Britain’s national debt has hit £2tn for the first time as the cost of fighting the Covid-19 pandemic pushed public debts above the size of the UK economy. Figures from the Office for National Statistics showed that public sector net debt increased by £227.6bn over the past year to £2,004bn in July, taking the national debt to 100.5% of GDP for the first time since March 1961. With only a few months until the chancellor is expected to hold his first full budget, the figures are a significant milestone and underscore the scale of the rescue programme. Rishi Sunak is understood to be keen to limit further growth in the deficit, despite pleas from industry for him to extend several subsidy schemes he has introduced, especially the furlough scheme, which ends in October. City economists said the spiralling deficit was increasing at a slower pace than expected, mainly because of more resilient VAT receipts, to give the Treasury a temporary boost. However, a multibillion-pound subsidy payment to self-employed workers this month and an expected rise in unemployment during the autumn as the furlough scheme comes to an end were likely to accelerate the need for extra borrowing, they said. In July the government needed to borrow £26.7bn, £28.3bn more than in July 2019, when the UK ran a small surplus. The ONS said the July borrowing figures ranked as the fourth highest borrowing in any month since records began in 1993. Since April, the beginning of the fiscal year, the UK has borrowed £150bn, an increase of £128bn on a year ago. Most of the increase can be attributed to the government’s rescue programmes to support the health service and fight the virus, while also making up for a plunge in tax revenues as companies and households hunkered down to ride out the pandemic. The ONS said: “The coronavirus pandemic continues to have a significant impact on the UK public sector finances. These effects arise from both the introduction of public health measures and from new government policies to support businesses and individuals.” The Office for Budget Responsibility, the Treasury’s independent economic forecaster, said earlier this year that it expected the government to borrow £322bn this year. In its response to the figures, the OBR said on Friday that while government spending was slightly lower and tax receipts higher than expected, lowering the Whitehall spending deficit by about £4bn, the sharper than expected fall in GDP meant it now forecast a rise in the debt-to-GDP ratio this year to 106.5%. The UK is not alone in taking on a rising debt pile. Italy’s debt is expected to rise to 158% of GDP this year, while France’s debt to GDP ratio is expected to hit 115% from just under 100% last year. Germany is on course for a debt to GDP ratio of 74% in 2020, up from 60% in 2019. Over the past four months, the UK has borrowed almost as much it did in the 12 months after the financial crisis. The deficit surged to almost £160bn in the 2009-2010 financial year because of the cost of bailing out the banks and handling a deep recession. Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “Borrowing currently is on track to total about 17% of GDP in this fiscal year, a trajectory that likely will prompt the chancellor to be relatively cautious when he draws up further measures to support the economy in the budget later this year.”