesting that the take-up of the relief in its inaugural month was somewhat lower than expected.
“As the government’s support measures shift from rescue to recovery this year, the rising cost of the capital allowance will be offset by the falling cost of the furlough scheme.
“So far, the pressure from the furlough scheme on the public finances has continued to ease. It cost the government £3bn in April, consistent with a fall in furloughed jobs to around 3.7 million.
“With a broadly flat rate of claimant count since the start of the year, this suggests that people exiting furlough have thus far been largely successful in being reabsorbed by the labour market.”