Figures released yesterday by the Office for National Statistics (ONS) showed that the government borrowed a further £4.3 billion last month.
January is normally a bumper month for the Treasury with Self Assessment tax payments causing a rise in revenues, however tax receipts from both Income and Capital Gains tax were insufficient, in fact they dropped by 11.8% compared to the same time last year and the government had to resort to borrowing. Not even the rise in VAT could produce a surplus.
This is the first time since records began in 1993 that a government has had to borrow money in the month of January.
The figures were unexpected with most experts having predicted that January would show a surplus of approximately £2.8 billion.
The UK has now borrowed approximately £122 billion in the current financial year; the Treasury are predicting that total borrowings for the year will be £178 billion equivalent to 12.6% of GDP (Gross Domestic Product). This estimate must now be in question and the Treasury will be keeping its fingers crossed that their estimate will be not too far off the mark.
Jonathan Loynes, of the economics consultancy Capital Economics, said: “Extrapolating the trend forward points to a full-year borrowing figure . . . equivalent of around 12.8 per cent of GDP, just in excess of Greece’s 2009 deficit . . . It is clear a more credible plan to restore the public finances to health will be required shortly after the general election to keep the markets and rating agencies at bay.”
The news from the ONS is particularly unwelcome and comes in a week when unemployment figures showed the number of longer term unemployed rising significantly and inflation rose significantly. Furthermore the Bank of England has ended its package of economic stimulus measures designed to help the economy come out of recession.
The job of managing the economy at the moment is certainly not easy with bad news almost daily, loud calls to cut spending now and contrary opinions that any cuts should be delayed until the economy is stronger. Alistair Darling’s position is certainly an unenviable one, plus he has the small matter of a General Election to fight in the next few months, possibly some light relief for him given everything that is currently on his plate.