UK to write off £21bn taxpayer-backed loans

AROUND £21 billion of government backed Covid-19 loans will simply never be repaid, the Office for National Statistics predicted today.

That’s the first official guess of what the size of the bad loans from the pandemic might be. Banks themselves, responsible for distributing the loans in most cases, will soon start recording their own expected losses when they report results.

That figure came as the latest government borrowing figures came in higher than expected, while still trending downwards.

The UK government borrowed another £20.5 billion in August to make ends meet, the highest amount for that month for every year apart from the last one.

So far this year total borrowing stands at £93.8 billion, also hugely down on a year ago when Covid was at its worst.

The good news is that public sector net borrowing keeps coming in lower than the Office for Budget Responsibility predicted.

The bad is that interest payments on government debt hit £6.3 billion last month. If interest rates rise, there are fears that figure could spiral, leaving the Government borrowing simply to pay interest on old debt.

Tax revenues of £61.2 billion were up on last August’s £55.8 billion, suggesting that the economic recovery is helping the nations finances.

That perhaps makes it easier for the Bank of England to begin cutting the amount of support it has been pumping into the economy.

There was more positive news from the property market today with HMRC saying home sales bounced back in August, up a third higher on July.

An estimated 98,300 transactions took place last month, a 21 per cent year on year rise.

Low mortgage rates, the tail-end of the stamp duty holiday and a continued “race for space” maintained momentum.

Mike Scott at estate agency Yopa said: “The housing market has recovered very quickly from the dip in activity after the stamp duty deadline at the end of June.”