Jonathan Gillham, chief economist at PwC comments on today's public sector borrowing data:
“Today’s public finance data show that things are improving for the Chancellor. The pace of the recovery means that in the last financial year the Government borrowed £29.7bn less than expected by the OBR’s forecast back in March. Tax receipts were also £9.5 bn (or 18.0%) higher than June last year.
“However, Government debt now stands at 99.7% of GDP and interest payments stood at £8.7bn for the month of June (almost as much as the Chancellor collected in VAT). What is concerning is that recent rises in inflation account for the best part of £6bn of the interest paid last month. If inflation is found to be persistent in the economy over the next couple of years, this could be very expensive for the Government.
“However, it’s worth noting that Government debt has been above 100% of GDP for 40 of the last 100 years and it must be accepted that circumstances are extenuating. We are also in the unusual position where the Bank of England is now holding roughly 10% of the Government’s debt because of its quantitative easing programme.”
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