The Office for National Statistics announced the latest figures associated with public finance on Tuesday where the organisation highlighted that though government borrowings have more than halved in the past year, it remains high.
According to the latest reported statistics, government borrowing more than halved in 2021, but remained the third largest on record, owing to Britain’s sluggish recovery from the Covid-19 pandemic.
The difference between the state’s revenues and spending in the year to March was £151.8bn, down from £317.6bn in 2020, according to the Office for National Statistics.
Despite the year-on-year reduction, the overall deficit for 2021-22 was more than £20bn greater than the Office for Budget Responsibility expected in its estimates for Rishi Sunak’s spring statement last month.
“Public debt is at the highest levels since the 1960s and rising inflation is pushing up our debt interest costs, which mean we must manage public finances sustainably to avoid saddling future generations with further debt,” Sunak said.
The chancellor stated that the economy was strengthening and that the public finances were improving, but that earlier borrowing had left a debt legacy.
Borrowing was £18.1bn in March, somewhat less than the City had projected, yet the second highest since records began in 1947.
According to the Office for National Statistics, the national debt in the total amount borrowed over time was £2.3tn at the end of last month, accounting for a little over 96% of the economy’s yearly production. The debt’s interest payments reached a new high of a little under £70bn.
Danni Hewson, Financial Analyst, AJ Bell said, “This is a real glass half full moment for the UK economy. The phasing out of covid restrictions and the end of support measures like the furlough scheme have helped the country surge back to its feet.”
Hewson said that the cash coming in from taxes has rebounded at a quicker rate that what was expected with inflation playing a role. However, the problem is that the revenue is not sustaining the expense in order to match the demands of the public.
“Cash is coming in fast just not fast enough to keep up with continued demands on the public purse and the difference in numbers between what the OBR forecast just last month, and the numbers offered up today just shows what a tightrope the Chancellor is having to walk.”
The cost of living increasing as inflation rises is said to “exacerbate the situation” as people already “struggle to make ends meet” said Hewson.
“Whilst borrowing in March was significantly down on the same period last year it was still almost £12bn above what was needed pre-pandemic, the second highest on record for the month and up on the amount borrowed just the month before – the government is not immune to those rising prices affecting households and businesses.”