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August 20, 2009    

Public sector borrowing in worst July deficit

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by Kay Murchie
”Public

Figures released today by the Office for National Statistics have revealed the poor state of the UK’s finances after public sector net borrowing totalled £8 billion last month - the highest level for the month of July for 13 years.

Traditionally, July is a bumper month as it includes a quarterly corporation tax bill.

The deficit represents the first in July since 1996, and the highest figure for the month since records began in 1993.

Furthermore, the figure was far worse than the £500 million shortfall expected by analysts. Overall debt now stands at £801 billion - the equivalent of 56.8% of UK Gross Domestic Product (GDP) - the highest level for more than three decades.

In May, credit rating agency, Standard and Poor’s, said the UK’s debt burden may reach 100% of GDP.

In April’s budget, Chancellor Alistair Darling predicted that borrowing would hit £175 billion in this financial year.

In a statement, the Treasury said that the large deficit in July was expected, and was the result of the recession.

A spokesperson said: “Today’s public finance data reflects what we knew at the time and other figures have since confirmed: in the first half of the year the whole world was in a steep recession and that affected the public finances here in the UK.”

Vicky Redwood at Capital Economics said: “the necessary fiscal consolidation is going to be a huge constraint on the economic recovery”.

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