The cost of the government’s efforts to combat the coronavirus pandemic has risen to £123.2bn, according to latest estimates from the government’s independent economics forecaster.
The Office for Budget Responsibility’s previous estimate was £103.7bn. The increased cost of the government’s furlough scheme is the main cause.
It now expects annual borrowing to equal 15.2% of the UK economy.
That would be the highest since the 22.1% seen at the end of World War Two.
The extra spending has pushed the deficit identified for 2020-21 in the OBR’s reference scenario, which it says is not a formal forecast, above the 15% in 1945-46, which included VE Day.
Borrowing for this year is calculated to be £298bn, up £26bn on the first attempt to calculate the impact of the pandemic a month ago.
This is mainly because of the extra costs of extending the furlough scheme to the end of July.
Including the extra extension of a modified scheme until October could add an additional £20bn, depending on the as yet unannounced details of the scheme.
The OBR also reckons that taxpayers could end up footing a big bill for bad bank loans.
Some £5bn in taxpayer cost from unpaid loans to banks is included in this financial year.
An extra £1bn is already earmarked for the cost of welfare, mainly spiralling claims for Universal Credit.
The OBR’s last official forecast at the Budget anticipated annual borrowing by the government of £55bn, rather than £298bn, says BBC economics editor Faisal Islam.
The difference in just two months – the result of the pandemic and shutdowns – is a £127bn hit to the money that government takes in, mainly expected tax revenues, and £119bn in extra spending to support the economy over the year, our editor adds.