The continued efforts to protect jobs and businesses throughout the coronavirus crisis saw government borrowing hit more than £22bn in October — the highest total for that month on record.
Figures from the Office for National Statistics showed public sector net borrowing is estimated at £22.3bn for October, £10.8bn more than the same month last year and the sixth-highest borrowing in any month since records began.
The exchequer saw nearly £40bn in tax receipts for the month. This was £2.7bn less than in October 2019, primarily due to falls in VAT, business rates and income tax.
The coronavirus pandemic has had an unprecedented impact on government borrowing.
In the first seven months of the financial year (April to October), the government borrowed around £215bn.
This was £169bn more than in the same period last year and the highest public sector borrowing on record for any similar period.
Figures from the Office for Budget Responsibility suggested borrowing in the current financial year could reach £322bn, around six times the amount borrowed in the financial year ending March 2020.
Today’s figures showed that since April, public sector net debt rose by £276.3bn to reach £2,077bn. The ONS said this was 100.8 per cent of gross domestic product.
UK debt tipped over the £2tn point for the first time in July this year, with the hefty total also marking the first time national debt had dwarfed the economy since the 1960s.
Paul Craig, portfolio manager at Quilter Investors, said: “It is clear the recovery from Covid-19 will not be quite the dramatic V shape we were all hoping for, and with extra borrowing required for the current lockdown and furlough extension to March, it will be some time before things look ‘normal’ once again.
“That said, these figures will not concern the Treasury or the Prime Minister. Interest rates remain at record low levels and the prospect of them turning negative remains on the table, although we still see this as a nuclear option.”
The Bank of England has pledged to continue funding government spending commitments and committed to take “whatever additional action necessary” to achieve its targets.
Many are preparing for chancellor Rishi Sunak to implement tax hikes in a bid to narrow the £2tn hole in the public finances. He is expected to announce his latest spending review next week.
The ONS had better news when it came to retail sales data. In October, sales volumes increased by 1.2 per cent compared to September — the sixth consecutive month of growth in the industry — and were up 7.9 per cent compared to pre-pandemic levels.
This was driven by a strong increase in sales online, the ONS said.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said retailers likely had the early Christmas shoppers to thank for the uptick.
She added: “Although it appears many more consumers got ahead of the game in October and started stockpiling presents before lockdowns took hold, the bulk of purchases will still need to be made.