Dr Isabel Stockton

This morning the ONS published its first estimates of the public finances over the whole of the financial year 2020-21. Borrowing is estimated to have reached £303 billion, or 14.5% of national income. This is £52 billion less than the £355 billion forecast by the Office for Budget Responsibility at the Budget in early March. However, it is a staggering £248 billion, or 12.1% of national income, higher than forecast just before the financial year began – and more to the point, just prior to the economic impact of Covid-19 started to be felt in the UK – in March 2020.

Pay is an important lever in attracting and keeping staff, but is subject to tight regulations within the NHS. At this event, we explored the findings of new IFS work looking at the flexibility of the current pay system and its ability to address differences in the local cost of living across the country.

Presentation given by Isabel Stockton at the IFS Spring 2021 pre-Budget event on the uncertain outlook for the public finances.

The IFS Green Budget 2020, in association with Citi and with funding from the Nuffield Foundation, analyses the huge economic trauma since the March Budget and the much heightened uncertainty over the path of the economy in coming years. The findings from chapters covering the economic and fiscal outlook were presented at this event.

This morning, the ONS published its monthly public finance release for April, giving us an initial snapshot of the public finances under lockdown. It throws the enormous impact of the restrictions on the public finances into sharp relief.

The coronavirus outbreak and associated containment measures have caused huge economic fallout across the world. The sharp decline in economic activity that is now occurring will depress government revenues and push up public spending. In addition, governments have, appropriately, responded with packages of fiscal measures that will help support households, businesses and public services through these challenging times and limit the long-run damage done by the crisis. But these measures will also have the direct impact of adding considerably more to government borrowing.

The Debt Management Office announced yesterday that in order to finance the Government’s response to the Covid-19 outbreak it intends to auction £45 billion of gilts this month. This would be a record. It is highly likely that the amount that needs to be raised over the new financial year will be the highest, as a share of national income, since 2009–10 and it could even exceed that peak. With an increasing amount of gilts set to be bought by the Bank of England the public finances will in future be even more exposed to changes in short-term interest rates.