Budget Deficit Reaches £128 Billion In Just Three Months

22nd July 2020

From the Office For Budget Responsibility.

The budget deficit continues to rise sharply. Three months into the 2020-21 fiscal year, tax payments received by HMRC are down by 35 per cent on last year, while central government spending is up 40 per cent. But year-to-date borrowing is lower than assumed in the central scenario from our Fiscal sustainability report. That reflects lower departmental spending and loan guarantee write-off costs that are not yet incorporated in the outturn data, as well as surprisingly strong June tax receipts.

Headlines

• Today's data highlight the gathering fiscal impact of the coronavirus crisis, but the numbers will

be prone to revision. It will be many months before the true scale of the shock becomes clear.

• Public sector net borrowing (PSNB) totalled £35.5 billion in June, £9.5 billion lower than market

expectations. Borrowing over the first three months of the year reached £127.9 billion, despite

the deficit for April and May being revised down by £11.4 billion.

• HMRC cash receipts over the first three months of 2020-21 are down by roughly a third on a

year earlier, with VAT accounting for the bulk of the deterioration thanks to the Government's

deferral scheme. Income tax and NICs receipts were surprisingly strong in June.

• Central government spending so far in 2020-21 is up by 40 per cent on a year earlier,

reflecting the cost of the coronavirus job retention and self-employment income support

schemes, plus additional grants to local authorities and higher public services spending.

• Net debt rose by 23.4 per cent of GDP on a year earlier to 99.6 per cent in June. Cash debt is up sharply thanks to the impact of higher borrowing and Bank of England schemes. The rise in

the debt-to-GDP ratio also reflects the year-on-year fall in nominal GDP assumed in our FSR central scenario. As that scenario is not as weak as our April reference scenario, which underpinned last month's public finances data, the ratio has been revised down to below 100 per cent of GDP this month. But it is likely to reach that landmark again soon.

Read the full report HERE