Long-term gloom overshadows borrowing figures
By Alex Stevenson
A slight improvement in this month's public borrowing figures has not been enough to shake off pessimistic forecasts about the prospects for the Treasury's finances.
Public sector net borrowing reached £14.1 billion in September, down from £15.4 billion in September 2010, according to the Office for National Statistics (ONS).
The coalition government's target for this year of total net borrowing of £122 billion seems achievable as a result, with average savings of £1.25 billion being achieved each month.
But experts have warned that it will get harder to cut the deficit in the coming months because of high unemployment driving the welfare bill up further and sluggish growth limiting tax revenues.
"The combined effect is likely to be one where the government could miss its deficit reduction targets this year and especially in 2012," Chris Williamson, chief economist at Markit, commented.
"In the absence of stronger economic growth, spending would need to be cut further to meet targets, but this raises the risk is that austerity measures end up driving the deficit higher rather than reducing it."
The Trades Union Congress highlighted this problem by pointing out that tax revenues were a third below the Office of Budget Responsibility's March forecast.
It claimed lost tax revenues had cost the government £1.8 billion between April and August. High social security of £1 billion had added to the headache of a £5 billion overspend so far this financial year.
"Deep, rapid spending cuts have sent unemployment spiralling to a 17-year high, are depressing living standards and adding billions to public borrowing," TUC general secretary Brendan Barber said.
"Even defenders of plan A admit it's going to get worse before it gets better. We need a new approach that prioritises jobs and decent wages, funded by making those that benefitted most from the boom pay their fair share of tax."
Today's ONS figures showed that Britain's net debt, not counting the bank bailouts, was £966.8 billion – the equivalent of 62.6% of GDP.