The United Kingdom has reported the highest rate of borrowings in April, something which Jonathan Athow, deputy national statistician at the Office of National Statistics (ONS) has said, “was pretty much unprecedented”. Government borrowings were essential to meet furlough schemes which amounted to £14 billion in April 2020 itself.
With the government borrowing help, it would have been extremely difficult to move ahead in corona virus times, Chancellor Rishi Sunak has substantiated.
Technically, the difference between the spending and the tax income has been recorded as the highest ever in a month, than forecasted for a whole year in the government budgets; i.e. six times of a predictable figure.
Furthermore, the government’s independent forecaster, the Office for Budget Responsibility (OBR), has predicted that borrowing for the whole year could reach £298bn, more than five times the estimate at the time of the March Budget.
Predictions over public financing looks impossible due to uncertainty of the economy coming back to normal due to a long period of lockdown. Attributing to this are causes like slag in payments on tax receipts as the Treasury has allowed companies to defer some payments. The amount received from VAT in April was negative, with the government collecting less than was handed back in repayments.
Money has not flowed in and in fact flowed the other way out. The surge in borrowing comes after Chancellor Rishi Sunak stepped up financial support for businesses and employees after vast areas of the economy were forced to halt due to the corona virus lockdown. Currently the government has increased its borrowings through financial market in the form of bonds and IOUs but there is a limit to that, and ultimately, taxes will have to be increased. But this will have to be done gradually and then there will a natural capping on spending too.