Government Borrowing Sky Rockets Due To Covid-19 Costs

Government Borrowing Sky Rockets Due To Covid-19 Costs

 · 2 min read

The UK government has borrowed £30.9 billion in August in an attempt to compensate for the economic strains on public finances.

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The UK government has borrowed £30.9 billion in August in an attempt to compensate for the economic strains on public finances.

Official figures show that the amount borrowed was £30.5 billion more than it borrowed last year. The amount borrowed is defined as the difference between what the government spent and the income they got from tax. This figure is the highest amount borrowed in August since 1993.

Official figures show that the total borrowed between April and August was a total of £173.7bn, also a record.

The government's amount of debt also passed a significant threshold of £2 trillion in July, the first time a UK government has incurred this amount of debt. It comes as a result of the government spending billions trying to implement measures designed to protect the economy against the economic impacts of the COVID-19 pandemic.

In August, the debt rose again, with reported figures showing that the UK debt had reached £2.024 trillion, £249.5 billion more than last year.

This is now the most enormous debt the UK has seen since the 1960s, with a debt value now larger than that of the UK economy.

A UK economist at Capital Economics, Andrew Wishart, said the reason behind the increase in borrowing figures is due to the government absorbing "much of the cost of the COVID-19 crisis".

Costs that the UK Government has been forced to cover include the furlough scheme and bailouts for several organisations that had been impacted, such as the railway industry. Also, VAT was cut for hospitality and tourism businesses, the costs of which also had to be covered by the government. The UK government also compensated for business rates holidays to try and keep businesses open.

Wishart also commented that "the big picture is that fiscal support will fade over the autumn causing many more job losses to be realised".

The government's tax income has dropped significantly. Therefore, despite there being billions injected into the economy to keep it afloat, there has been a significant drop in tax receipts.

In August, the amount of tax income collected by the UK government dropped to £37.3 billion, which is £7.5bn less than in 2019.

Zara Tunnicliffe
Zara Tunnicliffe
Zara joined Age Group in 2020 and is an expert in all things food and drink, travel and lifestyle.
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