Record level of Government borrowingGovernment borrowing soared to a record high in November, stoking fears that Chancellor George Osborne may not be able to meet the budget targets for the current financial year.
The public sector net borrowing requirement surged to £22.77 billion last month, its highest level since records began in 1993. The Office for National Statistics said the rise was mainly caused by increased public spending, including debt repayments.
The ONS said central government non-capital expenditure rose 10.8% in November on a smoothed-out basis, with spending on defence, health and the UK’s European Union contributions pushing the figure higher. That was the largest increase since February. However tax income was weak, with value-added tax receipts falling slightly on a yearly basis.
If the ongoing costs of supporting the financial sector are excluded, the PSBR actually hit £23.31bn in November. City economists had expected the borrowing requirement to be close to the £17.4bn recorded in November 2009. The latest figure topped the previous record monthly borrowing of £21.1bn in December last year. Monthly records begin in 1993.
Sterling fell against the dollar, euro and other currencies after the borrowing requirement figures came out. Analysts said the surprise overshoot raised fears about the state of Britain’s public finances.
“The public finances were truly horrible and much worse than expected in November,” said Howard Archer, chief UK and European economist at consultants IHS Global Insight,
He added: “There is now a very serious risk the Government will miss its fiscal targets for 2010/11.”
Mr Archer warned that the situation could deteriorate further if the prolonged severe winter weather erode economic growth.
“This is dire news for Chancellor George Osborne to digest over Christmas and is likely to reinforce the Government’s belief that there must be no let up in the fiscal consolidation efforts,” Mr Archer said.
“The fact that Government borrowing in November was much higher than a year ago, despite the economy recovering well in the past year, is a worrying sign.”
“Although tax revenues increased, the Government is struggling to get a handle on its spending,” said Hetal Mehta, UK economist at Daiwa Capital Market.
November’s dire borrowing data mean that in the financial year to date, which started in April, the public sector has borrowed £104.4bn against £105.1bn in the corresponding period last year.
A spokesman for the Treasury said the November borrowing figures showed why the Government had to take decisive action to reduce spending.
“These outturns are also in line with the Office of Budget Responsibility’s latest forecast for borrowing to fall by almost £10bn this year compared to last, and for tax receipts to increase by over 7% year-on-year,” he said.
The latest OBR forecast showed that the UK deficit would fall to about £149bn this year.
But Mr Archer predicted that, at current trends, the PSBR for 2010-11 will hit £155bn.
The only relief in the latest data was that the ONS once again lowered its estimate for the previous month’s borrowing.
It said net borrowing in October turned out £1.2bn less than originally reported at £9.2bn.