The UK�s public finances deteriorated badly in September, with public sector net borrowing soaring to a record level as spending outpaced tax receipts amid the worst economic crisis since the 1930s, the Office for National Statistics reported yesterday.
The UK's public finances deteriorated badly in September, with public sector net borrowing soaring to a record level as spending outpaced tax receipts amid the worst economic crisis since the 1930s, the Office for National Statistics reported yesterday.
Public sector net borrowing (PSNB) totaled £8.1bn in September, up from £4.8bn in the same month in 2007, and the highest level for the month since 1993.
September's record figure lifted net borrowing for the first half of the fiscal year, which started in April, to £37.6bn, the highest level since records began in 1946. Net borrowing totaled £21.5bn during the corresponding period last year.
The September PSNB was also larger than City estimates of around £6.9bn.
"The September public finances were dreadful, deteriorating even more than expected," said Howard Archer, chief UK and European economist at Global Insight.
"This highlights the extremely poor state of the public finances as they are hit by past largesse, the marked economic slowdown, markedly weak housing market activity and prices, rising unemployment and government policy concessions since the March budget."
Paul Dales, an economist at Capital Economics, described the state of the public finances as alarming.
He said: "September's UK public finances data show that regardless of the cost of recapitalising the banks and the Chancellor's plans to front-load spending, the economic downturn is set to push borrowing to alarmingly high levels."
The ONS said central government receipts rose 2.4% on the year in September while central government expenditures increased 5.1%.
The government is targeting full-year PSNB of £43bn but has said it may make changes to its fiscal rules in the pre-Budget report this autumn.
The UK's Debt Management Agency said last week it would issue £37bn of new debt as part of a plan to boost banks' capital by up to £50bn, and provide around £250bn of guarantees on short-term debt issuance by banks and expand liquidity injections.
The ONS said the public sector net cash requirement, or PSNCR, was £12.6bn, compared with £8.7bn in September last year. Economists were expecting a cash requirement of £10.5bn.
The government is targeting a full fiscal year target of £37.3bn. In the first six months of the year, the PSNCR was £21.2bn, compared with £13.4bn in the corresponding period last year.
Net debt as a percentage of gross domestic product increased to 43.4% in September from 36.2% in the corresponding month last year due to large transfers to ailing banks Northern Rock and Bradford and Bingley. That's well above the government's 40% ceiling.
Net debt as a percentage of GDP, excluding Northern Rock, increased to 37.9% from 36.2% in September last year.
Archer said the poor state of the public finances may curb Chancellor Alistair Darling's plans to increase public spending to fight a recession that now looks likely.
"The Chancellor's room for manoeuvre will be severely limited by the large fiscal deficits and it will make it all the more important that he maps out a way that the public finances can be reined in to a sustainable state over the medium term once the economy is on a sounder footing," Archer stated.
