KPMG comments on today’s public sector finances data

“Borrowing plummets in 2021-22 but debt has yet to peak” says Michal Stelmach, senior economist at KPMG UK:

“Having peaked at nearly 15% of GDP in the first year of the pandemic, borrowing is now estimated to have more than halved in the 2021-22 financial year. This is quite remarkable considering it took five years following the global financial crisis for that to happen.

“The outlook for borrowing naturally looks better in comparison to the pressures that pushed it up during the Covid-19 pandemic. In the last financial year alone, the Government’s Coronavirus Job Retention (CJRS) and the Self-Employment Income Support (SEISS) schemes together cost the taxpayer £17bn, while NHS Test & Trace added a further £16bn. These schemes have now been phased out.

“Public sector net debt rose to 96.2% of GDP, its highest level since 1963. We expect debt to peak in 2022-23, a year later than in the OBR’s forecast, largely on account of less favourable economic growth than they pencilled in.

“While the 2021-22 full-year borrowing was in line with our expectations, it came out around £24bn higher than the OBR forecast published just a month ago. The key difference stems from their judgements which are yet to appear in the published data, in particular in relation to greater departmental underspends, lower investment by local authorities, and an expected downward revision to the cost of the Covid-19 loan guarantee schemes.”

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