Public sector borrowing falls in June as UK economy reopens

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UK public sector borrowing fell in June compared with the same month last year, as the reopening of the economy supported tax revenues and cut government spending.

Public sector net borrowing was estimated to have been £22.8bn last month, £5.5bn less than in June 2020, the Office for National Statistics said on Wednesday.

The figure was lower than the £25.2bn forecast by the Office for Budget Responsibility, the UK fiscal watchdog, as the economy is recovering more quickly than expected in the March budget.

However, the figure was the second-highest June figure for borrowing since monthly records began in 1993, as the pandemic weighed on public finances.

“Stronger economic growth and, with it, stronger receipts will be welcome news to the chancellor,” said Isabel Stockton, a research economist at the Institute for Fiscal Studies. But she added that any additional spending due to Covid-19 or in areas such as social care “would potentially require spending cuts elsewhere or further increases in tax”.

Column chart of % of GDP showing UK public debt soared during the pandemic

Central government receipts were £62.2bn in June according to provisional estimates, £9.5bn more than in the same month last year and stronger than the £57.7bn forecast by the OBR as activity rebounded with the reopening of many businesses.

At the same time, central government bodies spent £84.1bn, which was £2.5bn less than in June 2020.

Despite the improvement, public sector net debt, or borrowing accumulated over time, was around 99.7 per cent of gross domestic product at the end of June, the highest ratio since March 1961, when the country was reducing the debt from the second world war.

Chancellor Rishi Sunak was “proud of the unprecedented package of support” to jobs and businesses, he said, but added it was also “right that we ensure debt remains under control in the medium term”. 

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