The cost of measures to support the economy during the coronavirus pandemic has pushed government borrowing to the highest level since the end of World War Two.
Government borrowing – the difference between spending and tax income – hit £303.1bn in the year to March, the Office for National Statistics said.
Compared to the previous year, borrowing is nearly £250bn higher.
Measures such as furlough payments have hit government finances hard.
Borrowing hit £28bn in March alone – a record high for that month.
Despite the record figure, Paul Johnson, director of the Institute for Fiscal Studies, Today programme the annual borrowing figure was “slightly better than expected a month ago”.
But, he added: “The big story in a sense is they [the borrowing figures] are £250bn more than a year ago.
“And that, of course, is because of to some extent the recession of the last year but mostly because of the huge amount of additional government spending to support the economy over the last year.”
Government borrowing of £303bn is at the same time, an extraordinary record, but also something a relief.
For starters it is not £400bn, as anticipated only a few months ago, though this number will go up when some Covid support loans fail to be repaid.
But its cause has been primarily an active government decision to spend more to support incomes during the pandemic. Of the £250bn difference in borrowing between this year and last, over £200bn comes from extra spending, the rest on a reduction in taxes.
In the latest reported month, March, taxes were barely down on last year. Whereas VAT, fuel duty and business rates were down, self assessment, PAYE, stamp duty and capital gains taxes were up.
That is part of a wider trend of the economy riding the second lockdown much more effectively than the first. It is epitomised by this morning’s separate retail sales figures showing a boost even ahead of the physical reopening of shops.
The ONS suggested Britons wanted to look good and deck out their gardens ahead of some restrictions being lifted. Others, less charitable, suggested lockdown excess meant our clothes no longer fit.
The chancellor’s slimming regime for the public finances is a gentle one. Borrowing is predicted to continue at high levels this year, as jobs support continues until the autumn, and massive tax cuts are meant to persuade companies to invest in plant and machinery.
It is a rebound in growth that will most effectively shrink these record borrowing numbers. That is why amid the sea of red ink, there is some reason for relief.