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Borrowing at highest level since WWII

THE BRITISH government borrowed £163.4bn during the last financial year, the highest amount since World War Two but still slightly below government forecasts.

The level of borrowing, which is at more than 11 per cent of national income, was £3.6bn lower than Alistair Darling’s Budget forecast of £167bn.

The huge budget deficit pushed public sector net debt to £890bn at the end of March, a staggering 62 per cent of GDP, highlighting the need for the next government to usher in swingeing spending cuts to repair the public finances.

Labour was quick to claim credit for the fact that the deficit was slightly lower than forecast, although economists said the main reason was lower-than-expected borrowing by local authorities.

Liam Byrne, chief secretary to the Treasury, said the borrowing figures showed that the government had successfully supported the economy through the recession.

He added: “Borrowing is significantly below the levels forecast in the autumn. The government’s action to help families and firms has supported the economy, and meant that tax receipts have come in better than many expected.”

But the Tories were quick to blame Labour for the parlous state of the public finances.

Philip Hammond, shadow chief secretary to the Treasury, said: “These borrowing figures remind us of the huge debt that has been built up under Gordon Brown. This year Britain will pay almost £42bn on debt interest alone – more than on educating our children.”

And Liberal Democrat Treasury spokesman Vince Cable said the figures showed the country faced a “massive challenge” and would “see several years of very tight spending control”.

Meanwhile, Hetal Mehta, senior adviser to the Ernst & Young Item Club, said the situation would not improve without severe fiscal tightening because “Treasury forecasts are still far too optimistic, both in terms of the speed of recovery and the extent to which tax revenues will recover.”