Government debt crosses the £2,000,000,000,000 barrier

Yes, you did count correctly – there are twelve zeroes after the two. Another month of Government borrowing above £20bn has pushed total Government debt over the £2tn level for the first time

The Public Sector Finances data released by the Office for National Statistics (ONS) on Friday were notable mainly for that £2tn figure. It is no surprise, given that the June figure for public sector net debt (PSND) was £1.983.8tn, but moving from £1. something to £2. something makes good headlines. In reality, the July numbers were slightly better – or perhaps that should be not as bad – as had been expected:

• The public sector net borrowing requirement (PSNBR) in July 2020 is estimated to have been £26.7bn, against a £1.6bn surplus a year ago (July tax receipts are usually boosted by payments on account). Although the monthly borrowing was the fourth highest on record since records started in 1993, there is some solace that it was slightly less than the Office for Budget Responsibility (OBR)’s central scenario projection of £28.4bn and the market’s average estimate of £28.6bn.
• For the first four months of this financial year, total borrowing amounted to £150.5bn. The ONS has reworked last month’s statement to say that this cumulative figure is ‘£128.4bn more than in the same period last year and the highest borrowing in any April to July period on record (records began in 1993), with each of the months from April to July being records’. However, there is an element of good news from the OBR: as the graph above shows, the £150.5bn figure is £28.7bn below the OBR’s central scenario projection. Unfortunately, about £13bn of that difference is attributable to a difference in accounting approaches to the various Government-backed loan schemes. The OBR allows for projected write-offs – hence increase debt – while the ONS is still in the process of incorporating these in its data.
• The uncertainty of the initial estimates for monthly borrowing figures was again underlined, with the April-June figures revised downby a cumulative £4.1bn. The ONS attributes the drop largely to “stronger than previously estimated tax receipts and National Insurance contributions”.
• Overall Government debt rose to £2,004.0bn, £227.6bn (12.8%) higher than a year ago. As a percentage of UK GDP debt rose to 100.5% in July: a year ago it was 80.1%. Revisions to earlier data in 2020 mean that the ONS now says July 2020 marks “the first time [the ratio] has been above 100% since the financial year ending (FYE) March 1961’.
• Self-assessed income tax receipts were £4.8bn in July 2020, £4.5bn (48%) less than in July 2019, because of the option given to defer payments on account until 31 January.

In the circumstances it is surprising that the reduction was not greater. The OBR had reckoned that 90% of tax due would not be paid. As the OBR hints, those constructively ambiguous words on the HMRC website telling taxpayers “you can still make the payment by 31 July 2020 as normal if you’re able to do so” clearly worked…

Summary

Well Apple (The US Tech giant) hit a market cap of $2 trn last week, doubling in valuation in just over two years.  It’s the first publicly traded U.S. company to reach a $2 trillion market cap and Apple was also the first publicly traded U.S. company to reach a $1 trillion market cap….. Maybe a Trillion is the new Million?