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UK finances deteriorate further UK finances deteriorate further
(about 1 hour later)
The state of the UK's public finances deteriorated further in January, according to official figures.The state of the UK's public finances deteriorated further in January, according to official figures.
The Office for National Statistics said the government borrowed a further £4.3bn last month - much more than expected. The Office for National Statistics said the government had borrowed a further £4.3bn last month.
Analysts had expected the government to repay about £2.8bn of its debts, but tax income for the month was lower than forecast. It is first time the government has borrowed money in January since records began in 1993.
Government spending also rose sharply, the ONS said. January typically brings the government a large income from tax receipts, giving it a budget surplus and allowing it to repay some of its debts.
'Ghastly figures' But this year tax receipts were significantly lower than expected, the ONS said, with both income tax and capital gains tax income falling sharply.
The figures mark the first January that the government has been forced to borrow money since records began in 1993.
January is traditionally a strong month for tax receipts, but this year the ONS said both income tax and capital gains tax income fell sharply.
Tax receipts dropped 11.8% compared with January last year, when the government was able to repay £5.3bn.Tax receipts dropped 11.8% compared with January last year, when the government was able to repay £5.3bn.
Analysts had expected a budget surplus would allow the government to repay about £2.8bn of its debts.
Major challenge
"These are pretty ghastly figures and come as somewhat of a surprise," said Andrew Goodwin, senior economic adviser to the Ernst & Young Item Club."These are pretty ghastly figures and come as somewhat of a surprise," said Andrew Goodwin, senior economic adviser to the Ernst & Young Item Club.
"January usually yields a healthy surplus due to receipts from corporation tax and even in the current climate it is surprising to see the government rack up a deficit." "January usually yields a healthy surplus due to receipts from corporation tax and, even in the current climate, it is surprising to see the government rack up a deficit."
He added that the deterioration emphasised the scale of the fiscal challenge still facing the government, calling the chancellor's borrowing predictions "far too optimistic". He added that the deterioration emphasised the scale of the fiscal challenge still facing the government, with Chancellor Alistair Darling facing growing calls to act more quickly to tackle the deficit.
'Credible plan' The government expects public sector borrowing to peak at £178bn this year - equivalent to 12.6% of GDP.
Currently, the government expects public sector borrowing to peak at £178bn this year - equivalent of 12.6% of GDP. Mr Darling has pledged to halve the deficit in percentage terms over the next four years, but earlier this week a group of 20 economists said action needed to be taken sooner.
Chancellor Alistair Darling has pledged to half the deficit in percentage terms over the next four years. The BBC's chief economics correspondent, Hugh Pym, said that whoever formed the next government would face the challenge of tackling the deficit while ensuring that the recovery in the UK economy continued.
Business groups renewed their calls for "a credible plan" from the government for curbing the deficit.Business groups renewed their calls for "a credible plan" from the government for curbing the deficit.
The British Chambers of Commerce (BCC) said that a failure to act more quickly was putting the UK's credit rating at risk. The British Chambers of Commerce said a failure to act more quickly was putting the UK's credit rating at risk.
"As well as explicitly spelling out its medium-term spending plans, it is now necessary for the government to announce a freeze in the public sector wage bill, and an immediate review into the cost of public sector pensions," said David Kern, the BCC's chief economist."As well as explicitly spelling out its medium-term spending plans, it is now necessary for the government to announce a freeze in the public sector wage bill, and an immediate review into the cost of public sector pensions," said David Kern, the BCC's chief economist.
The government has defended its approach, arguing that cutting public spending too quickly risks harming the UK's economic recovery.