UK government loans fell by more than half in the financial year 2021-22, which ended in March as the economy recovered from the pandemic, giving the chancellor more room to deal with the cost of living crisis.
The Office of National Statistics’ initial estimate of net public sector loans for 2021-2022 was £ 151.8 billion in 2021-22, down more than 50 per cent from £ 317.6 billion in 2020-2021. ., when the coronavirus crisis was most severe.
These provisional figures were worse than the £ 128.8 billion estimated by the government’s fiscal oversight body, the Budget Accountability Office, in its March forecast for the financial year. But with strong tax revenues, economists said the final official figure is likely to improve significantly as additional spending figures come from government departments.
Representing approximately 6.4% of national income, the level of government loans is lower than the total for the five years since the global financial crisis of 2007-2008, which shows a much faster economic recovery from the virus.
Economists said the figures were better than expected and that the ONS would soon revise its 2021-22 borrowing forecasts.
Michal Stelmach, a senior economist at KPMG UK, said the difference of 24 billion pounds between the OBR forecast and ONS data stems from the assumption made by fiscal oversight that many government departments would not spend their full budgets in 2021-22. .
“The key difference stems from [the OBR’s] estimates that are yet to appear in the published data, in particular in connection with higher under-expenditure of departments, lower investment by local authorities and the expected downward revision of the cost of Covid-19 loan guarantee schemes, “he said. Stelmach.
Samuel Thombs, a British economist at Pantheon Macroeconomics, noted that “early loan estimates have recently been significantly revised as more data have been collected.” He said tax revenues were higher than OBR’s forecasts for the entire financial year and government spending figures were often revised significantly downwards.
The sound public finance situation has enabled Chancellor Rishi Sunak to alleviate the pain of the crisis with the cost of living, according to James Smith, research director of the Resolution Foundation’s think tank.
Revenue-rich recovery, Smith said, suggests “the Chancellor may have little reason not to provide much-needed political support to families as they deal with higher inflation and energy bills, which are now hitting their finances.” .
However, Sunak did not hint that he was considering any further action to help households. In a statement after the figures were released, the chancellor emphasized the support he said he had already offered.
“We need to manage public finances sustainably to avoid burdening future generations with additional debt,” he added.
However, the provisional figures were worse than what the government’s fiscal supervisor, the Budget Accountability Office, predicted in its March forecasts, along with Chancellor Rishi Sunak’s spring statement. He expected loans to fall to £ 127.8 billion in the financial year.
The discrepancy is likely to be eliminated to some extent, as ONS receives more accurate data on tax revenues and public spending over the past few months. However, the big difference suggests that tax revenues are slowing as households cope with the cost of living crisis, shrinking their incomes.
The £ 18.1 billion loan in March was the second highest in history, ONS said.
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