UK government net borrowing for the year ending March 2021 is estimated at £303bn, the highest nominal level since modern records began in 1947.
Note that this figure is new debt taken on in the year, not total government debt. Total debt stands at £2,142bn or 98% of GDP (not including debt owed by public sector banks).
It is evident that measures taken to combat the effect of Coronavirus have had a powerful impact on government finances, reversing the previous trend of lower borrowing but, even so, the financial position appears marginally better than was initially expected.
This may be because UK businesses have ridden out the second period of “lockdown” better than the first, meaning that receipts from business and personal taxes were higher than planned whilst payments are lower.
Repayment of this very large debt is likely to be the key priority of government once the Coronavirus emergency is over.
The latest Budget suggests that the approach will be relatively conservative, relaying heavily on “fiscal” drag to increases tax income*.
If this is implemented – and timing remains unclear – then repayment will limit shopper prosperity far into the future, especially for those in higher tax bands.
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* “Fiscal drag” describes delaying changes to income tax bands as incomes rise, thus bringing more workers into the tax base and exposing more workers to higher rate taxes
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