Borrowing tops £1bn a day and double-dip recession looms

THE government is borrowing more than £1 billion a day to keep the UK economy afloat, the latest “eye-wateringly large” official figures show.

Tumbling retail sales and other economic indicators were also grim with a “double-dip” recession likely. The hard-hit services sector, three quarters of the economy, slumped. Companies are cutting jobs apace.

In December alone the government borrowed £34 billion, the third highest ever figure for any single month.  

That takes the total national debt to £2.13 trillion, leaving the debt to GDP ratio at 99.4%, or 102.9% if you include the debt held in public sector banks. Some in the City believe that when that ratio goes above 100%, serious problems ensue. Chancellor Rishi Sunak is said to be pondering tax increases in the March budget.

Borrowing in the first nine months of the year was £333 billion and will hit £400 billion by March on the latest forecasts, though they may need revising upwards.

Charlie McCurdy at the Resolution Foundation, said: “The fiscal cost of the Covid-19 crisis, nine months in, has pushed the UK’s debt-to-GDP ratio up to its highest level in almost six decades.”

He added: “This level of spending may be eye-wateringly large, but it is absolutely necessary in order to both tackle the virus, and protect families and firms from the crisis.”

“The current lockdown restrictions also mean that the pace of borrowing is likely to overtake that forecast by the OBR as recently as last November. The Job Retention Scheme alone cost £4.7 billion in December, a figure that will rise significantly in January.”

Even so, the debt figures are still less-bad than the OBR predicted. City economist Julian Joseph said: “This weakens the case for any form of tax rises.”

Retail sales fell 1.9% in December compared to a year ago – both the largest fall on record and a relatively decent performance in the circumstances.