Government borrowing drops by half, but remains close to all-time highs

The Government borrowed more in the last year than at almost any point since records began, but the amount of tax money it collected rose.

The public sector borrowed £151.8 billion in the year to March, the third highest since 1947, but less than half the £317.6 billion borrowed in the previous 12 months, according to the Office for National Statistics (ONS).

It was higher than the £128 billion forecast by the Office for Budget Responsibility (OBR) just a month ago.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said that the Treasury was unlikely to be anxious despite these higher-than-expected numbers.

“Early estimates of borrowing recently have been revised down significantly, as more data have been collated,” he said.

He added that the increased borrowing is not due to a weakened economy, but is based on government investment being higher in the ONS than the OBR figures.

“Estimates of investment often are revised considerably as government departments supply more accurate information,” Mr Tombs said.

“Revisions to investment likely will be downward right now, given supply chain issues presently impeding construction projects.”

The tax authorities collected £94.3 billion more than they had in the previous year, reaching £619.9 billion.

Michal Stelmach, senior economist at KPMG UK, said: “Having peaked at nearly 15% of GDP in the first year of the pandemic, borrowing is now estimated to have more than halved in the 2021-22 financial year.

“This is quite remarkable considering it took five years following the global financial crisis for that to happen.”

A lot of the drop is simply because the Government spent less over the last year, down by £50.3 billion to £893.3 billion.

This came despite a big increase, £30.5 billion, in the amount that the Government spent on paying interest on its loans.

The reduced spending on the furlough scheme, the support for the self employed and NHS Test & Trace saved many billions.

Chancellor of the Exchequer Rishi Sunak said: “Thanks to the action we’ve taken, the economy is recovering and our public finances are improving, allowing us to invest in vital public services, help the hardest hit with a £22 billion package of support and get people into work.

“Despite global economic headwinds, we continue to meet our fiscal rules, showing our commitment to keeping the public finances sustainable while supporting the UK’s long-term growth and addressing the immediate pressures facing people with their cost of living.”