UK government borrowing more than halved in the latest financial year ending in March as the economy bounced back from the pandemic, but the improvement has slowed significantly in recent months.
Public sector net borrowing was estimated by the Office for National Statistics to be £151.8bn in 2021-22, down more than 50 per cent from the £317.6bn in 2020-21 when the coronavirus crisis was deepest.
Representing approximately 6.4 per cent of national income, the level of government borrowing was lower than the five years following the 2007-08 global financial crisis, indicating the rapid recovery from the pandemic.
The provisional data was, however, worse than the government’s fiscal watchdog, the Office for Budget Responsibility, predicted in its March forecasts alongside chancellor Rishi Sunak’s Spring Statement. It expected borrowing in the financial year to drop to £127.8bn.
The discrepancy is likely to be closed somewhat as the ONS receives more accurate data on tax receipts and public spending for the past few months. The large gap, however, suggests tax revenues are slowing as households deal with a cost of living crisis squeezing their incomes.
Borrowing in March of £18.1bn was the second highest on record, the ONS said.
Michal Stelmach, senior economist at KPMG UK, said the £24bn difference between the OBR’s forecast and the ONS figures stemmed from an assumption made by the fiscal watchdog that many government departments would not have spent their full budgets in 2021-22.
“The key difference stems from [the OBR’s] judgments which are yet to appear in the published data, in particular in relation to greater departmental underspends, lower investment by local authorities, and an expected downward revision to the cost of the Covid-19 loan guarantee schemes,” Stelmach said.
