Government borrows £35.9bn in August in response to Covid-19
By Sean Farrell
Date: Friday 25 Sep 2020
(Sharecast News) - The government borrowed £35.9bn in August - the third highest monthly figure on record - as tax revenue fell and the government spent to deal with the economic effects of the Covid-19 crisis.
August's net borrowing figure was a record for the month and £30.5bn more than a year earlier, the Office for National Statistics said. But the total was less than in March and April as the economy picked up and some workers returned to work from furlough. It was also less than the average economists' forecast of £38bn.
Central government bodies spent £78.5bn on day-to-day activities in August - £19.5bn more than a year earlier. Estimated spending included £6.1bn for the Coronavirus job retention scheme and £4.7bn of support for self-employed workers.
Tax receipts were an estimated £37.3bn - £7.5bn less than a year earlier as VAT, corporation tax and income tax receipts dropped sharply as the government offered relief to the hospitality sector and others.
August's borrowing took public sector net debt to £2.024trn or 101.9% of economic output, the highest figure as a share of the economy since 1960-61.
The UK economy has been hit harder than those of other major economies by the Covid-18 crisis, forcing the government to cut taxes and spend heavily to prevent a mass collapse of businesses and surging unemployment.
Economists said monthly borrowing would start to ease as Chancellor Rishi Sunak replaces his generous furlough programme with more limited measures to support jobs and business. Some economists think Sunak's cutback in support will be counterproductive as coronavirus infections rise and the government imposes new limits on activity.
"The government borrowed another huge sum in August as it continued to absorb much of the cost of the Covid-19 crisis," Andrew Wishart, a UK specialist at Capital Economics, said. "But while the chancellor announced some modest further support yesterday, the big picture is that fiscal support will fade over the autumn causing many more job losses to be realised.
"After an impressive rebound in Q3, we think the resurgence of the virus and new restrictions will cause GDP to stagnate for the rest of this year, hurting tax revenues."
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