April public finances awash with red ink

ICAEW 27 May 2020: fiscal deficit of £62.1bn in April exceeds budget of £55bn for the whole of 2020-21.

The latest public sector finances for April 2020 published by the Office for National Statistics (ONS) reported a deficit of £62.1bn in April and a revision of £14.0bn to the deficit in the financial year to March 2020; a total of £76.1bn in costs and revenue losses reported since the previous monthly release.

Public sector net debt increased to £1,887.6bn or 97.7% of GDP, an increase of £118.4bn or 17.4 percentage points compared with April 2019.

These results reflect the substantial fiscal interventions by the UK Government to support businesses and individuals affected by the coronavirus pandemic, together with a collapse in tax revenues since the lockdown. The deficit of £62.1bn for the month of April is more than the budgeted deficit of £55bn for the whole of the 2020-21 financial year set in the Spring Budget only a couple of months ago.

Table 1 summarises the results for April 2020, while Table 2 sets out the revised results for the financial year to 31 March 2020.

Some caution is needed with respect to the numbers published by the ONS, which are expected to be revised as estimates are refined and gaps in the underlying data are filled.

Alison Ring, director of public sector for ICAEW, commented:

“The volume of red ink in April’s public finances is astonishing.

The scale of the damage from the coronavirus pandemic is only just starting to become apparent, particularly when you consider that the deficit in April alone is more than previous forecasts for the whole of 2020-21.

A full-year deficit of £300bn as suggested by the Office for Budget Responsibility looks increasingly plausible, with the only silver lining the ultra-low interest rates payable on the borrowing needed to finance it.”

This article was originally published by ICAEW.

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