GOVERNMENT borrowing reached £11.8bn in February -- a record high for this time of year – according to official figures released yesterday.
Net borrowing, excluding interventions in the financial sector, was considerably higher than in February 2010, when the government recorded a £9.45bn monthly deficit.
The figures cast doubt over the amount of leeway chancellor George Osborne has for today’s budget.
The government is still on course to undershoot the target deficit for the fiscal year, but no longer by as much as previously expected.
Across the fiscal year to January, net borrowing was £15.4bn below the same point in 2009-10. But after yesterday’s figures, borrowing is running only £13.1bn below.
The deficit is now unlikely to be less than around £7bn below the £148.5bn level anticipated by the government’s fiscal watchdog, according to Howard Archer of IHS Global Insight.
“Furthermore, the chancellor needs to tread very carefully in the budget as his targeted borrowing of £116bn in 2011-12 looks very challenging,” Archer added.
Slower than expected growth for this year poses a serious threat to the coalition’s deficit reduction programme, analysts have said.
“The main message of the budget will therefore be one of reform to create a more friendly and pro-business environment,” said Archer.
“British business supports the need for credible deficit-cutting measures,” added economist David Kern of the British Chambers of Commerce.
“But the strategy will only succeed if the austerity measures are backed by effective policies that enable businesses to create jobs and deliver growth.”
Tax receipts were actually down on the same time last year, the Office for National Statistics revealed.
Total central government current receipts came in at £43.1bn in February, compared to £43.5bn at the same time last year.
Over the course of the fiscal year, receipts are still up by £33.2bn compared to the same time in 2009-10.
However, central government spending has also continued to spiral upwards.
From April 2010 to last month, spending was £30.5bn higher than over the same period the previous year.
Government net debt at the end of February had hit £875.8bn – 58 per cent of Britain’s GDP.
The debt could reach 70 per of GDP in the coming years. The Office for Budget Responsibility predicted debt of 69.7 per cent of GDP by 2013-14 in its latest forecasts.
MEASURES TO LOOK OUT FOR
A £600 rise in the personal allowance from 2012, equating to an annual tax cut of £45 for all but the wealthiest.
A £250m shared equity scheme for new-build houses to help first-time buyers get on the property ladder while creating or securing 40,000 construction jobs.
An increase in Air Passenger Duty, which was slated for April, will be scrapped.
A planned £1p rise in fuel duty will likely be deferred.
A crackdown on cheap DVDs and CDs shipped from the Channel Islands which are sold free of VAT.
£1bn in tax loopholes to be closed, incuding a crackdown on some offshore pension trusts.
A “Learjet” tax on corporate and private jets.?Largely a symbolic measure that will raise revenue in the low tens of millions.
A fresh assault on non-doms who don’t pay tax on their foreign earnings.
Funding for 50,000 new apprenticeships.
Some reduction in the regulatory burden, especially for smaller firms.
20 new enterprise zones in the regions, which will beneft from lower business taxes.
Reform of the regime governing the taxation of foreign profits made by multinational corporations based in the UK.
Employers to be able to pay income tax and national insurance contributions in a single payment. Some indication of the chancellor’s intent to combine these two taxes in the future.
The sale of the government’s 49 per cent stake in National Air Traffic Services.
Duty on alcohol and tobacco is expected to go up by more than the rate of inflation.
By David Crow