Borrowing rate expected to grow

The dire state of the public finances was a key battleground for the political parties in the conference season and the figures should show the scale of the task ahead whoever wins the general election.

According to City forecasts, public sector net borrowing is likely to have grown by £15.3 million over the month - almost double the £8.9 billion seen 12 months earlier.

This would bring net borrowing for the six months of the financial year so far to around £80 billion - closing in on last year's full-year figure - as the recession punishes the public finances.

Tax revenues have suffered, while spending on unemployment and other benefits - as well as economic stimulus measures - has soared. September is also a month in which the Government pays interest on its debt, or coupon payments, to investors.

The Government says it plans to borrow £175 billion this year - around 14% of the UK's entire national output.

The Conservatives unveiled plans to tackle the mountain with a pay freeze for 80% of the public sector and a higher retirement age under Shadow Chancellor George Osborne to help cut the deficit.

Last week the Prime Minister unveiled asset sales worth £16 billion to improve the state of the finances. But the plans unveiled so far do not come close to the medicine needed and spectre of further cuts and tax rises looms large next year following the battle for Downing Street.

On current trends, Investec's Philip Shaw predicts borrowing of almost £17 billion for September and a full-year outturn some £7 billion above the Government's target at £182 billion.

He adds: "The new cross-party orthodoxy which has suddenly emerged embraces the necessity of reductions in public expenditure as the main route to achieving budgetary consolidation. The overwhelming likelihood is that whichever government is elected next year, further deficit reducing measures will be unveiled."