UK Government debt hits record high
UK Government debt is up, hitting a record high and tax receipts are down. The financial impact of the Covid pandemic and Lockdown have hit Government finances very hard.
What are the figures for Government debt?
The UK Government raises money for public spending in two ways. Most years the taxes collected are not enough to pay for public spending so the Government borrows as well to make up the difference. This creates Government debt, which is repaid over time with interest. For July;
- Government debt is now £2.039 trillion. A record high.
- Annual increase of £249.5 billion.
- Debt is now 101.9% of GDP. See the graph below.
- Borrowing so far since April is £173.7 billion. Another record for the financial year so far.
This graph from the ONS shows how Government borrowing is the highest since the 1960’s when compared to GDP*. It’s worth noting that borrowing hit a high point during the Second World War and took until the 1960’s to get below 100% of GDP.
What are the numbers for tax collected?
The economic recession has hit tax collection very hard. Compared with a year ago;
- VAT down by 19%
- Corporation Tax down by 26%
So, as well as the economic crisis creating more Government borrowing; it has also reduced tax income for the Government as well. The reductions in tax income will then create more Government borrowing to plug the gap!
Why is this happening?
Despite the Covid pandemic and Lockdown, public services still need to be paid for, plus the cost of the response to Lockdown such as the Furlough scheme, Business loans and grants etc., have added to costs. So, we have a situation where UK Government debt is up and tax receipts down.
According to the ONS;
“The coronavirus (COVID-19) pandemic has had an unprecedented impact on public sector borrowing.”
Want to learn more?
You can read a detailed briefing from the ONS here.
Learn more about NewsBrokerUK here.
The ONS is the Office for National Statistics and is the official statistics provider for the UK.
GDP means Gross Domestic Product. This is the name used for the size of a country’s economy.