According to the latest figures from the Office of National Statistics, the UK Government borrowed £4.3bn in January, up from net borrowing figures of -£5.3bn in January 2009.
The public sector budget deficit is now £90.7bn, 60.3 per cent or £54.6bn higher than the deficit at the start of 2009.
The net public debt now stands at £845.5bn, or 59.9 per cent of GDP. This is an increase of 16.6 per cent on January 2009’s net debt of £708bn. Not taking into account the financial interventions of the last year, net public debt would be at £743.1bn, or 52.7 per cent of GDP.
Travelex head of the UK trading desk Mark Bolsom, says these figures really challenge the fiscal reality of Chancellor Alistar Darling’s “optimistic” pre-Budget forecasts.
Darling says public borrowing will peak at £178bn this year, or 12.6 per cent of GDP in 2010. He says this will be halved by 2014.
Bolsom says: “These figures will only endorse the argument for full-scale spending cuts in the public sector and is quite likely to have negative consequences for growth. Unfortunately, we are about to undergo a period of fiscal austerity, whoever wins the general election.”
Liberal Democrat Shadow Chancellor, Vince Cable says: “This is worrying news for the state of the public finances.
“These figures underline the importance of having a credible plan to tackle the deficit and stimulate growth and jobs to strengthen future tax receipts.
“Simply slashing spending now regardless of the economic circumstances is not only a fruitless labour but a damaging one. If we cut too soon, the economy will be pushed back into recession, lowering tax revenues even further and negating the effect of the cuts.”
Barclays Capital says it predicted a net gain of £2bn in January. Although the figures are worse than it thought, analyst Varun Bhabha says that the total net outlay on financial sector support measures in the last three months of 2009, including equity injections into the nationalised banks and the cost of the special liquidity scheme was £6.1bn.
Bhabha says: “This is a relatively small number compared with the total public net borrowing of £42.3bn in Q4 2009, and certainly has a far smaller impact on total borrowing than many have assumed previously.”