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Record government borrowing in April as UK tackles coronavirus crisis

by Ace Damon
Record government borrowing in April as UK tackles coronavirus crisis

The government borrowed a record amount in April, adding £ 62.1 billion to the country's budget deficit.

The Office of National Statistics said government loans were £ 51.1 billion more than in the same month last year.

This comes amid chancellor Rishi Sunak's efforts to prevent massive job losses due to the coronavirus pandemic, by denouncing many of the country's workers.

The number is significantly higher than expected, with most economists predicting £ 30.7 billion for the month.

Public debt jumped to almost 98% of GDP – most of the GDP in this measure since 1963, according to ONS.

This was due to higher loans and a lower estimate of the size of the economy.

Paul Craig, portfolio manager at Quilter Investors, said: "Government revenue is dominated by income tax and national insurance, so the deductible scheme will help mitigate any serious damage here and now.

"However, the next biggest contributor is VAT, and that is where the concerns will be for the Treasury. Consumption has collapsed and it will take a considerable time to return to the levels seen before this crisis. All the work from the previous 10 years to balancing the books was undone at once.

"However, the conclusion is that the amount of loans is simply not important today or in the coming months.

"The amount of debt is not necessarily what matters, but the cost of servicing that debt. Although debt-to-GDP ratios increase, the ability to pay this will also increase, especially considering that the Bank of England and the Treasury have never been so tall.

"So as long as the gilts are being sold with negative yields and the BoE is the most prominent buyer of that debt, the government will be quite comfortable with the loans currently required."

Alex Tuckett, senior economist at PwC, said the number of loans in April was "dramatic", adding that it was almost the same number for the entire 2019/20 financial year.

"The dramatic deterioration in public finances was driven by a drop of more than 25% (compared to April 2019) in tax revenues, as the economy contracted in response to the COVID-19 crisis and by an even greater increase dramatic in spending (more than 50% compared to April 2019), as the government spent a lot on schemes like the Coronavirus Job Retention Scheme.

"The large monthly numbers of loans will continue until the economy recovers and some aspects of fiscal support can be reduced."

Sunak said: "Our main priority is to support people, jobs and businesses during this crisis and to ensure that our economic recovery is as strong and quick as possible. That is why we have taken unprecedented steps to provide lifelines for people and companies. license scheme, donations, loans and tax cuts.

"If we had not provided this support, more livelihoods would have been at risk and the economic and financial cost would have been much worse."

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