Government borrowing was almost £9 billion in January. That's the highest January deficit since records began. It was the first January deficit for ten years.
January is normally a month to fill the coffers. The surplus over the last two years has averaged £10 billion. Compared to prior year, the deficit this year, increased by £18 billion.
Over the first ten months of the year, borrowing was £270 billion. In the last update, borrowing in the first nine months of the year was also £270 billion. The ONS has managed down, the estimates for government spending and the cost of the furlough scheme, in the year to date. The reductions in the estimates, neatly covered the shortfall, in the latest monthly accounts.
Forecasts of a deficit of £400 billion in the current year, would appear to be extremely pessimistic. Pro rata forecasts would suggest the deficit in the year would be just £325 billion, of which £280 billion would relate to special pandemic measures. No real need for tax hikes in the March budget. The chancellor will have some headway to develop a budget, to manage the recovery. No need to move, at this stage, with a budget, to balance the books.
In November, the OBR were forecasting a deficit of £394 billion in the current year. At face value, the January numbers don't add up.The OBR numbers included a provision of £30 billion in write offs, relating to business loans under the government's Covid Schemes. No provision is included in the ONS data to date.
Some provision against the loan schemes, now in place, will have to be made.The cost of the furlough scheme may be revised up, as we receive the actual data for the first quarter of the year. The OBR update on the 3rd March will make for interesting reading. Provisions and revisions will be of critical dimension. Borrowing of £400 billion could yet be in reach for the year.
Public sector net debt, increased by £316 billion over the first ten months of the year. The total level of debt increased to £2.1 trillion, that's around 97.9% of GDP. Ten year gilt yields moved up 17 basis points to close at 0.69. Sterling closed higher against the dollar at $1.402. Markets are relaxed about government deficit spending and monetary financing by central banks apparently.
Bitcoin broke through $55,000 dollars this week. Musk and Tesla could have made more money from Bitcoin in January, than by selling electric cars in the whole of last year ...
The Saturday Economist
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