UK NATIONAL DEBT HITS £1 TRILLION
- The UK Government's debt has smashed through the £1 trillion barrier for the first time despite a bigger-than-expected fall in borrowing in December, figures revealed January 24.
Public sector borrowing, excluding financial interventions such as bank bailouts, fell £2.2 billion to £13.7 billion in the month. The City had expected it to fall to £14.9 billion. But this was still enough to drive net debt to £1,003.9 billion, or 64.2% of GDP, up from £883 billion a year ago, and its highest since records began in 1993.
The bigger-than-expected fall in Government borrowing in the month was partly offset by a £1.3 billion increase in estimates for borrowing between April and November after local Government spending was revised upwards.
But Chancellor George Osborne is still on track to hit a target set by the Office for Budget Responsibility to reduce borrowing to £127 billion in the financial year despite fears that the UK is on the brink of recession. Central Government spending fell 0.9% as the Chancellor's austerity measures increasingly kick in, while the tax haul rose with the help of last year's rise in VAT to 20% and the levy on banks' balance sheets. It is the fourth month in a row that borrowing has fallen on the previous year.
But there are fears that the deficit reduction plans may be derailed, with many economists expecting another recession, which would hit tax revenues and increase spending on benefit payments. The Government borrowed a total of £103.3 billion between April and December, which is £11.3 billion lower than the previous year.
A Treasury spokesman said: "That our national debt has reached more than £1 trillion simply shows the unsustainable level of spending this country built up over the past few years, and shows why it is critical for our nation's future that we deal decisively with the deficit. "Today's figures show that we are making good progress, with borrowing over £11 billion lower than in the same period last year."
It is understood that the Government's debt will fall back below the £1 trillion barrier in January as its coffers are swelled by increased tax returns. But debt is expected to push back back past £1 trillion in February as the Government continues to borrow more. The Government's £1 trillion debt figure excludes financial interventions but when these are added net debt hit £2.3 trillion in December, which is 149% of GDP, and reflects the impact of bailing out some of the UK's largest banks following the credit crunch.
Vicky Redwood, a UK economist at Capital Economics, said the figure was a reminder of the "enormity of the challenge that still lies ahead to get the public finances back on a sustainable footing". She fears that weaker growth than the OBR is currently forecasting will make future borrowing forecasts much harder to meet. "So far, it has been weaker spending growth helping borrowing to fall, whereas tax receipts are falling short of the fiscal forecasts," she added.
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