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Tax rises as Darling forced to tear up borrowing forecasts
Joe Murphy and Jonathan Prynn19.11.09
A record leap in borrowing today brought an admission from the Prime Minister that taxes may be about to go up again.
State borrowing ballooned by £11.4 billion last month — the biggest October surge since records began.
Some analysts said that a record budget deficit of more than £200 billion was on the cards if the trend continued, throwing Labour's tax and spending plans into disarray.
Interviewed on ITV's This Morning show, Gordon Brown said any tax rises needed will be announced by Chancellor Alistair Darling next month. “The Chancellor in the pre-Budget report will make any announcements that are necessary,” he said.
Asked if he could rule out increases on top of those announced in the Budget in the spring, Mr Brown replied: “I'm not going to say that because there's no decision on that.”
His words, a day after Lord Mandelson also left the door open to tax rises, appeared to be a clear signal that taxes on earnings or spending are being considered at the cash-strapped Treasury.
Today's “dismal” set of public finance figures took the tally for the fiscal year so far to £86.9 billion, equivalent to around £1,400 for every man, woman and child in Britain. In just seven months, Mr Darling has been forced to borrow more from the financial markets than all of last year, itself the worst period since ministers first started tapping the City for funds in the 1690s. At this stage last year the Government had borrowed just £33.9 billion.
The respected Paris-based OECD think tank publicly warned Britain today that it must speed up work to close the burgeoning gap between revenues and spending.
It said that while the world economic recovery was gathering pace it was being “held back by still substantial headwinds” and would be “modest” for some time.
The measures put in place to boost the British economy also pose risks to its recovery. The OECD said the Government needed a detailed plan to tackle the public spending deficit. The disclosure of the record borrowing for October comes a day after the Government pledged a law guaranteeing that the deficit will be halved over four years.
But the Standard has learned that the law will use next year's deficit as its starting point rather than the £175 billion figure that was forecast in the spring. If the deficit rises to £215 billion, as one analyst said it could, that would mean it being cut to £112 billion rather than £87 billion.
Mr Darling looks certain to be forced to tear up his spring forecasts for borrowing after the gloomy news.
Economists rushed to revise their forecasts for the total public sector deficit, now widely expected to breach £190 billion. The October black hole was seen as particularly grim because a flood of corporation tax receipts mean that the Government usually reaps a surplus in the month. Last year, in what was then the worst year on record, Mr Darling only needed to borrow £100 million in October.
The shortfall was caused by a bigger than expected rise in public spending, a 10 per cent leap to £48.6 billion, combined with a slump in tax revenues. Receipts from taxes on income and wealth dropped 16 per cent to £16.9 billion.
The Government's total “overdraft” now stands at £829.7 billion, equivalent to 59.2 per cent of GDP, the highest peace-time level on record.
David Kern, chief economist at the British Chambers of Commerce, said: “October's figures were worse than expected. On the basis of current trends, hopes that borrowing for this financial year would be below the budget forecast of £175 billion are not realistic.
“If present trends continue, Britain's international credit rating will be seriously threatened, especially if the Government does not announce credible and forceful plans for reducing the deficit in the pre-Budget report. These measures will have to be implemented as soon as the recession is over.”
Reader views (27)
Dennis - I presume you are still in China as taxation here in the UK has risen steeply over the last 12 years, usually by stealth! The govt has never pursued Keynesian policies, as had they done that we would have had a budget surplus in the good years which would have been useful now. Instead old fashioned tax and spend has been the Labour way.
- Nickspurs, London, London
I pray for an end to Broon and bust
- Dr Who, London
It was an International Global Crisis that led us to where we are and god help us if the Tories are elected to Government next year because they would have done nothing or cut too deep which is their policy now.We would be in a deeper recession with the Tories in power.
So what is the problem with having to pay some more in tax.Your taxes have gone down under Labour for most of the last 12 years as well as the benefits you in general have gained from a Labour Government.
During a recession the only policies econmomically on offer are Keynesian as the Government has to step in or should we have let the banks collapse as some idiots do not seem to see?
- Denis Regan, harbin china
The reason we are borrowing so much is that we are paying too much out to people who have paid nothing in.
- Ann Other View, Lake District
Teflon Bliar is the real architect of this horrendous mess. He was slippery enough to walk away before the faeces hit the fan leaving his financially challenged ex Chancellor to face the music surrounded by a vile melange of sycophants, incompetents, freeloaders, embezzlers and a well practiced spin doctor. Here we go again next year, time for change with the PM in waiting a carbon copy of Bliar except with a blue tie..........
- Andy Woodhead, London, ENGLAND
No wonder the Country is busted, it is run by a Man who cannot spell or write a proper Letter.
- Stan White, leeds
It amazes me that the British public have stood for this Labour government for so long. It is about time we rid ourselves of our world-famous 'sang-froid' manner and started some real militant action. I am sure the French or the Italians would have done something by now. There are gates now at 10 Downing Street - it's about time they were stormed! Our blood is up - let loose the dogs of war! (With apologies to The Bard)
- E. Clark, Los Angeles
Yes, tax increases are needed but so are spending cuts. Both Mr. Brown and Mr. Darling have proved themselves unable to cut the massive out of control deficit. All classes must suffer pain, but Mr. Brown as hater of the upper classes cannot accept this truth. None of us left to pay the bill! The IMF period under 1979 was not as bad. The truth is the Treasury is longer in conrtol of events, events are in control of the Treasury.
