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£9.2bn borrowing surge as Brown loosens rules
Joe Murphy, Political Editor18 Jul 2008
Public sector borrowing surged by £9.2billion last month as the economic slowdown hammered public finances.
The figure was announced as it was revealed the Treasury is considering tearing up its fiscal rules in order to borrow its way out of trouble.
Some forecasters predicted borrowing this year could leap to £57billion - up from a Treasury forecast of £42billion at the time of the Budget in March.
Shadow chancellor George Osborne said the day marked "the end of the Brown era" when "prudence" was the Government's stated priority.
He said the Prime Minister, who invented the fiscal rules for good housekeeping a decade ago, now resembled "an alcoholic who has just given himself the keys to the drinks cupboard".
The June borrowing figure vastly exceeded the £7billion forecast by the City and took the total for the first three months of the financial year to £24.4billion, compared with £14.7billion a year ago. Jonathan Loynes, chief European economist at Capital Economics, said the rising debt explained why the Government wanted to loosen its fiscal rules. He added: "At this rate of increase, borrowing will come in at about £57billion this year, almost £ 15billion higher than the Chancellor's Budget-prediction. This is before the slowdown in the economy has really had much effect."Treasury officials would not deny they are considering rewriting the housekeeping rules laid down by Gordon Brown when Labour took power. These pledged to keep borrowing below 40 per cent and to outlaw any Chancellor from dipping into borrowing to pay day-to-day bills.
Net debt now stands at 38.3 per cent, up one percentage point on a year ago. With the nationalisation of Northern Rock included, it would be 44.2 per cent.
Reader views (1)
If you or I hit the financial wall what do we do? We cut back all unnecessary expenses. It is about time the government did the same. We have huge numbers of people doing non-jobs in the public "services" with hugely inflated wages and pension rights compared to equivalently skilled people in the private sector. Time to cut a £36k bus driver down to a £12k unemployed bus driver and NOT time to keep them on and shove even more cash down the money pit. Stop all government financed pensions now and get these people off our backs once and for all.
- John, Dundee, UK, 18/07/2008 12:32
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