Recent data reveals government borrowing hit almost £36 billion in August, pushing the UK's national debt to a record £2.024 trillion. The monthly borrowing figure comes after an unprecedented spending by the government to combat the coronavirus and sent the accumulated borrowing for the first five months of the fiscal year to almost £174 billion. The deficit, however, was £2 billion lower than analysts' expectations and £8 billion below the amount the Office for Budget Responsibility estimated earlier this year when it forecast the likely gap between government spending and income.
Chief UK economist at Pantheon Macroeconomics, Samuel Tombs was quoted as saying monthly borrowing figures would decline sharply in the run-up to Christmas as the government scaled back its spending and tax receipts recovered. Borrowing picked up in August as the government paid out £4.7 billion to cover some of the lost income of self-employed workers and spent more than £500 million to cover the cost of the Treasury’s eat out to help out scheme.
Tombs said the new job support scheme announced by the chancellor was “markedly less generous” than the previous furlough scheme. He said, “We also expect take-up of the job support scheme by employers to be modest as they are financially better off employing a few staff members full-time than keeping on a larger number of staff part-time.” He said the lack of any significant injection from September to support the economy meant GDP would flatline at September's level “which we judge is approximately 5 per cent below its pre-Covid peak, over the next three months.”
The chancellor's new multibillion-pound spending package came under heavy criticism, with Chief Secretary to the Treasury Steve Barclay defending the emergency measures. He warned it would be a “difficult winter” and many jobs would not be saved. Barclay said, “We've been honest with the public that we will not be able to save, regretfully, every job. There's a whole range of investment going into the economy in those sectors while we protect as many of those jobs that are viable, that people have been protected in initially through the furlough and now through the winter package.”
Barclay added, “It is right that we also look at the cost to the wider economy, these measures come at a significant fiscal cost and that's why it's right we target those jobs that are viable during what is going to be a sadly difficult winter.”
