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UK’s borrowing hits record high of £15bn

The creaking public finances of the UK took another hit in December as public borrowing soared to £15.7bn, official figures showed yesterday.

The surge is slightly lower than expected but remains a record for December and takes public sector net borrowing for the nine months of the financial year so far to £119.9bn.

For the 2009 calendar year, borrowing reached £142.6bn — the highest since Office for National Statistics (ONS) records began in 1946.

The figures revealed the impact of a record recession on the UK's finances as tax revenues were hit and spending on measures to help the economy and on benefits such as Jobseeker's Allowance rose.

The Government's receipts were down marginally to £37bn from £37.1bn a year earlier — the 15th successive month of year-on-year falls in the tax take.

VAT income was flat year-on-year at £6.4bn, although this should be helped as the tax rate returns to 17.5% after the Government's temporary move to help the economy.

Spending ran much higher over the month at £48.3bn, with layout on social benefits up 9% to £14.2bn in December.

The UK's net debt also hit £870bn — the equivalent of 61.7% of the country's annual output.

This is the highest proportion since the ONS began recording the measure more than 30 years ago.

The data will add to pressure on the Government to set out clearer plans to repair the public finances — either through spending cuts or tax rises — to soothe worries among international investors over the UK's borrowing burden.

The Conservatives want to begin cutting the deficit sooner than the Government, which argues that sharpening the axe too early could endanger the UK's pull out of recession.

Minutes of the Bank of England's latest policy meeting released this week highlighted the state of public finances as a powerful headwind against recovery, alongside a sustained squeeze on bank credit and higher savings levels by cautious households.

They said: “It was clear that a significant fiscal consolidation was needed in the United Kingdom, the precise nature and pace of which remained unclear, and to which monetary policy would need to respond as new information became available.”

Bank Governor Mervyn King also hinted at the problems which could lie ahead for the UK, warning that markets could be “unforgiving” amid continued uncertainty over the scale and timing of the tightening needed.

Belfast Telegraph