The UK government has been forced to borrow almost £130bn between April and June to combat the coronavirus pandemic, more than double the amount it did over the whole of last year.
Setting out the scale of the economic shock unleashed by the virus, the Office for National Statistics said public borrowing in the first quarter of the 2020-21 financial year jumped to £127.9bn, the highest quarterly sum since comparable records began in 1993.
According to the latest snapshot, borrowing in June was £35.5bn, roughly five times the level in the same month a year ago, albeit a gradual decline from even higher levels of borrowing in April and May during the earlier stages of the pandemic.
The chancellor, Rishi Sunak, said that despite the impact on public finances it was important to continue supporting the economy to cut the chances of long-term scarring for jobs and growth.
However, paving the way for potential cuts to spending or higher taxes in future, he warned: “I am also clear that over the medium term we must, and we will, put our public finances back on a sustainable footing.”
Speculation has been mounting that Sunak could use his autumn budget later this year to either raise taxes or launch a renewed austerity drive to pay for the government response to Covid-19, as the state steps in with billions of pounds of financial support to soften the economic blow.
Britain’s national debt – the sum total of every annual deficit in history – increased by £195.5bn year on year to almost £2tn, roughly equalling GDP, and standing at the highest level as a share of the economy since 1961.
However, experts have warned warn that cutting back spending or raising taxes too soon risks choking the economic recovery before it fully takes hold. Economists argue that higher levels of borrowing can be sustained by cheaper borrowing costs for the state, helped by the Bank of England’s quantitative easing bond-buying programme.
Jeremy Thomson-Cook, the chief economist at financial services firm Equals, said debt levels did not matter in the short term. “If your house is on fire you do not tell the fire brigade to only use a certain amount of water,” he said.
“The UK economy continues to burn, and the government’s spending taps need to remain open for the foreseeable future in order to give businesses and consumers every opportunity to support each other as we gradually return to normality.”
