Covid-19 pandemic – and efforts to fight it – send borrowing to over £300 billion

The Covid-19 pandemic has sent public sector borrowing for the year 2020-21 to £303.1 billion – almost six times as large as the Office for Budget Responsibility (OBR) pre-pandemic forecast back in March 2020 (£54.8 billion) – the Resolution Foundation said today (Friday) in response to the latest ONS public sector finance figures for March.

The Foundation notes that the huge levels of borrowing over the past year – which has sent public sector net borrowing as a share of the economy to its highest level since the end of World War Two – has been largely been driven the unprecedented £354 billion policy response to the pandemic, which has supported the NHS and protected firms and families from the worst effects of the economic crisis.

But while large in historic terms, the UK’s policy response – worth around 16 per cent of GDP – is actually in line with many others countries’ response to the pandemic (such as Australia and Japan), and smaller than the US response (worth 25 per cent of GDP), despite the UK experiencing a far bigger economic contraction.

Charlie McCurdy, Economist at the Resolution Foundation, said:

“The Covid-19 pandemic – and unprecedented efforts to both curb the virus and protect firms and families from the economic fallout – has sent borrowing to a record £303 billion.

“But while this level of borrowing is historically high, it is broadly in line with the scale of response in many other countries have adopted to fight the virus. And it hasn’t stopped the cost of servicing government debts from falling.

“Most importantly, a policy response on this scale has been absolutely necessary in terms of fighting Covid-19. Without support such as the Job Retention Scheme, which at its peak protected one-in-three private sector workers, the UK would have experienced catastrophic levels of unemployment.”