The UK’s public sector debt has exceeded gross domestic product (GDP) for the first time since March 1963, according to the latest data from the Office for National Statistics (ONS), which assesses the impact of the government’s coronavirus support package
ONS figure show that public sector net debt at the end of May was 100.9% of GDP.
The total stood at £1,950.1bn, an increase of £173.2bn (or 20.5 percentage points) compared with May 2019, the largest year-on-year increase in debt as a percentage of GDP on record.
Central government net cash requirement in May was £62.7bn, £46.1bn more than in May 2019, the highest cash requirement in any May on record.
The current financial year-to-date (April to May 2020) figure was £126.2bn, £119.4bn more than in the same period last year, and the highest cash requirement in any April to May period on record.
Borrowing in May is estimated to have been £55.2bn, roughly nine times (or £49.6bn more than in May 2019.
The ONS report states: ‘The coronavirus (Covid-19) pandemic has had an unprecedented impact on borrowing.
‘The £55.2bn borrowed by the public sector in May 2020 is the highest monthly total on record (records began in January 1993)’
However, the ONS warned borrowing estimates are subject to greater than usual uncertainty; borrowing in April was revised down by £13.6bn to £48.5bn, largely because of stronger than previously estimated tax receipts and National Insurance contributions and lower expenditure than previously estimated associated with the Coronavirus Job Retention Scheme.
In its analysis, the Institute for Fiscal Studies (IFS) said if long run growth rates reach levels forecast in the March Budget, the UK would still need a fiscal tightening (probably tax rises) of £30bn-£40bn just to stabilise debt at a level around 100% of GDP.
Isabel Stockton, IFS research economist, said: ‘This year will see a record increase in government borrowing, most likely pushing it to its highest level since the Second World War.
‘Even so, with current low interest rates, additional borrowing now that boosts the economic recovery would still be worthwhile.
‘The future health of the public finances will depend greatly on the strength of the subsequent recovery. But once we are through the immediate crisis and the economy reaches a new normal, we will be left with elevated debt.
‘At that point a mix of some tax rises alongside an acceptance that higher debt will need to be managed carefully for decades to come seems the most likely outcome.’