Sharp rise in public sector borrowing

Government borrowed more than expected.

By New Statesman Published 21 November 2012
George Osborne. Photograph: Getty Images
George Osborne. Photograph: Getty Images

Government borrowing was much greater than expected in October, which has reduced the probablility the UK hits its targets for deficit reduction. This is the last borrowing data available before the chancellor's Autumn Statement on December 5th.

Public sector borrowing reached £8.6 bn in October, according to the Office for National Statistics, an increase from the £5.8bn borrowed in October last year. The figures were far worse than the 6bn analysts had expected.

David Kern, chief economist at the British Chambers of Commerce, wrote in the Guardian:

Unless there are distinct improvements over the next few months, borrowing for the entire financial year could exceed the Office for Budget Responsibility's budget forecast by around £15bn.

Analysts blamed falling corporation tax reciepts, which were down 9 per cent this year, and a rise in departmental spending.

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Corporate tax revenues are down 9 per cent in the financial year to date and represent the main reason total tax revenues are barely higher than a year ago.

While the rapid spending growth in October compared with the previous year might reflect a different pattern of timing of payments due to the government introducing a new system of budgeting for expenditure, the shortfall in important tax revenues is likely to be another blow to the chancellor’s preparations for the December 5 statement.

He is likely to have to admit that it will take take three years’ more austerity than originally planned to bring public borrowing under control and that his fixed rule to see public sector net debt falling as a share of national income by 2015-16 will be broken.

 

 
 

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