Press release

22 May 2020 London, GB

UK public finances in deficit by record £62 billion in April; PSNBex looks set to reach £320 billion (15.6% of GDP) at least in 2020/21

The public finances suffered substantial deterioration in April – the start of fiscal year 2020/21 – as the Government’s measures to support businesses and jobs from the impact of coronavirus on the economy started to feed through.

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  • The public finances suffered substantial deterioration in April – the start of fiscal year 2020/21 – as the Government’s measures to support businesses and jobs from the impact of coronavirus on the economy started to feed through
  • The budget deficit (PSNBex) surged to a record £62.1 billion in April from £10.9 billion a year earlier
  • The major hit to April’s public finances came from both increased government spending and reduced receipts, which reflected substantial contracting economic activity and the introduced delaying of tax payments for businesses
  • The substantial deterioration of the public finances in April is undoubtedly just the start of what is clearly going to be a record year for the budget deficit. The EY ITEM Club expects the budget deficit (measured in terms of PSNBex) to get up to at least £320 billion in 2020/21 (15.6% of GDP) at least in 2020/21 and it could well exceed this level
  • It is notable that the March budget deficit was revised up substantially to £14.7 billion from the previously reported £3.1 billion. Consequently, PSNBex for fiscal year 2019/20 was lifted to £62.7 billion from the previously reported £48.7 billion, meaning that it missed March’s budget target of £47.4 billion by an increased margin of £15.3 billion. However, this seems insignificant compared to the budget deficit that the UK is heading for in 2020/21
  • Central government receipts fell 26.5% year-on-year in April, as they were impacted by a combination of sharply reduced economic activity, rising unemployment and weaker earnings, and companies being allowed to delay tax payments
  • Central government expenditure surged 56.6% year-on-year in April as it was pushed up by government measures to support the economy in the face of the impact of the pandemic. This included £14.0 billion were Coronavirus Job Retention Scheme Repayments

Howard Archer, chief economic advisor to the EY ITEM Club, comments:

The public finances measured in terms of Public Sector Net Borrowing excluding Banks (PSNBex) saw a sharply weakened performance in April as the government’s measures to support businesses and jobs from the impact of coronavirus on the economy started to really feed through.

Specifically, PSNBex surged to a record £62.1 billion in April from £10.9 billion a year earlier.

Although fiscal year 2019/20 already seems an age away – the March budget deficit was revised up markedly to £14.7 billion from the previously reported £3.1 billion. Consequently, PSNBex for fiscal year 2019/20 was lifted to £62.7 billion from the previously reported £48.7 billion, meaning that it missed March’s budget target of £47.4 billion by an increased margin of £15.3 billion. However, this really seems insignificant compared to the budget deficit that the UK is heading for in 2020/21.

Central government receipts fell 26.5% year-on-year in April, as they were impacted by a combination of sharply contracting economic activity, markedly rising unemployment and weaker earnings, and companies being allowed to delay tax payments.

Income and capital gains tax receipts were down 36.0% year-on-year in April, as jobs were lost and pay hit. There was also a fall of 14.1% in corporation tax receipts while VAT receipts were down 43.6% year-on-year.

Meanwhile, central government expenditure jumped 56.6% year-on-year in April as it was pushed up by government measures to support the economy, businesses and jobs in the face of the impact of the pandemic. The ONS reported that central government subsidy expenditure was £16.3 billion in April, of which £14.0 billion were Coronavirus Job Retention Scheme Repayments.