The current state of the UK economy and finances is deeply worrying, especially over the long-term and when seen against the potential catastrophic consequences of any changes in borrowing rates.
Whilst currently rates allow borrowing to be relatively easily managed, even the smallest of changes may spell trouble.
The latest figures show that Public sector net borrowing is estimated to have been £19.1 billion in February 2021, £17.6 billion higher than in February 2020, representing the highest February borrowing since monthly records began.
Parallel to that HMG’s tax receipts for February 2021 were £1.5 billion lower than in February 2020, with biggest falls seen in Value Added Tax (VAT), Business Rates and Fuel Duty.
For the fullest picture, readers are directed to The ONS, at
The effects of this are that HMG faces record deficit levels, with the OBR forecasting a deficit of £355 billion in 2020/21, or 17% of GDP. Keeping a sense of relative perspective here, it is predicted that for the G7 countries, borrowing will be 16% of GDP.
Whilst the HMG is to be commended for its response to the pandemic through such as furlough, it is of critical importance that The UK economy and business returns to ‘normal’ as quicky as possible, and that HMG pursues fiscal policies that proactively support business, entrepreneurship and international trade over the low term to that underwrite and assure The UK’s economic recovery, stabilisation and short- and medium-term growth.
Whilst a quick route out of this debt is neither likely nor desirable, we would expect a pro-business and Conservative government to pursue and support a low tax, low bureaucracy, business innovation and growth orientated strategy.
We need not panic at the moment, but all of us would do well to be cognisant of the reality of the impact of the COVID-19 pandemic, the economic and financial situation we face, and the impact, challenges and issues which will arise from this on all of us, as individuals, enterprises, organisations and businesses.
For readers who are interested, the following resources will prove informative.
The House of Commons Library’s The Budget Deficit: a Short Guide
The OBR’s Brief Guide to the Public Finances
The House of Commons Library’s Coronavirus: Economic Impact report