Government borrowing up on last year

Julian Harris
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THE chancellor could have to cut public spending by even more than planned, economists warned yesterday after government borrowing in?October was higher than last year.

The Office for National Statistics (ONS) said net borrowing was £10.3bn last month, up from £10.1bn in October 2009.

There is now a “very real risk the deficit will overshoot” the government’s target of net borrowing of £149bn for 2010-11, according to Graeme Leach, chief economist at the Institute of Directors.

Chancellor George Osborne may have to “revisit spending cuts and tax hikes” if the economy underperforms between now and March, Leach added.

The ONS figures show public sector net debt reaching £845.8bn – the equivalent of 57.1 per cent of the UK’s GDP – up from £694.7bn or 49.3 per cent of GDP at the end of October 2009.

These figures exclude financial interventions such as bailouts for banks. Including these amounts, the public sector debt is 64.5 per cent of GDP, says the ONS.

Mark Littlewood, director general of the Institute of Economic Affairs, said: “The real liabilities facing the country are even worse than these numbers indicate. When our colossal pensions liabilities are considered, the true scale of our indebtedness runs into several trillion.”

Interest payments on the debt also increased to £3.86bn in October from £3.35bn a year earlier.

However, economists at IHS?Global Insight pointed out that that the public finances have benefited from increased corporation tax and VAT receipts.