BRITISH PRIME minister Gordon Brown’s hopes of an end to recession in the UK have received a major blow with news that government borrowing in October was billions higher than had been expected.
Borrowing in October hit £11.4 billion (€12.7 billion), rather than the £7.1 billion predicted by the chancellor of the exchequer, Alastair Darling – even though October’s figures were boosted by corporation tax receipts.
The figures reflect the impact of the recession, the worst in Britain since the 1930s. Tax receipts are down 9.1 per cent, while spending is up by 10.3 per cent, spurred on by higher unemployment benefits.
Corporation taxes, which are paid quarterly, and taxes on petrol and diesel – despite higher prices at the pumps – are down by a quarter on a year ago, according to the figures from the Office of National Statistics.
The latest statistics make it likely the chancellor will have to acknowledge publicly in his pre-budget statement next month that borrowing this year will significantly exceed current predictions.
The reputable independent think tank, the Institute of Fiscal Studies, has warned that the worsening state of the economy – despite a £200 billion stimulus – means the deepest spending cuts since 1976 are now necessary.
Meanwhile, the Organisation for Economic Co-operation and Development (OECD) yesterday raised questions about the British government’s plans to cut its debts as it predicted that the British economy will shrink this year by 4.7 per cent, rather than the 4.3 per cent figure given in June.
In April, the Treasury forecast that the UK would have to borrow £175 billion up to March next year, equal to 12.4 per cent of gross domestic product – the worst result of any of the world’s biggest economies. Mr Brown desperately needs an economic recovery to help narrow the budget deficit and boost his chances of winning next year’s general election. The Bank of England believes the recession is ending, but statistics are still not backing up this belief.
In Wednesday’s queen’s speech, Mr Brown vowed to pass new legislation that would require the government to halve the deficit over four years, though detail on how this can be achieved is sketchy.
Including bank debts guaranteed by the government, the UK now owes £829 billion, or 59 per cent of gross domestic product – the worst burden since 1974, the Office of National Statistics said.
More positively, high street sales were up 0.4 per cent in September and 3.4 per cent ahead of the same month last year, boosted by falling prices for clothing and footwear, the statistics show.
Some of the sales figures may have been artificially boosted by people buying online ahead of Christmas for fear that the threat of industrial trouble at the Royal Mail might have prevented them from getting presents to loved ones on time.
