Brown sinks deeper into deficit as government investment soars

Click to follow

The Government borrowed £6.5bn in December from January's £6.2bn and way ahead of independent forecasts of a £4.4bn shortfall.

The figures also showed that the Government's cash requirement hit an all-time record of £14.9bn although the figure is disregarded by City analysts as too volatile.

The driving factor was a surge in net investment to £2.9bn, double the £1.5bn figure for December 2004. So far this fiscal year, investment has risen by almost 14 per cent.

Douglas McWilliams, chief executive of the analysts CEBR, said: "The one item of good news for the Chancellor is that he seems to be getting some of his investment spending through at last."

However, the rise pushed public sector net borrowing for the year to date to £38.9bn, above the Budget forecast of £37bn with three months of the year to go.

Allan Monks, a UK economist at JP Morgan, said: "It looks likely the Chancellor will overshoot his borrowing projections for the full year."

The deficit on the current budget - the measure of non-investment spending that is used to test the Chancellor's "golden rule" - came in at £23.6bn. Although this was a marked fall from the equivalent figure of £27.4bn a year ago, it was still far ahead of the full-year target of £10.6bn.

George Osborne, the shadow Chancellor, said Mr Brown had breached the borrowing target for the full year that he set just six weeks ago in the pre-Budget report. "Gordon Brown's lack of fiscal responsibility will damage our ability to compete, and mean further tax rises for hard working families," he said.

The Treasury dismissed the claim, saying that "no sensible measure of the public finances" could be judged on a month-by-month basis.

"Our forecasts are made over a full year and the fiscal rules measures across a full cycle," a spokesman said. "We remain on track to meet the forecast set out last month, meeting the golden rule with a margin of £16bn."

Meanwhile, the Office for National Statistics said that the television licence fee, which helps fund the BBC, would be classified as a tax rather than a service charge.

The BBC is being reclassified to central government from the public non-financial corporation sector. The changes will not affect the public finances, although it would raise the tax burden - the ratio of tax to GDP.

Comments