Public borrowing continues to soar in August
Figures from the Office for National Statistics (ONS) have revealed the UK’s public sector net borrowing surged to a record £16.1 billion in August, up from £9.8 billion a year ago.
August’s rise takes net borrowing to £65.3 billion for the five months of the financial year so far, said the ONS, as the recession continues to eat into Government tax receipts.
However, while Government borrowing in August was slightly lower than the £18 billion forecast by many analysts, it still represents the highest ever for the month, and the third largest monthly borrowing total since records began.
Overall debt now stands at £804.8 billion – the equivalent of 56.8% of GDP.
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.
However, the Centre for Economic & Business Research has predicted borrowing would reach £180 billion for the full year, higher than Mr Darling’s forecast.
In the meantime, the temporary cut in VAT from 17.5% to 15%, which was aimed at boosting the economy, saw VAT takings down 16%.
Furthermore, as a result of rising unemployment, spending on benefits has risen by £900 million to £13.4 billion.
Howard Archer, chief UK economist at IHS Global Insight, described the figures as “dismal” and highlighted the need for huge cuts in Government spending.
Meanwhile, Colin Ellis, European economist at Daiwa Securities, said: “The problem is, even if the UK economy starts growing again… the public finances are not going to magically return to health overnight.”