Government may miss deficit target as borrowing rockets

Ben Southwood
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IC SECTOR net borrowing soared between October 2011 and the same month this year, official data revealed yesterday, prompting some analysts to predict that the government would miss its borrowing targets for the year as a whole.

The public sector borrowed £8.6bn in October, according to data from the Office for National Statistics (ONS), up 45.8 per cent on the same month last year.

This rise pushed the overall public sector net borrowing requirement – excluding the Royal Mail pension plan transfer – to £73.3bn for the tax year so far. This is some £5bn – or 7.3 per cent – up on last year’s total borrowing between April and October.

HM Treasury played down the bump in the deficit, claiming the government was still in line with its plan to rein in spending. But Chris Williamson at Markit said that extrapolating the 7.4 per cent increase for the whole of the year would see the government borrow around £135bn over the full financial year, well above its £120bn projection.

He predicted that the Office for Budget Responsibility would hike its public finance projections to at least £130bn for 2012-13, which combined with worse-than-expected economic growth could see a longer fight to reduce the UK’s structural deficit. Williamson said the “widening shortfall” would add to pressure on chancellor George Osborne to hike taxes or cut spending in the Autumn Statement.