There were fresh warnings about looming tax hikes and austerity today as figures showed the government borrowed a record £62.1billion in April.
The eye-watering figure was the highest for any month on record, amid desperate moves to bail out millions of workers and businesses.
It was even higher than analysts had predicted, with a consensus of economists predicting £30.7billion for the month.
The sum is thought to have pushed total public debt to the brink of the £2trillion mark for the first time – roughly the same size as the entire economy.
Ex-Chancellor George Osborne warned there will have to be ‘hard choices’ and the respected IFS think-tank cautioned there is no guarantee the economy will recover quickly enough to avoid belt-tightening.
The Office for National Statistics (ONS) said borrowing was £51.1 billion higher than the same month last year
The figures appear to be even worse than the doomladen estimates produced by the independent OBR watchdog last week
The Office for National Statistics (ONS) said borrowing was £51.1billion higher than the same month last year.
The sum for April was almost the same as the entire financial year from April 2019 to March this year – estimated at £62.7 billion. And it was more than was forecast for the whole financial year at the Budget in March.
Some £14billion of the borrowing came from the furlough scheme, the biggest of the government’s bailout. It is covering 80 per cent of income for around 7.5million employees, up to a ceiling of £2,500 a month.
Alongside spending, much of the increase was from lower government income, with cash receipts £25billion lower than April 2019. Half the decline was due to lower VAT revenue.
Meanwhile, state borrowing in March 2020 has been revised up by £11.7billion to £14.7billion.
The ONS said this was driven by a reduction in previous estimates of tax receipts and National Insurance contributions.
As a result of the jump in borrowing, public sector debt rose to £1,887.6billion at the end of April – £118.4billion higher than April 2019.
The ONS said that the Government borrowed £62.7billion over the 12 months to the end of March, representing a £22.5 billion rise on the previous year.
The Office of Budget Responsibility has warned that the government could borrow £300billion this year.
IFS economist Isabel Stockton said: ‘There will clearly be a substantial spike in borrowing this year. What this means for policy will depend crucially on the shape and extent of the recovery that follows.
‘If the increase in borrowing is a one-off then one option could be to manage down the elevated debt stock gradually over many years.
‘Should higher borrowing endure – for example, because the economy doesn’t fully bounce back – then tax rises or spending cuts would be needed if borrowing is to be returned to its pre-crisis path.
‘Any additional spending pressures arising from the current crisis would also put upward pressure on taxes.’
Mr Osborne told BBC Radio 4’s Today programme: ‘These numbers are striking but they’re not a surprise.
‘And of course, they reflect the fact that there’s a lot of emergency, one-off spending – quite rightly, on things like the furlough scheme and loans to small businesses.’
The former chancellor warned: ‘We have to come to terms with the fact that Britain, like every other country, is poorer than we thought it was going to be and our economy is smaller than we thought it would be.
‘And that I’m afraid, will lead to hard choices about what we can afford, how much we want to spend and how many taxes we want to raise to pay for it.’
Apocalyptic predictions from the Bank and England and others show the UK is on track for the worst recession in 300 years, when the Great Frost swept Europe
Charlie McCurdy, Researcher at the Resolution Foundation, said: ‘The latest borrowing figures offer a stark illustration of the fiscal costs of coronavirus and the lockdown measures required to contain it, with the Government borrowing as much last month as it during the whole of last year.
‘But while there is significant pressure on the public finances, there are no signs that the Government is struggling to find the cash. Record low interest rates mean the UK’s higher debt burden should remain more than manageable.
‘It would therefore be wrong to reduce coronavirus support measures prematurely. Government must continue to support workers and firms, not only during the lockdown phase, but also to deliver the strong recovery that needs to follow.’
John O’Connell, chief executive of the TaxPayers’ Alliance, said: ‘Government borrowing is now breaking records thanks to this crisis, with this being the largest proportionate annual increase in debt since D-Day.
‘Attempting to tax away a fiscal deficit driven by the deepest slump in living memory would be crazy.
‘Priority one must be to get the economy back up and running, with tax cuts on jobs and investment being the only way to power us towards growth again.’