- UK Public Finance data released this morning shows a sharp improvement compared to where the Government’s finances were a year ago.
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- Public Sector Net Borrowing in July almost halved, to £10.4bn, although this is still the second worst July for borrowing levels since records began. Both sides of the equation improved; spending fell by £2.9bn to £79.8bn, whilst government tax receipts of £70.0bn were up by £9.5bn on the prior year run-rate.
- Much of the improvement came from higher Self-Assessed Income Tax receipts, which improved by £3.7bn, or 76%, which likely reflects the catching up of receipts after 2020’s introduction of tax payment deferrals.
- With borrowing below expectations, total Public Sector Net Debt of £2.22 trillion stayed just below 100% of GDP, but at 98.8%, the level is at its highest since March 1962.
Improvement In UK Public Finances
Commenting on the numbers, Steve Clayton, HL Select Fund Manager said:
“You can almost hear the sigh of relief coming from 11 Downing Street this morning. Chancellor Rishi Sunak must feel as if someone has poured cream on his cornflakes. These numbers could have been so much worse, but with the UK economy turning up, government finances are fast improving. This bodes well for the Chancellor’s flexibility going into the next Spending Review and makes it easier to keep the promise of no return to austerity.
But after the initial relief subsides, the stark truth remains; the pandemic played havoc with public finances and borrowing is way above anything that economists expected in late 2019. Whilst interest rates are rock bottom, this higher level of debt can easily be supported. But the Treasury will be keen to see debts brought down before the day interest rates eventually rise and servicing those trillions of debt becomes increasingly challenging.”
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