UK deficit reaches ‘colossal’ peacetime high

The UK’s deficit rose to levels not seen since the Second World War as the Government revealed an annual deficit equal to nearly 12 per cent of GDP.

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According to the Office of National Statistics, the Government was forced to borrow £23.5bn in March, bringing the annual deficit figure to £163.4bn, or 11.6 per cent of GDP – the largest annual deficit since the end of the war.

This figure was lower than the £166.5bn forecast by Chancellor Alistair Darling in last month’s Budget.

The ONS says that at the end of March 2010 public sector net debt was £890bn, equivalent to 62 per cent of GDP, up from £857.5bn or 60.2 per cent in February.

In March, the national budget deficit was £14.8bn, doubled from £6bn in February 2010. This was the biggest monthly spike since 1993.

Ernst & Young ITEM Club senior economic adviser Hetal Mehta says: “While it is still a colossal amount of borrowing and highlights the dire state of the public finances, today’s figures show a slight undershoot from the Budget projections.

“Though that in itself is good news, it is the coming years that still pose more of problem. In our view the current Treasury forecasts for the medium term are still far too optimistic, both in terms of the speed of recovery and the extent to which tax revenues will recover.”

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