Britain’s national debt, as a share of the economy, is at its highest since the early 1960s.
October’s borrowing has pushed public sector net debt to around £2,076.8bn, the ONS reports, or around 100.8% of gross domestic product (GDP). That debt-to-GDP ratio is now at levels last seen since the 1960-61 financial year, when Harold Macmillan was prime minister and Britain was paying down the debt incurred in the second world war.
The ONS explains:
The extra funding required to support government coronavirus support schemes combined with reduced cash receipts and a fall in gross domestic product (GDP) have all helped push public sector net debt as a ratio of GDP to levels last seen in the early 1960s.
Introduction: UK borrowing hits £22.3bn in October
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Britain has racked up another month of record-breaking borrowing, as the cost of the Covid-19 pandemic continues to mount.
The latest public finances, just released, show that the UK borrowed £22.3bn in October to balance the books, around £10.8bn more than a year ago.
That’s the highest October borrowing figure on record, and the sixth-highest borrowing in any month since monthly records began in 1993 (beaten only by April, May, June, August and September this year).
But, it’s well below the £35.2bn which City economists forecast, and lower than September’s £28.6bn [which has been revised down]. Even so, borrowing is heading towards record levels:
The Office for National Statistics report that tax receipts fell last month, while the pandemic continued to push up government spending:
Central government tax receipts are estimated to have been £39.7 billion in October 2020 (on a national accounts basis), £2.7 billion less than in October 2019, with falls in Value Added Tax (VAT), Business Rates and Pay As You Earn (PAYE) income tax.
Central government bodies are estimated to have spent £71.3 billion on day-to-day activities (current expenditure) in October 2020, £6.4 billion more than in October 2019; this growth includes £1.3 billion in Coronavirus Job Retention Scheme (CJRS) and £0.3 billion in Self Employment Income Support Scheme (SEISS) payments.
Since April, public sector net borrowing has reached £214.9bn — the highest public sector borrowing in any April to October period since records began in 1993.
The news comes as the chancellor, Rishi Sunak, prepared to announce a renewed squeeze on public sector pay in next week’s government spending review, as part of a Whitehall savings drive to tackle record levels of government borrowing incurred during the crisis.
As our story explains:
It is understood that NHS staff, including doctors and nurses, will be exempt from the renewed period of restraint to avoid triggering an angry public backlash as a result of the frontline role played by healthcare workers during the pandemic.
However, unions warned a renewed pay freeze elsewhere would still come as a kick in the teeth for staff after Boris Johnson had promised to bring austerity to an end before the 2019 election, and as millions of key workers continue to keep the country going through the health emergency.
European stock markets, meanwhile, may be overshadowed by US politics. Overnight, US treasury secretary Steven Mnuchin announced that some of the Federal Reserve’s emergency lending programs will expire on 31 December, when the CARES stimulus act ends.
That could make it harder for the central bank to backstop the US financial system, further complicating Joe Biden’s transition.