Public sector borrowing rise is new blow to Chancellor

 
Chancellor George Osborne leaves the Royal Courts of Justice, London, after attending the Leveson Inquiry, as the investigation into media standards enters its most politically-charged week.
PA Wire/Press Association Images
21 November 2012
WEST END FINAL

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George Osborne was dealt a blow today with grim borrowing figures just weeks before his autumn statement to Parliament.

Public sector net borrowing was £8.6 billion last month, up £2.7 billion on the same month last year, and considerably higher than City expectations.

The bleak news, driven by a sharp fall in corporation tax, cast new doubts on whether Mr Osborne will meet his rule to get debt falling as a share of GDP in 2015/16. The Chancellor is already drawing up plans for billions more in public spending cuts or tax increases which are causing fresh friction within the coalition.

But he could be forced to abandon his debt rule or impose an even more painful fiscal squeeze. He also faces a growing struggle to cut borrowing to £120 billion this year as forecast by the independent Office for Budget Responsibility.

A Treasury spokesman said: “The economy is healing, but it still faces many challenges. These numbers illustrate that, but also show the Government’s plans to bring spending under control are on track for the year.”

He noticeably did not say that the Government was on course to get borrowing under control.

Shadow Treasury minister Rachel Reeves said: “George Osborne is borrowing billions more simply to pay for the cost of his economic failure.” Borrowing so far this year was up £5 billion to £73.3 billion, or a 7.4 per cent rise, instead of dropping by 1.2 per cent to meet the OBR’s forecast.

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