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Public sector finances still on track?

October’s public borrowing was worse than analysts had been expecting, but it is still possible that the government is on target to produce a budget deficit of £149bn, compared to £155bn in the previous financial year.

The borrowing figure for October was £10.3bn, which was up from the £10.1bn of the previous year, but was the first time for five months that a figure was worse than it was last year.

It is still in doubt whether the government will meet its net borrowing target this year.

Altogether, borrowing between April and October reached £81.6bn, which was an improvement on the £87.5bn recorded in the same period last year. The revenues coming from corporation tax and VAT were up in October, but were offset by increased interest payments on debt.

The additional borrowing last month took the UK’s total net debt to £845.8bn, which is equivalent to 57.1% of GDP. However, when the financial interventions to bail out the banks are taken into account, net debt reached £955bn or 64.5% of GDP.

Of course, if the UK economy does not perform as well as anticipated, with the OECD only yesterday downgrading its growth forecasts for the coming year, then the government may have to take additional measures of even greater spending cuts or an increase in tax rates.

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Posted in government borrowing, government spending, Public Finances

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