Britain’s stronger than expected recovery during the third lockdown limited government borrowing in April to just less than £32bn, an improvement of £16bn on the record high set a year earlier. As parts of the economy reopened and businesses adapted to Covid restrictions, tax receipts improved from a year earlier and government spending on the furlough scheme fell, said the Office for National Statistics (ONS). The Office for Budget Responsibility, the Treasury independent economic forecaster, said in March it expected borrowing in April to be £39bn, more than 20% higher than the £31.7bn total estimated by the ONS. However, the scale of spending on health measures to limit the impact of Covid-19 as well as wage guarantees to stop unemployment rising significantly during the sharpest economic downturn in more than 300 years meant the deficit was still three times higher than the level in April 2019. The UK’s debt pile reached £2.17tn at the end of April 2021 or about 98.5% of GDP, the highest ratio since the 99.5% recorded in March 1962. Isabel Stockton, a research economist at the Institute for Fiscal Studies said: “Growth prospects for 2021 have increased materially in recent months which, if realised, should deliver greater tax revenues in the current financial year. The average of recently made forecasts for the growth this year now stands at 6.5%, which is considerably higher than the 4.0% that the OBR forecast used in the March budget.” Samuel Tombs, the chief UK economist at the consultancy Pantheon Macroeconomics, said the public finances were healing faster than predicted due to the resilience of the labour market. “Meanwhile, central government total expenditure of £95.9bn undershot the OBR’s £98.8bn forecast, primarily due to debt interest payments coming in £1.8bn lower than it expected as a result of smaller-than-expected increases in the retail prices index in previous months,” he said. Worryingly for agencies that rely on government spending to support their day-to-day work, he said the official estimates of Whitehall department spending showed officials appear to have continued to underspend relative to their allocated budgets. Some analysts said the improvements in recent months could leave the chancellor with an undershoot of about £20bn on OBR forecasts for the year, and possibly more if GDP growth picks up as the Bank of England predicts to about 7% this year. Tombs said the Treasury’s ability to increase spending above current budgets will depend on the size of the long-term hit to potential GDP, known as scarring, from the recent recession. “While scarring should be smaller than after past recessions, given that the unemployment rate has remained low, we still see significant costs in the form of diminished investment and an unprecedented exodus of non-UK nationals,” he said. “Accordingly, we think that the OBR’s judgment that long-term potential GDP will be about 3% lower than otherwise is about right. “For now, then, we doubt that the chancellor will be able to scrap planned tax increases while also enjoying lower forecasts for borrowing. The government spent £3bn less on the furlough scheme in April, consistent with a fall in furloughed jobs to about 3.7 million, said Michal Stelmach, a senior economist at KPMG. “With a broadly flat rate of claimant count since the start of the year, this suggests that people exiting furlough have thus far been largely successful in being reabsorbed by the labour market,” he said. Howard Archer, the chief economic adviser to the EY Item Club, said there would be significant revisions to the data when the ONS incorporates estimates of write-offs from various government-backed loan schemes. The OBR expects these to be about £27.2bn. The chancellor, Rishi Sunak, said: “At the budget, I set out the steps we are taking to keep the public finances on a sustainable footing by bringing debt under control over the medium term. “But we also need to focus on driving a strong economy recovery from the pandemic. That is why the government is continuing a comprehensive package of support to help businesses and workers get back on their feet – and the evidence shows that our plan for jobs is working.”