UK Government borrowing hits £10.4bn in July
UK Government public sector borrowing reached £10.4 billion in July, however, this was £10.1bn less than in July 2020.
According to the latest figures published by the Office for National Statistics (ONS), this was the second-highest July borrowing since monthly records began in 1993.
Central government receipts in July 2021 were estimated to have been £70.0bn, £9.5bn more than in July 2020, while central government bodies spent £79.8bn in July 2021, £2.9bn less than in July 2020.
Self-assessed Income Tax receipts were £8.5bn over the month, which is £3.7bn more than in July the year before. At the same time, public sector net debt (excluding public sector banks, PSND ex) was £2,216.0bn or around 98.8% of GDP, the highest ratio since the 99.5% recorded in March 1962.
The ONS said the cost of measures to support individuals and businesses during the pandemic meant that day-to-day spending by the government rose by £204.3bn to £942.7bn last year.
Martin Beck, senior economic advisor to the EY ITEM Club, said: “Both receipts and spending continue to perform better than the OBR anticipated, largely due to the strength of the recovery through the summer which has comfortably exceeded the OBR’s very cautious near-term forecast.
“The scale of the outperformance should lessen over the latter part of the fiscal year, given the backloaded nature of the OBR’s growth forecast. But the EY ITEM Club still expects borrowing to come in at around £215bn for 2021-2022 as a whole, well below the OBR’s forecast of £233.9bn.
“However, the key question is the degree to which the OBR will deem the stronger-than-expected fiscal performance to be cyclical or structural, when it comes to deliver its updated forecasts on 27 October.”
The EY ITEM Club thinks it will rule that it’s a mix of the two. The OBR’s current view that there will be economic scarring of 3% of GDP from the pandemic looks pessimistic and is a clear outlier given that the Bank of England recently said that it thinks scarring is likely to be closer to 1% of GDP.
Mr Beck added that should the OBR agree, its forecast revisions will give the Chancellor more policy flexibility if he presents a Budget in October.