Britain`s public debt has hit a record high as the coronavirus pandemic continues to soar causing the government to spend more on support.
Despite widespread criticism of the government`s handling of the crisis, chancellor Rishi Sunak said the situation could have been worse if the government had not acted to protect livelihoods.
“Whilst it’s clear that the coronavirus pandemic has had a significant impact on our public finances, things would have been far worse had we not acted in the way we did to protect millions of livelihoods,” Sunak said.
According to statistics, borrowing in September took the country`s public debt to its highest level in 60 years. The UK government borrowed £36.1 billion last month and the national debt is now 103.5% the size of the UK`s economy as measured in GDP.
In a statement, Sunak said: “Over time and as the economy recovers, the government will take the necessary steps to ensure the long-term health of the public finances.”
The pandemic has had an impact on public sector borrowing “unprecedented in peacetime” and economists warned that setting longer-term targets would be difficult due to uncertainty.
Borrowing in the tax year to date remained 20.6% below levels expected by the Office for Budget Responsibility in July, Paul Dales, chief UK economist at Capital Economics said.
“But the stuttering recovery and further fiscal support are likely to mean that the pace of borrowing is higher than the OBR expected in the second half of the fiscal year,” he said.
“But with 10-year gilt yields currently just 0.19%, the markets don’t seem to care one bit. Overall, low inflation and low gilt yields give the Bank of England and the chancellor the green light to do more to support the economy.”