Public sector borrowing hits record high of £16.1bn

Friday 18th September 2009

Public sector borrowing in the UK has soared to £16.1billion in August, the highest figure for the month since records began.

The rise takes net borrowing to £65.3 billion for the five months of the financial year so far, according to figures released by the Office of National Statistics (ONS) today.

The August figure of £16.1 billion compares to £9.9 billion for the same month last year, with the government's overall debt now standing at £804.8 billion, or 57.5 per cent of GDP; £172 billion of which has been added to the total in the past year, with £140 billion of which is accounted for by banking sector bailouts.

However, the figure was better than the £18 billion that had been predicted by some.

Public spending during August reached £45.6 billion, up 2.9 per cent compared to the year before. Spending on benefits rose by £900 million due to rising unemployment.

Chancellor Alistair Darling has warned the public sector net borrowing requirement (PSNBR) could reach a record £175 billion this year due to the global financial crisis.

Borrowing has also been pushed up as tax receipts drop – with VAT receipts down 16.2 per cent on last year and income and capital gains tax were down by 12.7 pert cent.

Howard Archer, chief UK economist at IHS Global Insight, said: "Another month, another set of dismal public finance data.

"While the public finance shortfalls may not have been quite as large as feared in July, they were nevertheless depressingly large."

He added: "While it is not inconceivable that the chancellor could meet his target of a PSNBR of £175 billion this fiscal year, there is no getting away that major, extended public spending cuts will have to occur to get the public finances back to a sustainable state.

"It also seems inevitable that some tax increases will be needed. It is hard not to feel some pity for whoever is chancellor after the next election, as he is going to have to take a lot of difficult and unpopular decisions!"

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