Borrowing rise threatens AAA status
Britain's coveted AAA rating has come under further pressure after official figures showed another leap in public sector borrowing.
The figure, excluding financial interventions such as bank bailouts, was £15.4 billion in December, compared with £14.8 billion in the same month the previous year. It is slightly worse than the £15.2 billion pencilled in by economists.
It comes after an unexpected increase in November, when borrowing rose to £17.5 billion, up £1.2 billion from last year, after tax receipts were dented by lower energy company profits.
Within the December figures, the picture was much the same as previous months, with Government spending outstripping tax receipts. Total expenditure was up 5.4%, with tax receipts up just 3.6% in the month.
Public sector borrowing for the year to date is £106.5 billion, excluding a one-off £28 billion boost from the transfer of the Royal Mail pension fund into Treasury ownership, which is 7.3% higher than the same period last year.
Martin Beck, UK economist at consultancy Capital Economics, said December's public finance figures confirmed that the Government's fiscal consolidation plans were still off track. He expects borrowing for 2012/13 to come in at around £113 billion, £5 billion above the tax and spending watchdog's forecast of £108 billion.
More bad news on the UK economy is expected this week with the Office for National Statistics due to reveal that output contracted in the final quarter of 2012. All three of the major credit ratings agencies now have the UK's AAA rating on negative outlook.
ING economist James Knightley said: "The question is how long the UK can hold on to its AAA status. With the US and France having been downgraded by one ratings agency in the past couple of years, another disappointing UK borrowing number and a widely expected contraction in GDP on Friday will intensify the threat of the UK suffering the same fate."
But a Treasury spokesman said the figures underlined that the recovery in the Government's finances was taking time but the economy was healing. In his Autumn Statement in December, Chancellor George Osborne admitted that he would be forced to draw out the age of austerity by at least another year.
Labour Treasury spokeswoman Rachel Reeves said: "David Cameron and George Osborne's economic plan is hurting, but it's not working. Their failure on jobs and growth means they are now failing on the one test they set themselves - to get the deficit and debt down. Borrowing is rising and is over £7 billion higher than at the same point last year. And this is borrowing to pay for economic failure as a flatlining economy and rising long-term unemployment have sent the welfare bill soaring and tax revenues have been revised down."