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| Public borrowing hits new record | Public borrowing hits new record |
| (9 minutes later) | |
| New government borrowing rose sharply in April, the Office for National Statistics (ONS) said. | New government borrowing rose sharply in April, the Office for National Statistics (ONS) said. |
| Public sector net borrowing rose to £8.46bn this April compared to £1.84bn in the same month last year. | Public sector net borrowing rose to £8.46bn this April compared to £1.84bn in the same month last year. |
| It was a new record for the public deficit in April, with government coffers hit by higher social benefits payments and lower tax receipts. | It was a new record for the public deficit in April, with government coffers hit by higher social benefits payments and lower tax receipts. |
| Significantly, ratings agency Standard & Poor's revised its outlook for the UK to negative due to borrowing worries. | Significantly, ratings agency Standard & Poor's revised its outlook for the UK to negative due to borrowing worries. |
| Blow to UK | Blow to UK |
| The ratings agency said that Britain's triple-A rating for its government bonds was at risk in the future if the next government did not produce a credible plan to put its debts on a "secure downward trajectory". | The ratings agency said that Britain's triple-A rating for its government bonds was at risk in the future if the next government did not produce a credible plan to put its debts on a "secure downward trajectory". |
| WHY IT MATTERS A credit downgrade could make it more expensive for the UK to borrow moneyThe higher cost of borrowing increases government spending, and could mean higher taxes Bringing down the total level of debt may be politically difficult as it will require tough spending curbs and tax rises See how the public finances have evolved Markets fall as growth hopes fade | WHY IT MATTERS A credit downgrade could make it more expensive for the UK to borrow moneyThe higher cost of borrowing increases government spending, and could mean higher taxes Bringing down the total level of debt may be politically difficult as it will require tough spending curbs and tax rises See how the public finances have evolved Markets fall as growth hopes fade |
| It reaffirmed the UK's actual credit rating, but said the outlook had deteriorated because of massive borrowing to deal with the recession and the banking crisis. | It reaffirmed the UK's actual credit rating, but said the outlook had deteriorated because of massive borrowing to deal with the recession and the banking crisis. |
| S&P said that government debt could reach 100% of GDP by 2013 - a level it said was incompatible, if sustained, with the top credit rating. | S&P said that government debt could reach 100% of GDP by 2013 - a level it said was incompatible, if sustained, with the top credit rating. |
| Currently, public debt is 53% of GDP, according to the latest ONS figures. | Currently, public debt is 53% of GDP, according to the latest ONS figures. |
| It is the first potential downgrade of UK public debt since the agency began rating government debt in 1978, and could lead to higher borrowing costs if it makes international investors less likely to buy Treasury bonds. | It is the first potential downgrade of UK public debt since the agency began rating government debt in 1978, and could lead to higher borrowing costs if it makes international investors less likely to buy Treasury bonds. |
| One reason the outlook has been revised is the belief by the ratings agency that the government will eventually be liable for costs of between £100bn to £145bn (between 7% and 10% of GDP) for bailing out the banking system. | One reason the outlook has been revised is the belief by the ratings agency that the government will eventually be liable for costs of between £100bn to £145bn (between 7% and 10% of GDP) for bailing out the banking system. |
| In a statement, the Treasury said that "the Budget set out a clear plan to halve the deficit within five years. That judgement was based on a deliberately cautious view of the public finances." | In a statement, the Treasury said that "the Budget set out a clear plan to halve the deficit within five years. That judgement was based on a deliberately cautious view of the public finances." |
| Putting British sovereign debt on negative outlook is not as bad as being assessed for possible downgrade, which almost always leads to a downgrade Robert Peston, BBC Business Editor Robert Peston's vies | |
| And it pointed out that Standard & Poor's said it could revise its outlook to stable "if fiscal outturns are more benign than [they] currently anticipate". | And it pointed out that Standard & Poor's said it could revise its outlook to stable "if fiscal outturns are more benign than [they] currently anticipate". |
| But Hetal Mehta, economist at the Ernst & Young ITEM Club, said "there is now mounting pressure on the Government to tighten fiscal policy further." | But Hetal Mehta, economist at the Ernst & Young ITEM Club, said "there is now mounting pressure on the Government to tighten fiscal policy further." |
| Standard & Poor's says that in the past, revised outlooks lead to downgrades in around 37% of cases. | |
| The pound fell 3 cents against the dollar on the news, to $1.5514 from $1.5817. | The pound fell 3 cents against the dollar on the news, to $1.5514 from $1.5817. |
| Forecast at risk | Forecast at risk |
| Mr Darling's borrowing forecast may be too optimistic | Mr Darling's borrowing forecast may be too optimistic |
| The new figures suggest that the government may miss its forecast of public borrowing of £175bn for this financial year 2009-10 - itself a massive increase on last year's public borrowing of £90bn. | The new figures suggest that the government may miss its forecast of public borrowing of £175bn for this financial year 2009-10 - itself a massive increase on last year's public borrowing of £90bn. |
| "It is obviously very early days, but the dreadful April public finance data and ongoing sharply deteriorating trend suggest that the chancellor is straight away on the back foot in his expectations [for public borrowing]," said Howard Archer of IHT Global Insight. | |
| The narrow measure of public sector borrowing, the current budget deficit, also increased sharply in April, rising to £7bn compared to just £728m in the same month one year earlier. | The narrow measure of public sector borrowing, the current budget deficit, also increased sharply in April, rising to £7bn compared to just £728m in the same month one year earlier. |
| The recession has sharply reduced government tax receipts, especially from the corporate sector and bonus payments in the financial sector. | The recession has sharply reduced government tax receipts, especially from the corporate sector and bonus payments in the financial sector. |
| Meanwhile, the government is having to pay out more in benefits as unemployment continues to rise. | Meanwhile, the government is having to pay out more in benefits as unemployment continues to rise. |
| Income tax and VAT receipts were both around £2bn lower in the month compared to one year ago, while social benefit payments were £1bn higher. | |
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