The UK government borrowed a record amount in January to battle the coronavirus pandemic, but the official figures on Friday will give chancellor Rishi Sunak a boost before next month’s Budget as they showed the public finances to be in a better shape than feared.
In the crucial month of January, when self-assessment income tax bills are paid, the government’s budget was £8.8bn in the red, the first deficit in the public finances for 10 years and the highest level of borrowing since equivalent records began in 1993.
The government’s burden of debt rose to 98 per cent of national income, the highest level since the early 1960s, the Office for National Statistics said.
Even so, the chancellor is now likely to be on course to keep public sector net borrowing below £400bn this financial year after the deficit in the first 10 months rose to £270.6bn. This figure was £222bn higher than the same period in 2019-20 and is already twice the level of the global financial crisis of 2008-09.
Almost £30bn of expected additional borrowing is yet to be captured by the ONS figures. Defaults are expected on credit issued under the government’s so-called bounce-back loan scheme to small companies and other loan guarantees.
Still, the total is now likely to come in below the £393bn expected for the full year by the Office for Budget Responsibility.
Large downward revisions to the borrowing figures for earlier in the 2020-21 financial year helped lead to the better than expected figures. These were revised down by £9bn in the latest data release from the ONS as a result of new estimates that showed the government had spent less on Covid-19 procurement than previously thought.