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| Recession hurts public finances | Recession hurts public finances |
| (40 minutes later) | |
| The recession is taking its toll on public finances, official figures show. | The recession is taking its toll on public finances, official figures show. |
| The UK's public sector finances recorded a surplus of £8.4bn in January, well down on the £15.3bn surplus in the same month last year. | The UK's public sector finances recorded a surplus of £8.4bn in January, well down on the £15.3bn surplus in the same month last year. |
| Government borrowing for the first 10 months of the financial year now stands at £67.2bn. The chancellor has forecast borrowing for the full year of £77bn. | Government borrowing for the first 10 months of the financial year now stands at £67.2bn. The chancellor has forecast borrowing for the full year of £77bn. |
| The debts of RBS and Lloyds will be included in the public finances, the Office for National Statistics said. | |
| The year-on-year drop in January's surplus was largely due a slump in tax receipts, which fell by nearly £7bn. | The year-on-year drop in January's surplus was largely due a slump in tax receipts, which fell by nearly £7bn. |
| Rapid deterioration | Rapid deterioration |
| Government borrowing now stands at 47.8% of the UK's economic output. Last January, it stood at 42.2%. | Government borrowing now stands at 47.8% of the UK's economic output. Last January, it stood at 42.2%. |
| "It's clear that public sector finances are deteriorating quite rapidly," said Amit Kara at UBS. | |
| The tax take is being hammered by the recession Howard Archer, economist, Global Insight | |
| January is traditionally a good month for the public finances as they are boosted by annual tax receipts. | January is traditionally a good month for the public finances as they are boosted by annual tax receipts. |
| However, these have been hit by falls in income tax caused by rising unemployment and the curbing of bankers' bonuses in the City, and by falls in corporation tax as businesses' profits suffer during the recession. | However, these have been hit by falls in income tax caused by rising unemployment and the curbing of bankers' bonuses in the City, and by falls in corporation tax as businesses' profits suffer during the recession. |
| The temporary cut in VAT from 17.5% to 15% has also affected tax revenues. | The temporary cut in VAT from 17.5% to 15% has also affected tax revenues. |
| "The tax take is being hammered by the recession," said Howard Archer at Global Insight. | |
| And the next few months could see tax receipts falling further. | |
| "Tax revenues were 11% down on a year ago and the situation is likely to get a lot worse over the course of the year," said Andrew Goodwin, advisor to the Ernst & Young Item Club. | |
| Bank debt | Bank debt |
| The Office of National Statistics, which releases the public finance figures, also said that it plans to incorporate the finances of the Royal Bank of Scotland (RBS) and Lloyds Banking Group into the public finance balance sheet. | The Office of National Statistics, which releases the public finance figures, also said that it plans to incorporate the finances of the Royal Bank of Scotland (RBS) and Lloyds Banking Group into the public finance balance sheet. |
| Spending will rise sharply over the coming months Andrew Goodwin, advisor to the Ernst & Young Item Club | |
| It said this could add between £1 trillion and £1.5tn to public sector debt - between 70% and 100% of the UK's GDP. | It said this could add between £1 trillion and £1.5tn to public sector debt - between 70% and 100% of the UK's GDP. |
| The government was forced to bail out RBS in October last year and now owns almost 70% of the bank. | The government was forced to bail out RBS in October last year and now owns almost 70% of the bank. |
| It also provided funds to smooth the take over of HBOS by Lloyds, and now owns 43% of the combined Lloyds Banking Group. | It also provided funds to smooth the take over of HBOS by Lloyds, and now owns 43% of the combined Lloyds Banking Group. |
| The government needs to borrow money in order to raise funds to invest in the banks. | The government needs to borrow money in order to raise funds to invest in the banks. |
| Despite the ever-growing debt burden, the government has made it clear that it will borrow more money if necessary in order to boost the ailing economy. | Despite the ever-growing debt burden, the government has made it clear that it will borrow more money if necessary in order to boost the ailing economy. |
| "Spending will rise sharply over the coming months... We expect the chancellor to be forced to make significant upward revisions to his borrowing projections when he presents the Budget. | |
| "Item expects public sector net borrowing to rise above £130bn in 2009/10," said Mr Goodwin. |