Borrowing pressure on public purse

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Public sector net borrowing now stands at £30.5 billion for the two months of the financial year so far - more than double the level seen at the same stage 12 months earlier.

Chancellor Alistair Darling predicts net borrowing over the year as a whole will reach £175 billion as recession hits tax revenues while spending on unemployment benefits soars.

Even though May is traditionally a weaker month for the public finances, the borrowing seen over the month surpasses March's £19 billion and is the biggest figure since the Office for National Statistics' (ONS) records began in 1993.

The country's overall net debt now stands at a mammoth £774.8 billion. This is almost £150 billion higher than a year ago and equivalent to 54.7% of the UK's entire annual economic output - the biggest proportion for more than 30 years.

The figures painted a stark picture of the impact of the current economic woes on the Government's tax receipts.

During May, corporation tax takings were down 27%, VAT revenues were down 19% and income tax takings fell almost 11% on a year earlier.

Meanwhile Government spending on social benefits rose 8%, or £1 billion, to £13.5 billion - reflecting higher unemployment payouts. Figures on Wednesday showed unemployment rising to a 12-year high of 2.26 million and it is expected to increase further to three million.

Total Government outlay over May jumped 16% to £50.6 billion, while receipts shrank 1% to £30.6 billion, the figures showed.