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Epidemics

Britain's Public Borrowing to Reach Over £350bn this Financial Year

Strategic Insights

— 2 min read

The UK's Chancellor, Rishi Sunak, has introduced a new package of job support worth up to £30bn as part of a strategy to minimize the long-term economic damage caused by the coronavirus pandemic. Despite this, the country's public borrowing is expected to rise to over £350bn this financial year, with the deficit reaching 18% of national income. This is almost twice the size of the deficit during the 2008-09 global financial crisis.

Key Takeaways:

  • The UK's public borrowing is expected to reach over £350bn this financial year, with the deficit reaching 18% of national income.
  • The Chancellor's new package of job support is worth up to £30bn, which includes a "job retention bonus" of £1,000 per worker paid to companies that bring staff out of the government's furlough scheme.
  • The temporary cut in value added tax (VAT) rate from 20% to 5% for the tourism and hospitality industry will last for six months and cost around £4bn.
  • The "eat out to help out" initiative, involving a 50% discount for meals in restaurants during August, will apply to Mondays, Tuesdays, and Wednesdays and be limited to £10 per diner.
  • The stamp duty threshold on all home purchases in England and Northern Ireland has been raised from £125,000 to £500,000 until the end of March to help revive the struggling housing market at a cost of £3.8bn.
  • A new "kickstart" work creation scheme will be introduced to stop the UK's young people from becoming part of a "Covid generation" at a cost of £2bn.
  • Paul Johnson, director of the Institute for Fiscal Studies, has said that the high cost of the job support package demonstrates how hard it is to target resources only where they are really needed.
  • Business leaders have welcomed the Chancellor's statement, but some have expressed disappointment that help was confined to hospitality and tourism, and are seeking extensions to existing bailout schemes.

Statistics:

  • The UK's public borrowing is expected to reach over £350bn this financial year.
  • The deficit is expected to reach 18% of national income, which is almost twice the size of the deficit during the 2008-09 global financial crisis.
  • The temporary cut in VAT rate will last for six months and cost around £4bn.
  • The "eat out to help out" initiative will apply to Mondays, Tuesdays, and Wednesdays and be limited to £10 per diner.
  • The stamp duty threshold on all home purchases in England and Northern Ireland has been raised from £125,000 to £500,000 until the end of March at a cost of £3.8bn.
  • The new "kickstart" work creation scheme will cost £2bn.
  • The job retention bonus could cost up to £9bn if all 9m people currently furloughed were reemployed before January.

Sources:

  • Britain's public borrowing to reach over £350bn this financial year, Financial Times.
  • Rishi Sunak gambles on £30bn job support package, Financial Times.
  • Institute for Fiscal Studies.

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