UK public finances worsen as February borrowing hits record

UK public finances deteriorated further in February as spending on Covid-19 measures continued to grow while tax receipts fell.

The public sector spent more money than it received in taxes and other income last month, requiring it to borrow £19.1bn, the highest February figure since records began in 1993, new data showed on Friday.

The figure from the Office for National Statistics was lower than the £21bn forecast by economists polled by Reuters. It included a £14.2bn annual increase in central government expenditure, including £3.9bn spent on coronavirus job support measures.

Tax receipts fell by £1.5bn in February compared with the same month last year as Covid-19 restrictions closed business and limited consumer spending.

Public sector net debt as a ratio of gross domestic product rose to 97.5 per cent, a level not seen since the early 1960s. 

Rishi Sunak, chancellor of the exchequer, said the government’s support measures were the “responsible thing to do”, but that it was necessary to “return the public finances to a more sustainable path once the economy has recovered”.

Neil Birrell, chief investment officer at Premier Miton, said public sector borrowing in February was “a frightening number, although it was at the lower end of expectations”.

In the 11 months to February, net borrowing rose to an estimated £278.8bn, also the highest on record.

The Office for Budget Responsibility, the UK fiscal watchdog, this month revised down its public sector borrowing forecast for 2020-21 to £355bn from the £394bn forecast in November.

The OBR forecast includes an estimated £27.2bn in write-offs of business loans issued under the government’s coronavirus programmes, which are yet to be reflected in the ONS numbers.

The funding for government coronavirus support schemes, combined with reduced tax receipts and a fall in output, have pushed public sector net debt as a ratio of GDP to levels last seen in the early 1960s. Public sector net debt in February was equivalent to 97.5 per cent of GDP.