As British Government Borrowing Soars, Public Debt Highest Since 1960

As British Government Borrowing Soars, Public Debt Highest Since 1960
People walk during the morning rush hour in Canary Wharf amid the outbreak of the CCP virus in London on Oct. 15, 2020. (Reuters/Hannah McKay)
Mary Clark

The British government borrowed six times more than before the CCP virus pandemic, pushing the public debt to its highest since 1960, according to the latest government data.

During the pandemic, Britain’s borrowing was 208.5 billion pounds ($272.4 billion) in the first six months of this year, over 174.5 billion pounds ($227.8 billion) more than in the same period last year, the Office for National Statistics (ONS) said on Wednesday.

It hit record highs in each of the six months from April to September this year, making it the highest since records began in 1993, ONS said.

In a snapshot of September alone, the ONS said public borrowing, at 36.1 billion pounds ($47.1 billion), was 28.4 billion pounds ($37 billion) more than in September last year, making it the third-highest monthly borrowing ever recorded.

Meanwhile, the government saw big drops in VAT and other business taxes, receiving 6 billion pounds ($7.8 billion) less in taxes overall last month than in September 2019.

At the same time, government spending was up by 18.1 billion pounds ($23.6 billion) in September, with 4.9 billion pounds ($6.4 billion) spent on the Coronavirus Job Retention Scheme and another billion pounds ($1.3 billion) on supporting the self-employed.

‘Unprecedented Impact’

The surge in borrowing amid the pandemic, which has had an “unprecedented impact” on Britain’s finances, increased public debt to over 2 trillion pounds, or 103.5 percent of GDP, the ONS said, which is the highest since 1960.

Spending risks continue rising again in the second half of the financial year as lockdown restrictions return to much of Britain, pressuring the government to offer extra support to closed businesses and their workers.

Ratings agency Moody’s downgraded Britain’s sovereign credit rating on Friday to the same level as Belgium’s and the Czech Republic’s, warning that Britain “effectively has no fiscal anchor”.

But financial markets have shrugged off rising borrowing, and 10-year government borrowing costs of around 0.2 percent are only slightly above an all-time low struck at the start of the pandemic.

Britain’s government had aimed to set out a three-year plan for public spending next month, but said on Wednesday this would only cover one year due to CCP virus uncertainty, with exceptions for schools, health care, and some infrastructure.

Finance Minister Rishi Sunak said his “enduring priority” would be to protect jobs during the crisis.

“Over time and as the economy recovers, the government will take the necessary steps to ensure the long-term health of the public finances,” he said.

Reuters contributed to this report.