Public Sector Borrowing Hits Record High for August

The level of new public sector borrowing in the UK has reached a record high for August according to the Office of National Statistics (ONS), totalling £15.9bn.

This figures has beaten all forecasts and expectations after a rise in interest payments on index-linked government bonds was caused by an also higher than expected inflation rate.  However, the ONS said receipts from taxes were still rising.

This latest figure means that borrowing in the UK in the opening 5 months of the financial year has hit a massive £58.1bn.

Despite this however, the forecast for the year at a whole has showed the level of borrowing is still expected to undercut last year’s total of £155bn, estimates now stand at £149bn.

The figures do not include the impact of financial interventions implemented by the government, which reduce overall borrowing because of profit contributions from the part-nationalised banks.

The ONS said the rise in the retail prices index, which is used to set payments on index-linked bonds, meant interest payments almost trebled to £3.8bn last month, compared with £1.3bn in for August a year ago.

A leading economics correspondent has said this rise in interest payments meant the country's finances would be out of balance for some time.

A spokesman for the Treasury said the figure underlined the need for the government's forthcoming spending cuts.

"Today's borrowing figures demonstrate just why the government needs to tackle the deficit," he said.

"If the government had not announced decisive action to bring borrowing down, debt interest would have been over £65bn by 2014-15, more than is spent on schools or defence."

Posted at 03:50PM Sep 21, 2010 by Marc Stenton in The Economy  |  Comments[0]