Public sector borrowing increases
Friday 21 December 2012
Chancellor George Osborne's plan to bring down the budget deficit was dealt another blow today after it emerged borrowing unexpectedly increased last month.
Public sector net borrowing, excluding financial interventions such as bank bailouts, was £17.5 billion in November, up £1.2 billion on the same month last year, according to the Office for National Statistics (ONS).
Economists had predicted borrowing would fall slightly to around £16 billion.
Meanwhile, updated gross domestic product (GDP) figures showed the economy did not grow quite as much as previously expected, with GDP revised down to 0.9% in the third quarter of the year, from 1%.
James Knightley, analyst at ING Bank, said the borrowing figures highlighted the weak state of the UK economy, and the fact that austerity measures were failing to generate the improvement in Government finances that were hoped for.
He said: "All in all, the UK appears to be ending 2012 not in particularly great shape, and as such we suspect the Bank of England has more work to do with further policy stimulus likely in early 2013, especially if the worst fears over the US fiscal cliff materialise."
Public sector borrowing for the year to date is £92.7 billion, excluding a one-off £28 billion boost from the transfer of the Royal Mail pension fund into Treasury ownership, which is 9.9% higher than the same period last year.
Within the November figures, the picture is much the same as previous months, with Government spending outstripping tax receipts.
Total tax receipts were 0.6% higher at £39.1 billion in October, while total expenditure rose 6.3% to £55 billion.
The ONS said the Treasury was looking into why income tax fell 12.3% to £9.2 billion in November.
The ONS said today's figures do not take into account the transfer of assets from the Bank of England's money printing programme into the Treasury, and the auction of bandwidth for 4G mobile broadband services, which is expected to boost the finances.
In the Chancellor's Autumn Statement earlier this month, the Office for Budget Responsibility (OBR) said it expected borrowing to be £108 billion in 2012/13, compared to £119.9 billion in the March estimate.
Today's news will put further pressure on Britain's gold-plated AAA status.
All of the three main ratings agencies have now put the UK on negative watch.
Vicky Redwood, chief UK economist at Capital Economics, said: "Although a number of temporary factors flattered the OBR's new forecast for borrowing this year, the underlying picture is that the weak economy is preventing the deficit from falling."
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