Blow for George Osborne as borrowing figures jump

 

Chancellor George Osborne's deficit-busting plans were dealt a blow today as the last borrowing figures to be published before his Autumn Statement revealed further pressure on the public finances.

Public sector net borrowing, excluding financial interventions such as bank bailouts, was £8.6 billion in October, up £2.7 billion on the same month last year.

The Chancellor wants to record borrowing for the full year 2012/2013 of £120 billion, compared with £121.4 billion in the previous year, but this is looking increasingly unlikely.

Mr Osborne is now widely expected to announce in his Autumn Statement in December that the Government will be unable to start bringing down debt as a percentage of GDP in 2015/16.

The chances of the Chancellor altering the debt target were heightened after Bank of England governor Sir Mervyn King effectively endorsed such a move, on condition that the global economy was growing slowly.

If Mr Osborne sticks to the debt target, he will be faced with the unpopular decision of announcing potentially large tax rises and further spending cuts in December.

Public sector borrowing for the year to date is £73.3 billion, excluding a one-off £28 billion boost from the transfer of the Royal Mail pension fund into Treasury ownership, which is £5 billion higher than the same period last year.

Within the October figures, the picture was much the same as previous months, with Government spending outstripping tax receipts.

Total tax receipts were 1.8% higher at £47.5 billion in October, while total expenditure rose 7.4% to £52.8 billion.

Tax revenues were dragged down by a drop in corporation tax, which fell 9.5% to £8.1 billion, while spending on social benefits, such as state pensions, jumped 7.7% to £16 billion.

Public sector net debt was £1.1 trillion at the end of October, equal to 67.9% of gross domestic product (GDP), compared with £971 billion or 63.4% of GDP last year.

A Treasury spokesman said: "The economy is healing, but it still faces many challenges. These numbers illustrate that, but also show the Government's plans to bring spending under control are on track for the year."

Downing Street said lower receipts reflected the "global economic position" and downward revisions to growth prospects.

"The economy is healing but it still faces major challenges. What today's figures show is that the Government's spending plans remain on target," the Prime Minister's spokesman said.

"Receipts are slightly lower than forecast at the time of the Budget and that reflects the global economic position and the downward revisions we've seen to growth prospects since March."

The spokesman added: "It's going to take some time to get the deficit down but we are sticking to our planned reductions and borrowing is a quarter down on where it was back in April 2010."

PA

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