Public Sector Debt To Reach GBP180 Billion

Mon, 30 Mar 2009

UK public sector debt levels will reach a staggering £180 billion in the next financial year as the economic recession worsens, experts have warned.

Forecasts by Ernst &Young's influential ITEM Club group of economists suggest the government will need to borrow some 12.6 per cent of GDP in 2009/10 to counter a sharp rise in spending, a fall in tax receipts and a rapid surge in unemployment .

The alarming outlook comes after official figures, released earlier this week, revealed public borrowing had soared to a record £9 billion in February, bringing borrowing in the financial year to £75.2 billion so far - the highest since records began in 1993.

Furthermore, the ITEM Club prediction suggests the current year's figure will at least double in 2009/10, leaving little room for further economic stimulus efforts.

"The public finances are continuing to deteriorate at an alarming rate and as the economy continues to shrink, the outlook is bleak," the ITEM Club commented.

"Spending will rise sharply over the coming months as unemployment surges, while the steep fall in output will continue to reduce tax revenues."

It added: "Given the critical state of the public finances, the Chancellor has few ways to inject resources into the economy."

"ITEM believes that Alistair Darling should do what he can to support employment while also taking steps to support the UK's manufacturing base."
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