Record UK borrowing as debts hit £1 trillion

 
Tim Wallace
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GOVERNMENT borrowing slowed in December, figures from the Office for National Statistics (ONS) showed yesterday, with new borrowing falling on an annual and monthly basis.

The government borrowed £13.7bn last month, down from £17.9bn in November and £15.9bn in December 2010.

That takes borrowing for the financial year so far to £103.3bn, down £11.3bn on the £114.6bn borrowed in the same period of last financial year.

The national debt now stands at £1.003 trillion, or 64.2 per cent of GDP in December, up from 59.4 per cent in December 2010.

Once the bank bailouts are included, net debt stands at £2.33 trillion, or 149.1 per cent of GDP, and the Treasury estimates public sector pension liabilities add an additional £1.13 trillion on top of that.

Tax receipts rose £2.87bn compared with December 2010 to £42.2bn, with last January’s VAT rise adding £11.5bn to tax receipts for the year so far.

Other temporary factors also distort the reading slightly – local government grants, for example, are being paid out later in the financial year than last, flattering the current figures by comparison.

Current expenditure fell £451m to £51.46bn compared with the same month of 2010, while investment spending rose from £2.6bn to £2.88bn over the period.

However, central government investment spending for the financial year so far stands at £18.2bn, down from £23.6bn in the previous year.

“The government has made good progress in consolidating the public finances so far and, despite some upward revisions to borrowing in previous months, there’s still a good chance that borrowing will undershoot the OBR’s full-year forecast of £127bn,” said economist Nida Ali from Ernst and Young’s Item Club.

“However, with the Eurozone crisis showing no signs of abating it is possible that the OBR’s growth forecasts will prove to be too optimistic. This will have implications for the public finances and the Chancellor could have more difficult decisions to take in his Budget in two months time.”