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Surge in borrowing as pressure mounts on Osborne to hit targets

By Holly Williams

Published 23/12/2015

Chancellor George Osborne is under pressure
Chancellor George Osborne is under pressure

Britain's borrowing jumped to a higher-than-expected £14.2bn in November, putting pressure on Chancellor George Osborne to meet his targets to bolster the nation's finances.

The Office for National Statistics (ONS) said public sector net borrowing excluding state-backed banks leapt £1.3bn year-on-year in November, taking the overall figure so far this financial year to £66.9bn.

The November figure is higher than the £11.1bn expected by economists.

While year-to-date borrowing is £6.6bn less than a year earlier, experts warned Mr Osborne will struggle to meet his £73.5bn target for the full year.

James Knightley, economist at ING, said although the monthly data can be volatile, "barring a dramatic improvement in the trend, it is looking likely to be missed by possibly more than £5bn".

Mr Osborne's Autumn Statement showed that independent forecasts from the Office for Budget Responsibility (OBR) confirmed the UK would move into surplus by 2020, while also confounding experts by revealing public sector net borrowing was set to narrowly beat this year's target.

The OBR also handed the Chancellor an early Christmas present when it unveiled a £27bn boost to the public finances over the course of the parliament.

But experts said the improvement this year is unlikely to match OBR predictions.

David Kern, chief economist at the British Chambers of Commerce (BCC), said: "The public finances are likely to be better this year than in the previous financial year.

"But the improvement may not be as large as the OBR suggested in the Autumn Statement.

"The underlying message remains that our budget deficit is still too high, and greater efforts are needed, through reducing current public spending and generating sufficient tax receipts."

The ONS said last November's figure was boosted by a one-off gain of £1.1bn in fines from financial institutions for foreign exchange rigging.

Its figures also revealed some improvements in tax receipts last month, meaning that over the financial year to date, income taxes are up 4.6%, Vat 4.1% higher and corporation tax 6.4% ahead.

Overall, central government receipts have risen 3.1% or £12bn in the financial year to date, while government expenditure is up 1.2% or £5.5bn.

Mr Knightley said: "Things are moving in the right direction, just more slowly than hoped."

But Howard Archer, chief economist at IHS Global Insight, said: "The Chancellor now faces a massive task to meet his fiscal targets for 2015/16 and it is frankly hard to see how he can make it."

He added: "The Chancellor will certainly need very strong UK economic activity over the next few months if he is to have even a fleeting chance of meeting his fiscal target."

A Treasury spokesman blamed the rise in borrowing last month on a number of "one-off factors".

He added: "Beyond these factors, we can see that our plan is working, with government receipts growing - stronger income tax, VAT and on-shore corporation tax - showing the benefits of a growing economy with record employment levels."

Belfast Telegraph

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