The International Monetary Fund yesterday urged Gordon Brown to rein back on government spending as official figures showed borrowing had posted its second largest rise last month since modern records began.
The Treasury borrowed £9.9bn in November to take the total for the fiscal year to £31.9bn, just £5bn short of its forecast of £36.8bn with just four months to go.
The current budget deficit, which is used to test the Chancellor's golden rule, was £7.7bn. This was the worst for any November on record other than 2005's £8.3bn shortfall, and took the annual deficit to £16.1bn.
Tax revenues undershot the target in the pre-Budget report, while spending came in ahead of the target, which analysts said made it unlikely that the Government could cut the annual deficit back to the PBR target of £7.9bn.
In its annual assessment of the UK economy, the IMF praised the UK for setting a target of cutting public spending as a share of GDP, but said further "fiscal restraint was essential".
"The spending pattern thus far means strong discipline is needed through the remainder of the year," it said, adding that the Government needed to stick to its plans to slow the rate of growth of spending. "This will require tough choices in the Comprehensive Spending Review, particularly as important infrastructure needs argue for maintaining capital spending as a share of GDP at its present level."
Analysts in the City said Mr Brown should meet his golden rule to balance current spending over the economic cycle, which the Treasury now expects to end early next year.
Looking forward, Howard Archer, chief UK economist at Global Insight, said: "While Mr Brown is unlikely to have to take major corrective action in March's Budget, we believe it is highly possible that significant tax hikes will ultimately be needed to restore sound, sustainable public finances."
CEBR, a City analysts firm, said that Mr Brown - or his successor - was at greater risk of breaking his sustainable investment rule which limits the total stock of debt to 40 per cent of the economy. It said that with economic growth forecast to slow from 2.6 per cent this year to 2.3 per cent in 2007 and 2.0 per cent in 2006, the ration would break through 40 per cent in the 2008/09 fiscal year.
Meanwhile the Conservatives accused Mr Brown of burying bad news by producing a raft of negative reports on the same day as the public finances.Reuse content