UK budget deficit hits $271bn in H1

23 October, 2020 12:00 AM printer

LONDON: The UK budget deficit climbed to an unprecedented 208.5 billion pounds ($271 billion) in the first six months of the months of the fiscal year, highlighting the cost of supporting the economy through the coronavirus pandemic as calls mount for fresh aid.

Borrowing in September alone was 36.1 billion pounds, the Office for National Statistics said Wednesday. The median forecast of economists surveyed by Bloomberg was 33.6 billion pounds, report agencies.

The readings will fuel the debate about how much economic aid the government can provide amid a resurgence in the virus and fresh wave of restrictions. Chancellor of the Exchequer Rishi Sunak has already scaled back his job support plan, leaving local leaders in areas hit by regional lockdowns such as Manchester calling for more financial help.

“Over time and as the economy recovers, the government will take the necessary steps to ensure the long-term health of the public finances,” Sunak said in a statement after the figures.

Still, while the pandemic has wrought havoc with the public finances—pushing debt above 2 trillion pounds for the first time on record—Bank of England bond-buying has kept borrowing costs at record lows. That’s left economists, and Sunak’s own fiscal watchdog, suggesting he has plenty of time to balance the books.

Nevertheless Sunak also says he has a “sacred responsibility” to leave the public finances, with the latest figures showing debt climbing to 103.5 per cent of GDP—the highest ratioi since the financial year ending 1960.The deficit—the amount the government needs to borrow to fund its spending—was set to be approaching 400 billion pounds in the current fiscal year even before Sunak announced further measures to support jobs and wages in recent weeks.

In a sign of the uncertainty, the government said Wednesday it was cutting the length of its upcoming spending review to just one year, rather than the planned three.