Borrowing hits record high as talk of “double-dip” recession grows

GOVERNMENT borrowing hit record levels in November and City economists fear the latest lockdowns will push Britain back into recession.

Figures from the Office for National Statistics show the government borrowed £31.6 billion last month, the highest November figure since records began.

That is also the third highest monthly figure ever.

Since the start of the financial year, the UK has borrowed almost £241 billion. The total national debt has hit £2.1 trillion.

Hinesh Patel, portfolio manager at Quilter Investors, said: “The debt to GDP ratio now stands at 99.5% of GDP, a level not seen since Harold Macmillan occupied Downing Street in 1962.”

Few in the City presently think there is any other way out of the crisis than to spend now and worry about debt later.

Also today, official figures show the economy bounced back in the third quarter more strongly than previously thought. In those three months the economy was up 16%, while remaining down 8.6% across the year.

But those figures came before the latest virus fears and there is no a growing expectation that the economy will slump again post-Christmas, leading to a dreaded “double-dip” recession.

Ruth Gregory at Capital Economics says: “While a double-dip recession is a clear possibility if the Tier 4 COVID-19 restrictions are extended into 2021, Q3’s high saving rate provides optimism that as long as vaccines are effective and widespread, GDP will stage a strong rebound in the second half of next year.”

Patel adds: “The borrowing looks disastrous, but there is simply no credible alternative to splashing the cash while the government attempts to pull the economy from its Covid-induced slumber. In reality, the pandemic overrides everything else and the Government will throw caution to the wind by fighting it now, and paying back later, made possible by the sponsorship of the Bank of England.”

A budget expected in early March is seen as the earliest time when the government could plausibly even begin to plot a pull back on spending.

Capital Economics said in a note to clients: “November’s surge in borrowing is unlikely to be reversed much over the next few months as the ongoing COVID-19 restrictions keep many businesses closed. This will only increase talk of how to pay for the crisis, but the successful roll out of vaccines next year and a rapid rebound in GDP could mean that the deficit returns to its pre-crisis level within the next few years without the need for much fiscal tightening.”