Public Sector Borrowing Reaches All-Time High

Fri, 18 Dec 2009

Britain’s public sector net borrowing soared to a record monthly high of £20.3bn in November, according to new data from the Office for National Statistics (ONS).

The figure is up from the £15.5bn recorded in November 2008 and exceeds the level of borrowing by the UK for the whole of 2002, but is still far less than analysts had expected.

The ONS figures also showed that public sector net debt reached a record £844.5bn last month, up from £706bn a year ago and equal to 60.2 per cent of the UK’s economic output - the highest figure in the post-war period.

According to analysts, the level of public borrowing for the current financial year is on track to hit the £178bn forecast by Chancellor Alistair Darling.

But they added that the deficit could improve slightly when VAT increases to 17.5 per cent next month January, boosting government tax receipts.

James Knightley, economist at ING Financial Markets, commented: "Certainly the better labour market data is helping the government finances and a return to growth will further help moderate the rate of deterioration."

"However, the deficit is still likely to exceed 13 per cent of GDP this fiscal year, which will necessitate further fiscal policy tightening. In turn this will constrain the UK's growth prospects."
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