- Andrew, London
When will they stop their pathetic policy announcements which are there to create dividing lines and increase public spending! We MUST CUT spending, we can`t keep raising taxes like this, I cannot wait for that election date.
- Nickspurs, London, London
This shows a clear contrast with the proposed tory cutbacks. I was amazed when Boris announced with glee £3 billion in cuts to infrastructure and transport when he came to office. Now he has added another £5 billion in cuts to the transport.
It seems if Boris can make cuts in public services then the PM is right to relieve him of his responsibilities and announce further spending. I do not want to see cuts during the deepest recession since the 1930's when small businesses are struggling and people are being laid off.
Even the French have announced a grand plan today for a further 50 billion euros into their national infrastructure over and above that already announced.
I really dread to think of the scale of the cuts that the tories will bring in if they get into office (apart from the cuts in taxes for millionaire home owners and non-dom peers)
- Sam, London,UK
It was the bankers who got us into this mess. That is why the taxes are having to go up. They are laughing all the way to the bank to collect their bonuses. You are paying for the bankers mistakes. They are getting paid to create more disasters.
- Richard, London
At least the real 3 Stooges were funny. Brown, Darling and Mandy are beyond a joke.
- Nobby Clark, Perth, the Scottish one
Every Labour Govt leaves us in this situation - like them or not it is always fiscally conservative Tories who have to come in and sort it out. So much for "an end to boom and bust". Goodbye Gordon.
- Tj, London
They are absolutely useless but are hanging on for the pay and the pension!!!!
- Getto Grad, london
Gordon has the most ghastly smile ever seen outside horror movies,everything the poor fellow does or says seems implausible and phoney,the biggest tragedy of all is that he genuinely seems to think that we are taken in by it all!!.
- Duchess Of Maidstone, Battered Britain, Fried UK.
Here we go again, Comrade Brownripthemoffasmuchasyoucansky has not changed. It about time we all had a change.
- Macdangler, Wimbledon SW19
Women joke about credit card limits being seen as a "target". Crash Gordon and his bunch of 11+ rejects seem to believe this is actually a good idea. How DARE he appear on national TV and face the bad taste to gloat about his catastrophic failure?
- Marianne, SW France/London
A clueless, witless ex-chancellor appoints a new clueless, witless chancellor. No wonder we're in such a mess! Thanks Labour!
- Mhmedia, Guildford, UK
Every Labour Government since WW2 has been the same...no fiscal know-how whatsoever. As neither Gordon or Darling seem able to do simple mathematics and remotely balance the UK's finances, can I suggest they both for a start buy £5 pocket calculators and use them to bring some sanity back to running the country's dwindling financial base?
- Jon Kent, Hertford. UK
I repeat the worst PM this country has ever had!
- Tojo, Hythe Kent
If I had managed my company and my companys assets in a similar way to those who manage the UK economy; not only would there be more unemployed, but we would be declared bankrupt and prohibited from trading.
I wonder if the assets were a little more personal and the retribution a little closer to home, whether Brown and Darling would be so profligate.
They argue the bankers have let us down, they must be rewarded only in line with their success not their failure...does this apply equally to our PM and Chancellor.
It is a tragedy that none of the Government have the slightest idea about running a business, but with their background is one surprised?
- Michael, London
If this Government was a dog, it would have been put down by now.
- Alex, St Albans, England
You can't even state the obvious can you Gordon.
- Alex C, London
So taxes will go up now, no wonder with all this borrowing going on. If the government stopped the child trust, tax credits, healthy eating of £190 for pregnant women, free nursery for over 3s then we may have some more money to play around with. Reduce immigration and those coming in from the EU, asylum seekers sent home, more money available. Reduce the quangos, time for government to cut their cloth accordingly. But guess what the middle classes of our society will be the ones burdened with higher taxes not the well off who are getting richer.
- Frances, Leics
Darling has always been wrong with his forecasts so nothing has changed except that such lack of ability has added to our problems.
- Edwin, beaconsfield bucks
We have already had a load of tax changes, which mean some people will be paying 61.5% some of their income and I don't mean those who are earning over a £ 150k per annum. There have been some subtle changes to NIC and as a result some NIC paid, within the usual lower and upper limits, by employees will not be counting towards their State pension but is just extra tax.
So what's left? VAT! 20% or perhaps 25% as allowed by European law. Much easier than taking hard decisions regarding a major restructuring of the benefits system and Welfare State as well as closing all Govt. final salary pension schemes that this country needs.
- Mark, South-East London
McBroon , Darling , & Mandy have brought this country to their knees and now they want the public to bail them out - again & again. If it wasn't so serious , they would make a good replacement for the 3 Stooges .
- Bill Gordon, Pattaya , Thailand
