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Treasury borrows record £37bn in just six months
Hugo Duncan20.10.08
GOVERNMENT borrowing has surged to record levels as Gordon Brown and Alistair Darling look to spend their way through recession.
Official figures today showed the Treasury borrowed £37.6 billion between April and September as tax receipts sank and spending soared.
It dwarfed the £21.5 billion borrowed in the same period last year and was the highest for a first-half since records began in 1946.
Critics in the City and Westminster warned worse is to come as Britain enters recession, tax receipts fall, and the Government increases spending. Tory leader David Cameron attacked the Chancellor's plans to spend his way through the downturn by fast-tracking construction of schools, hospitals and housing. He said the spending "splurge" would eventually lead to higher taxes and undermine Britain's recovery.
Experts also warned the £500 billion bail-out of the banking system will put further strain on the creaking public finances. Paul Dales, an economist at Capital Economics, said: "The triple whammy of the economic downturn, the recapitalisation of the banks and the Chancellor's plans to frontload public spending is set to push borrowing to alarmingly high levels.
"The key message is that the higher public borrowing goes, the larger the eventual fiscal consolidation will need to be. Tax rises and/or spending cuts will restrain the eventual economic recovery, underlining the need for a prolonged period of very low interest rates."
Borrowing for September alone hit a record high of £8.1 billion, almost double the £4.8 billion borrowed in the same period last year and well above predictions of £6.6 billion. It left Mr Darling with little hope of achieving the £43 billion borrowing total for the full year with economists warning it could be as high as £70 billion this year, rising to more than £100 billion.
Last month's surge was driven by falling tax receipts from the likes of stamp duty and corporation tax.
Philip Shaw of Investec said it was "of major concern, particularly bearing in mind that the figures are, as yet, relatively unaffected by the recession" and a significant fall in tax receipts.
Howard Archer, chief UK economist at Global Insight, said: "The September public finances were dreadful, deteriorating even more than expected. This highlights the extremely poor state of the public finances as they are hit by past largesse, the economic slowdown, markedly weak housing market activity and prices, rising unemployment and government policy concessions since the March Budget."
Figures on Friday are expected to show that the economy contracted in the third quarter of the year for the first time since 1992, leaving Britain on the brink of recession. Recession is official defined as two consecutive quarters of negative growth.
Reader views (12)
Who is ever going to pay for that?! Nu Labor really needs moving on they go from blunder to blunder. This is serious and now taxes can not be moved higher and Crash Gordon only does not realize this...
- Peteo, London
This is scary - especially when you realise that these numbers do not include any provisions for public sector pensions and PFI - include these and you can add 50 - 100% on top. THANK YOU GORDON!
- Jeremy E, London, UK.
Does Brown really think that if he says something often enough everyone will believe him (though he may have a point there given his comeback in the polls), or that it will become true? How can he possibly describe current borrowing as low? The government is already in hock to the eyeballs before the bank bail-outs, and there is still the larger monster lurking in PFI. That's 'off balance sheet', but it still has to be paid for. Not saving in the good times has dragged the country deeply into the smelly stuff.
- Paul, London, UK.
This will be Browns legacy, he's finally broken this society. His plan from the beginning was to turn this country into a third world communist state.
- Frank, Home Counties, England
Never learned the Micawber lesson did you, "Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery." In all these years you never learned that political parties don't care about the people, they only care about staying in power, no matter what the cost. They just hope and pray that the debt never catches up with them, only the opposition when they take over.
- Len, Perth, Australia.
Go to jail go directly to jail , do not pass GO do not collect 37 Billion.
- Mr.S.Port, London, UK.
Darling is right to risk a high deficit at this abysmal trough of the economic cycle. Worrying about balancing the books now would put the country underwater. The government is not the same thing as a family shop. The national deficit has not caused the current crisis, though it has limited the room for manoeuvre. When you are on the edge of a Depression, you don't need to worry as much about inflationary pressures. I wish he had the guts to propose tax reductions and rebates as a means of fiscal stimulus instead of merely using the opportunity to fund pet Labour projects. It's not all about big government saving the day.
- Blackstone Coke, London, UK.
Can someone please explain why I should pay MPs to have 24 days off at Christmas? I will be lucky for 3.
They receive generous enough allowances, pensions and pay, to me they should be all made to work like everyone else and get in the 21st Century.
- Alan, London, UK.
Just how are we going to pay back all the huge debt that will be NuLabour’s legacy to the next government?
We manufacture very little these days that the rest of the world wish to buy. We were told that didn’t matter because we earned foreign currency providing ‘services’ to the rest of the world, i.e. banking and insurance etc. Well, that’s gone by the board - the City will never again regain credibility. That leaves wartime-like austerity and massive tax increases - thanks Brown, with acknowledgements to Blair of course, for not sacking the clown years ago.
- William Boreham, Mitcham UK
Will someone please stop these maniacs before we are all have to suffer for the next 20 years. This is recklessness beyond the pail, how can this unelected buffoon be allowed to get away with this. He is mortgaging all our futures and yet still 40% of the stupid British public think they are doing a good job. Darling borrowed in September alone ( just one month) the equivalent of £325 per taxpayer it is insane, he is insane please please the media have got to highlight this for the public.
- Richard K, Nottingham
They seem to be attempting to follow a recession model that promotes saving during boom times and spending during recession, unfortunately they neglected to save during the boom which helped cause the recession in the first place.
- Bob, Cheam
Hasn't the British Government only just paid off the loan Labour saddled the country with after World War II . . . ?!
'Nothing New Under the Sun' with Nu-Labour.
- Roz, Chamonix, France
