Tuesday October 20, 01:46 PM
British public finances slump to record deficit
By Roland Jackson
LONDON (AFP) - Britain's deficit ballooned last month, reaching a record for September as the public purse buckled under the weight of a steep recession, according to official data published on Tuesday.
The data, published by the Office for National Statistics, is a major headache for British Prime Minister Gordon Brown, whose Labour government is already trailing the opposition Conservatives before an election due next year.
The public sector net borrowing requirement -- the government's preferred measure of public finances -- hit 14.8 billion pounds (16.2 billion euros, 24.3 billion dollars) in September, the ONS said in a statement.
That was almost double the 8.7 billion pounds in the same month one year ago, but marginally less than the 15 billion pounds forecast by analysts.
Britain has now borrowed a total of 77.3 billion pounds in the first six months of the 2009-10 financial year, which began at the start of April.
That is the highest half-year PSNBR figure since records began back in 1946, according to the ONS.
Experts warned Tuesday that public borrowing this year could now breach the government's official target of 175 billion pounds.
Capital Economics economist Vicky Redwood predicted that British finance minister Alistair Darling, known officially as the chancellor of the exchequer, would lift his PSNBR forecast in a pre-budget report due next month.
"September's public finance figures were marginally better than expected, but still suggest that the chancellor will have to revise his projections for public borrowing higher," said Redwood.
She added: "At this rate, borrowing still looks likely to reach over 200 billion pounds, compared to Mr Darling's 175 billion pound forecast."
The nation's public finances have been slammed by the costly banking sector bailouts, economic stimulus measures, and a deep recession that has slashed taxation revenues and ramped up spending on unemployment benefits.
The ONS also revealed on Tuesday that the state spent a record 5.9 billion pounds in interest payments on debt in September. That was 43 percent higher than the same month in 2008.
In another damaging blow, Britain's total net debt surged to 824.8 billion pounds -- or a record 59 percent of the country's entire gross domestic product.
The ONS added Tuesday that net benefit payouts jumped by almost 10 percent in September to 13.8 billion pounds, compared with the same month of 2008.
Revenues from value-added tax on goods and services, and income tax, both sank by more than 13 percent.
The public sector net cash requirement (PSNCR) -- an alternative measure of public finances -- expanded last month to show a deficit of 19.4 billion pounds, compared with 13.3 billion pounds in September 2008.
In recent months, Conservative and Labour politicians have clashed repeatedly about how to nurse the public finances back to health, with steep public spending cuts dominating the political agenda.
IHS Global Insight economist Howard Archer also predicted that major taxation increases were on the cards.
"Not only will major, extended public spending cuts have to occur to get the public finances back to a sustainable state, but it seems inevitable that these will have to be accompanied by serious tax hikes as well," Archer said.
- Office of National Statistics ()
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