Public borrowing soars to record levels

Public borrowing ballooned to a record £67.2bn in the nine months to January, official figures showed today.

The dire figures put Chancellor Alistair Darling's Pre-Budget forecasts of £78bn in borrowing for the year to April - already revised upwards once - under threat.

The data also showed the impact of a deepening recession on Government tax receipts.

January is usually a strong month for tax income but the public sector repaid a net £3.3bn over the month, well below £13.9bn a year earlier, the Office for National Statistics (ONS) said.

The ONS also announced that Royal Bank of Scotland and Lloyds Banking Group were being classified as public sector organisations from the date of October's bail-out.

Under its initial estimates, this will add between £1 trillion and £1.5 trillion to the public debt - the equivalent of 70-100 per cent of the entire economic output of the UK.

The ONS said its decision was based on the Government's ability to control the banks' corporate policies following the recapitalisation schemes last autumn. The taxpayer has pumped a total of £37bn into the duo.

Net debt as a proportion of national output was supposed to stay below 40 per cent under the Treasury's former fiscal rules but rocketed to 47.8 per cent last month, the ONS added.

Jonathan Loynes of Capital Economics said: "January's figures confirm that the downturn in the economy is starting to hit the fiscal position very hard indeed.

"At this rate, borrowing will total close to £100bn this year, more than £20bn above Mr Darling's Pre-Budget forecast.

Public sector net borrowing is now almost three times higher than at the same stage last year.

The Government's total current receipts were £6.7bn lower than last year, with spending £2.8bn lower than 12 months earlier."

The impact of the recession on businesses was reflected by a £2.5bn fall in corporation tax revenues compared to 12 months earlier, while VAT income was also £1bn below last year.

IHS Global Insight economist Howard Archer warned it was "anyone's guess" as to how high the public deficits may go over the next couple of years.

TUC general secretary Brendan Barber said: "A steep fall in the tax take in the middle of a recession will surprise no-one.

"But it is absolutely right to let the deficit grow. When companies and consumers stop spending, the public sector must fill the gap.

"But this deficit also makes tackling tax avoidance and evasion, and getting tough on tax and secrecy havens such as Antigua, even more urgent.

"The super-rich who did so well out of the asset bubble that brought us recession must pay their fair share of the bill for putting it right."