COVID loan program default estimates add £ 21bn to record borrowing for 2020/21 | Economic news
It has emerged that the record peacetime public borrowing to pay for the coronavirus crisis over the past fiscal year has been revised even higher to reflect fears that more than £ 20 billion in government guaranteed loans may be never reimbursed.
The revelation was made by the Office for National Statistics (ONS) in its latest update on the state of the country’s finances.
He said a provision of just under £ 21 billion had been made for defaults on business lending programs, such as the Bounce Loan Program, which disbursed 80 billion in pounds to help businesses cope with pandemic disruption.
The sum was less than the £ 27 billion reimbursement shortfall predicted by the Office for Budget Responsibility.
The ONS said its estimate of total loan for 2020/21 was now £ 325.1 billion due to the inclusion of the default estimate.
The wider figures showed government borrowing fell less than expected in August with a net borrowing of £ 20.5bn in the month as the Treasury continued to face heavy debt-related bills. COVID-19[female[feminine pandemic.
The figure was £ 5 billion more than economists polled by Reuters expected.
Data showed borrowing so far this fiscal year reached £ 93.8 billion.
It was £ 88.9 billion less than at the same time a year ago, when the economy was first hit by the public health emergency.
The ONS said government debt as a percentage of gross domestic product (GDP) stood at $ 2.2 trillion – or 97.6% of GDP – in August, the highest ratio since March 1963 .
Chancellor Rishi Sunak is due to unveil his budget at the end of next month along with new multi-year spending limits for different ministries.
Persistent challenges for the Treasury include the impact of the national labor shortage, which companies expect to limit the economic recovery over the next two years.
Another is the fact that soaring inflation increases the cost of interest payments on public debt.
The ONS said interest payments in August stood at £ 6.3bn and were “the result of movements in the Retail Price Index (RPI) to which indexed gilts (bonds of State) are attached “.
There is speculation that Mr Sunak will use the impending fiscal event to set some longer-term borrowing targets, having previously warned that public finances need to be placed on a more sustainable basis.
Isabel Stockton, research economist at the Institute for Fiscal Studies, said: “For the overall health of the public finances, the precise size of last year’s historic peak in borrowing is not that important.
“What matters most is the strength of the eventual recovery, if the current strength of tax revenues persists in the years to come and if the significant increases in income tax, corporate tax and the national insurance tax announced since March are effectively implemented as planned.
“These questions will determine whether the Chancellor can afford to complete tight spending plans during next month’s spending review to address some of the many challenges facing utilities while staying on track to eliminate the deficit. current medium-term budget. “