UK Finance Ministry sees budget deficit hitting record GBP337 billion – The Telegraph

Citing an internal UK government document, the Daily Telegraph reported late Tuesday, the Kingdom’s Finance Ministry is worried that the government borrowing this year could hit a record GBP337 billion ($414 billion) due to the coronavirus pandemic.

Key quotes

“Under a worst-case scenario, where the economy does not recover, borrowing could surge to 517 billion pounds compared with a forecast of just 55 billion pounds for 2020-21 as recently as March.”

“The document was “a summary of all the existing levers,” and that no policy decisions had been taken.”

“Timing, pace and composition of any consolidation should be managed carefully to avoid the risk of stifling the economic recovery.”

“To raise fiscally significant amounts, we would either have to increase rates/thresholds in one of the broad-based taxes ... or reform one of the biggest tax reliefs (eg. pensions tax).”

“In the best-case scenario, a so-called V-shaped recovery, the budget deficit was projected at 209 billion pounds.”

“This was optimistic, and a more realistic scenario was a “prolonged recovery and some permanent damage to the economy” - a U-shaped recovery.”

“In the latter case, the deficit would fall to 83 billion pounds in 2021-22 and drop to 32 billion pounds by 2024-25.”