Public borrowing hits record levels
Updated on 18 September 2008
Public borrowing soared to a record £10.4 billion in August in a fresh warning over the state of the UK's ailing finances, official figures show.
The highest-ever figure for the month came as tax receipts struggled to keep pace with rising spending as the downturn tightens its grip.
The gloomy figures exceeded City forecasts and put Chancellor Alistair Darling's Budget predictions of £43 billion in net borrowing during 2008/09 under severe strain.
Net borrowing has already reached £28.2 billion in the first five months of the financial year alone.
Howard Archer, chief UK and European economist at Global Insight, said the Chancellor's predictions had been "well and truly blown out of the water".
Total current receipts grew by just £700 million over the same month last year, while expenditure was £3.2 billion higher, the figures showed.
Meanwhile, Government tax moves - such as the £2.7 billion cost of unwinding the 10p tax row, raising stamp duty thresholds to £175,000 as part of initiatives to help the housing market and the scrapping of October's 2p fuel duty hike - are set to add to the pressure.
"The public finances are being battered by the economic slowdown, and they are also being undermined by Government policy concessions," he said.
He said: "Sharply weaker economic activity will take an increasing toll on VAT and corporation tax receipts, while extremely low housing market activity and markedly falling house prices are hitting stamp duty receipts."
The figures also included the official impact of Northern Rock on the public finances for the first time.
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