Borrowing hits record but less than predicted
Britain's financial woes were back at the heart of the election campaign today after government borrowing soared to a record high.
Official figures showed the Treasury borrowed £163.4 billion in 2009-10 — the biggest annual peacetime figure and up from £96.5 billion the previous year.
But in a boost to Gordon Brown ahead of tonight's second televised leaders' debate, it was less than the £166.5 billion forecast in the Budget last month and well below the earlier prediction of £177.6 billion.
City commentator David Buik, of BGC Partners, said the undershoot was good news for the Prime Minister but warned: "Rectifying this gargantuan deficit is going to hurt."
It came as the three main parties traded blows over the size of the deficit — which at nearly 12 per cent of gross domestic product is nearly as high as in Greece — and how to deal with it.
The Treasury borrowed a record £23.5 billion in March, which pushed overall debt up to £890 billion or a record 62 per cent of GDP.
Borrowing has soared in the recession as unemployment and government actions to help prop up the economy have taken their toll. However, there were signs of improvement in today's figures. Total tax receipts rose nearly four per cent in March and have risen in four out of the last five months.
VAT receipts rose after the rate reverted back from 15 per cent to 17.5 per cent in January. Corporation tax receipts grew by 51.4 per cent as business racked up improving profits.
Spending rose by 10.6 per cent in March and by 6.8 per cent over the financial year.
Philip Shaw, chief economist at Investec, said: "The fiscal situation remains extremely serious. However recent figures have helped to confirm that the UK's public finances are not in total meltdown, as some had feared last year."
Labour will be relieved that the borrowing figures were slightly better than expected, after data this week showed a shock rise in inflation to 3.4 per cent and a jump in unemployment to the highest level for 16 years.
