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Debt hits highest November level as UK tax receipts drop

written by Bella Palmer
uk-tax

It comes as separate GDP figures from the ONS show the economy rebounded more than expected, with the UK economy expanding by 16% in the third quarter compared to the previous quarter

UK public borrowing hit its highest November level since records began in the early 1990s, as tax receipts dropped and furlough costs racked up.

The latest data from the Office for National Statistics (ONS) shows the UK government borrowed £31.6bn ($41.69bn) in November, with borrowing levels higher than the previous month and than analysts’ expectations.

Business rates and VAT income dropped with lockdowns in force in large swathes of the UK for much of November.

It comes as separate GDP figures from the ONS show the economy rebounded more than expected by analysts between July and September. Third-quarter GDP data shows the UK economy expanded by 16% compared to the previous quarter.

The government has been forced to issue new debt to cover the wide-ranging costs of the pandemic, from the furlough scheme and bailouts for rail firms to support for the NHS.

Borrowing has also propped up other spending with UK tax receipts plummeting, as many firms’ revenues have collapsed and many tax payments have also been deferred.

It comes a week after UK chancellor Rishi Sunak extended the furlough scheme by another month to April next year. The coronavirus job retention scheme, as it is formally known, has seen the UK government seek to limit mass unemployment by subsidising 80% of wages for workers at risk of redundancy.

More than 1.2 million employers had claimed £46.4bn to protect the jobs of 9.9 million staff as of early December, with 30% of the workforce furloughed at its peak in May.

The scheme was due to run to October but has repeatedly been extended, with the Treasury under pressure as the pandemic has dragged on.

The latest Tier 4 curbs in parts of England and tighter restrictions in Wales, Scotland and Northern Ireland have been predicted to cost the economy £900m a day. The hit to economic activity could further push up the debt-to-GDP ratio, a key metric of the public finances.

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