Britain’s gradual emergence from the Covid-19 pandemic meant government borrowing more than halved in the latest financial year but remained the third highest on record, the latest official figures show.
The Office for National Statistics said the gap between the state’s revenues and its spending stood at £151.8bn in the 12 months to March, down from £317.6bn in the previous year.
Despite the improvement over the year as a whole, the total deficit for 2021-22 was more than £20bn higher than forecast by the Office for Budget Responsibility predicted when preparing estimates for Rishi’s Sunak’s spring statement last month.
The chancellor said the economy was recovering and the public finances improving but said previous borrowing had left a legacy of debt.
“Public debt is at the highest levels since the 1960s and rising inflation is pushing up our debt interest costs, which mean we must manage public finances sustainably to avoid saddling future generations with further debt,” Sunak said.
Borrowing in March alone was £18.1bn – lower than had been predicted by the City – but still the second highest since modern records began in 1947.
According to the ONS, the national debt – the accumulation of borrowing over time – stood at £2.3tn at the end of last month, just over 96% of the economy’s annual output. Interest payments on the debt rose to a record of just under £70bn.
Bethany Beckett, a UK economist at the consultancy Capital Economics, said there was likely to be a further fall in the deficit to around £100bn in 2022-23 even though the economy was now slowing. As a result, the chancellor would have scope to use his autumn budget to respond to the cost of living crisis.
Michal Stelmach, a senior economist at KPMG UK, said: “The outlook for borrowing naturally looks better in comparison to the pressures that pushed it up during the Covid-19 pandemic. In the last financial year alone, the government’s coronavirus job retention and the self-employment income support schemes together cost the taxpayer £17bn, while NHS test and trace added a further £16bn. These schemes have now been phased out.”