Business

British borrowing set a new record with the preparation of the spending plan

British Finance Minister Rishi Sunak leaves 11 Downing Street in London. (AP photo)

London: Britain borrowed a record £ 215 billion in the first seven months of the fiscal year, highlighting the challenge for Finance Minister Rishi Sunak as he prepares new spending plans.

Borrowing in October alone was below all economists’ forecasts in a Reuters poll of 22.3 billion pounds, and borrowing in September was also revised down sharply.

But debt remained just below its 60-year high as a share of the economy.

Separate official data published on Friday showed that retail sales rose 1.2% in October, 5.8% higher than the previous year, stronger than all survey forecasts.

However, retailers are facing a bleak November with many stores closed due to recent restrictions to slow the coronavirus epidemic that has hit Britain more than other large economies.

The British government is on the way to borrow nearly 400 billion pounds this fiscal year, the highest compared to the size of the economy since World War II.

“This is a responsible thing to do, but it is also clear that over time, we are ensuring that public finances are put on a sustainable path,” said Finance Minister Rishi Sunak.

The Government Budget Responsibility Office will publish new borrowing forecasts on November 25, and Sunak will unveil spending plans for the next fiscal year as well.

The government has already said it will approve the largest increase in military spending since the Cold War.

But newspapers have reported that Sunak will freeze teachers’ and police salaries, and the government has refused to confirm it will keep foreign aid spending at 0.7% of GDP.

The Office for National Statistics said public debt rose and reached 2,077 trillion pounds, or 100.8% of annual economic output in October.

The stronger growth of the economy in the third quarter meant that debt, as a share of GDP, fell slightly from its September peak of 101.2%, the highest level since 1960/61.

The Office for National Statistics trimmed its borrowing estimate from April to September by 15.9 billion pounds after spending less than expected on the government’s master plan to protect jobs and higher-than-expected value-added tax revenue.

Britain can, for now at least, borrow cheaply to finance the spending increase, most of which is likely to end once the pandemic is gone.

But the Bank of England has warned of the potential for some long-term economic damage or scarring.

The International Monetary Fund said last month that Britain may need to raise taxes after the pandemic to fill the gap.

Early Christmas shopping

Friday’s data shows unexpected strength in the retail sector in October, before Covid’s four-week lockdown begins in England this month.

The Office for National Statistics said: “Feedback from a group of companies indicates that consumers have started shopping at Christmas earlier this year, helped further by early discounting from a group of stores.”

Retailers have rebounded strongly from the lockdown, with sales volumes up 6.7% from pre-pandemic.

Shifts in consumer spending have helped specialty stores such as Halfords bike and auto parts chain.

But much of the gains have been from online sales, and some sectors such as high-end clothing stores are suffering.

Fashion chains Peacocks and Jaeger entered the department on Thursday, putting 4,716 jobs at risk.

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