George Osborne's debt reduction plans took another blow last month as government borrowing hit its highest on record for any August.
Public sector net borrowing excluding financial sector interventions – the government's preferred measure – widened to £14.41bn from £14.37bn in August 2011 – and is now the largest it has been since records began in 1993.
That takes the deficit for the tax year to date to £31bn. But, stripping out the transfer of Royal Mail pension assets, the deficit has actually widened 22% to £59bn so far this year.
George Buckley at Deutsche Bank said Friday's public finance data suggested the government will miss its targets by about £10bn or £20bn.
The 22% increase in the deficit between April and August compares with the government's target of reducing the deficit by 4.6% this year.
With the UK mired in recession, benefit payments rose while key sources of income – such as corporation tax – fell.
The public finances data show corporation tax since April was 10% lower than the same period last year.
Overall tax receipts for the tax year to date inched up 0.4%, just a fraction of the 3.9% rise the Office for Budget Responsibility is forecasting for the year.
The figures leave the Treasury's calculations in tatters and could force Osborne into an embarrassing climbdown at his autumn statement in December.
Chris Leslie MP, Labour's shadow Treasury minister, claimed Osborne was now borrowing more than planned because of his failed economic plans.
"With the longest double-dip recession since the second world war, the government has borrowed over £10bn more in the first five months of this year than in the same period in 2011.
"And this is billions more in borrowing not to invest in the jobs of the future, but simply to pay for the mounting costs of economic failure as the double-dip recession leads to higher benefit bills and lower tax revenues."
Weak growth blamed
The chancellor said in his first budget that the market should judge his commitment to stronger public finances by his success in eliminating the structural deficit over five years, and cutting national debt as a proportion of GDP by the 2015/2016 financial year.
But the government has since been forced to extend its austerity programme by another two years and David Cameron has warned that it could continue until 2020. Osborne is now faced with the choice of imposing further cuts or scrapping his targets.
Most economists believe more cuts or tax rises would damage the economy further. The Bank of England governor, Mervyn King, seemed to prepare the ground for the dreadful public finances data on Thursday night, when he endorsed tearing up the government's debt-reduction goal.
King said in an interview on Channel 4 that it would be acceptable for the chancellor to miss his targets if the economy continued to grow slowly. In one bit of good news, the ONS revised down last year's public sector net borrowing by £7bn.
The Treasury latched onto this point and the exchequer secretary, David Gauke, said: "This is further evidence that we are dealing with our debts and getting the deficit down."
Chris Williamson of Markit said the ballooning deficit was clearly linked to disappointing economic growth, which he blames on a combination of spending cuts and falling demand from the eurozone.
"It seems likely that the disappointing economic performance this year is due to a combination of factors, with the eurozone crisis hitting export performance while austerity has subdued domestic demand.
This has been clearly evident from consumer confidence surveys, which showed household sentiment falling sharply after austerity measures were first introduced by the coalition and remaining subdued ever since."
guardian.co.uk
Public sector net borrowing excluding financial sector interventions – the government's preferred measure – widened to £14.41bn from £14.37bn in August 2011 – and is now the largest it has been since records began in 1993.
That takes the deficit for the tax year to date to £31bn. But, stripping out the transfer of Royal Mail pension assets, the deficit has actually widened 22% to £59bn so far this year.
George Buckley at Deutsche Bank said Friday's public finance data suggested the government will miss its targets by about £10bn or £20bn.
The 22% increase in the deficit between April and August compares with the government's target of reducing the deficit by 4.6% this year.
With the UK mired in recession, benefit payments rose while key sources of income – such as corporation tax – fell.
The public finances data show corporation tax since April was 10% lower than the same period last year.
Overall tax receipts for the tax year to date inched up 0.4%, just a fraction of the 3.9% rise the Office for Budget Responsibility is forecasting for the year.
The figures leave the Treasury's calculations in tatters and could force Osborne into an embarrassing climbdown at his autumn statement in December.
Chris Leslie MP, Labour's shadow Treasury minister, claimed Osborne was now borrowing more than planned because of his failed economic plans.
"With the longest double-dip recession since the second world war, the government has borrowed over £10bn more in the first five months of this year than in the same period in 2011.
"And this is billions more in borrowing not to invest in the jobs of the future, but simply to pay for the mounting costs of economic failure as the double-dip recession leads to higher benefit bills and lower tax revenues."
Weak growth blamed
The chancellor said in his first budget that the market should judge his commitment to stronger public finances by his success in eliminating the structural deficit over five years, and cutting national debt as a proportion of GDP by the 2015/2016 financial year.
But the government has since been forced to extend its austerity programme by another two years and David Cameron has warned that it could continue until 2020. Osborne is now faced with the choice of imposing further cuts or scrapping his targets.
Most economists believe more cuts or tax rises would damage the economy further. The Bank of England governor, Mervyn King, seemed to prepare the ground for the dreadful public finances data on Thursday night, when he endorsed tearing up the government's debt-reduction goal.
King said in an interview on Channel 4 that it would be acceptable for the chancellor to miss his targets if the economy continued to grow slowly. In one bit of good news, the ONS revised down last year's public sector net borrowing by £7bn.
The Treasury latched onto this point and the exchequer secretary, David Gauke, said: "This is further evidence that we are dealing with our debts and getting the deficit down."
Chris Williamson of Markit said the ballooning deficit was clearly linked to disappointing economic growth, which he blames on a combination of spending cuts and falling demand from the eurozone.
"It seems likely that the disappointing economic performance this year is due to a combination of factors, with the eurozone crisis hitting export performance while austerity has subdued domestic demand.
This has been clearly evident from consumer confidence surveys, which showed household sentiment falling sharply after austerity measures were first introduced by the coalition and remaining subdued ever since."
guardian.co.uk
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