Economic boost as record borrowing levels slashed

There was more good news on the economy as we emerged from lockdown, with official figures showing UK borrowing had been slashed in July, compared with the same period last year.

The news comes as all Covid restrictions are now lifted, with more people returning to near normal lives.

The figures from the Office for National Statistics (ONS) show Government borrowing, the difference between spending and tax incomes, plunged in July compared with a year earlier, but unsurprisingly given the pandemic, was still the second highest for July since records began.

The figure was estimated to have been £10.4 billion in July 2021 as opposed to the  £10.1 billion in July 2020, with one of the main financial strains on the economy, the furlough scheme, being slowly eased back and due to end on 30 September.

It is the kind of figure not seen since the 1960s and equates to around 98.8 per cent of gross domestic product (GDP), while funding furlough contributed to pushing the UK to debt more than £2.2 trillion

Chancellor Rishi Sunak was upbeat about the development but also warned there is much more to do before we get back to anything like normality and there are risks ahead.

Interest payments alone in July were £3.4 billion and the ONS said the cost of measures to support the economy during the pandemic meant that day-to-day spending rose by £204.3bn to £942.7bn last year.

Meanwhile the economic bounce continues as house prices have continued to surge, job vacancies are hitting new monthly records and unemployment fell again last month. Even people still on furlough schemes seem generally relaxed about the job situation, according to one survey.

It all seems good news for big business and SMEs with people spending on their houses with improvements and cash saved during the lockdown flowing back into the economy.

It will also be fingers crossed that those who have benefited from a cut in the VAT rate to a temporary figure of five per cent rate will not be hard hit when it increases at the end of September to 12.5 per cent, before reverting to 20 per cent next April.

The reduction encouraged schemes like the Eat Out to Help Out initiative and those in tourism and hospitality, before further lockdowns were introduced in the autumn and again at the beginning of this year.

Overall, the public sector borrowed £78 billion in the financial year-to-July 2021, £61.6 billion less than in the same period a year earlier, with official forecasts suggesting that borrowing may reach £233.9 billion by the end of the financial year ending March 2022, which is £64.1 billion less than year ending March 2021.

Chancellor Sunak said:  “We’re committed to keeping the public finances on a sustainable footing, which is why at the Budget in March I set out the steps we are taking to keep debt under control in the years to come.”