Soaring public borrowing fuels spending cuts row

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The Independent Online

Bleak figures showing a fresh surge in borrowing during August stoked the political row over spending cuts today.

Net borrowing reached £16.1bn and now stands at £63.5bn for the first five months of the financial year so far - more than double 12 months earlier.



The figures came as Chancellor Alistair Darling was said to be asking Cabinet ministers to come up with savings to tackle the soaring deficit.



Official forecasts already put borrowing at a record £175bn this year but one expert said this could overshoot by almost £50bn at the current rate.



"August's public finance figures did nothing to reduce the looming prospect of a very large fiscal tightening incorporating a severe squeeze on public spending over the next few years," Capital Economics' chief European economist Jonathan Loynes said.



Richard Snook, senior economist at the Centre for Economics and Business Research, added: "There is an enormous black hole in the public finances which only major spending cuts can fill."



Gordon Brown this week used the c-word - "cuts" - for the first time in a speech to the TUC, but has been accused of a cover-up by the Conservatives after leaked Treasury documents appeared to show plans to slash spending in the three years to 2014.



The April documents pencilled in severe cuts in departmental spending as the cost of servicing the UK's debt balloons - while Mr Brown was taking the 'Labour investment versus Tory cuts' line for months afterwards.



The Conservatives claim that the UK will have to embark upon the tightest squeeze on public spending since the IMF-imposed cuts of the late 1970s.



Shadow chief secretary to the Treasury, Philip Hammond, said: "We used to worry about borrowing £16 billion in an entire year. Now Labour have done it in just one month with a new August borrowing record.



"These shocking figures show the depth of Gordon Brown's debt crisis and just how irresponsible he was to pretend that spending cuts weren't necessary."



A Treasury spokesman said today's figures were in line with Budget forecasts.



"They reflect the impact of the global financial crisis on tax receipts as well as the action we are taking to support the economy right now and invest to benefit from the recovery."



August's borrowing is slightly lower than the £18 billion forecast by most experts, but still represents the highest ever for the month, and the third biggest monthly borrowing total since the Office for National Statistics' records began.



For August, the impact of the slump on tax revenues was shown by a 9.2% fall in current receipts to £34.1bn.



Receipts are more than £23bn down over the financial year so far, as businesses suffer and unemployment hits income tax revenues.



VAT takings were down 16.2% to £6.1bn, while income tax takings also fell 12.7% to £10.5bn during the month.



Meanwhile, the Government's current spending during August was £45.6bn, up 2.9% compared to 12 months earlier.



Spending on benefits rose by £900m to £13.4bn as a result of rising dole queues. Unemployment rose by 210,000 to 2.47 million in the three months to July, the highest level for more than 14 years.



The UK's overall net debt stands at £804.8bn - an increase of £172bn in the past year - although more than £140bn of the rise is accounted for by banking sector bailouts.

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