By David Williams
18 September 2009
Public sector debt has ballooned to 57.5% of gross domestic product, latest figures from the Office for National Statistics show.
The data, released today, shows that in August, the UK public finances were £804.8bn in the red – up from £632.8bn a year earlier.
When the cost of interventions in the banking sector is removed, the level of debt for August 2009 was £658.2bn, or 46.9% of GDP.
The budget for 2009/10 was in deficit by £52.9bn – up by £35.8bn on the same period a year ago. The public sector net cash requirement was £57.1bn – representing a leap of £48.4bn on a year earlier.
The ONS figures also show the effect on national income of the temporary reduction in VAT. The chancellor cut the rate from 17.5% to 15% last December, in an economy-boosting measure that expires on January 1, 2010. In 2008/09, the tax generated fell to £78.4bn, compared with £80.6bn in 2007/08.
Provisional figures for July 2009 show £7bn was raised – compared with £10.5bn for the same period in 2008. In August, VAT income was £5.4bn, down from £6.2bn.
Gemma Tetlow, senior research economist at the Institute for Fiscal Studies, said: ‘The Treasury forecasts that borrowing this year will be about twice as large as it was last year. Today’s figures reveal that borrowing over the first five months of this financial year has been two-and-a-half times as large as over the same months last year.
‘So, if the Treasury is to hit its forecast for the year as a whole, growth in borrowing will have to slow.
‘There are some good reasons to expect that this will in fact be the case, with additional revenue to be brought in from this month’s increase in fuel duties and the planned increases in stamp duty on residential property and VAT, due to happen on New Year’s Day.
‘But it remains to be seen whether this rebound will be sufficient to prevent borrowing from overshooting the Treasury’s Budget forecast for the year as a whole.’
Neil Rutledge, director in the government and infrastructure advisory team at accountancy giant Grant Thornton, said that Prime Minister Gordon Brown’s admission that the public sector would suffer spending cuts in the years ahead was the ‘inevitable culmination of the vast growth in public debt’.
He said: ‘Public sector debt will continue to remain at the top of the government agenda. It will be vital to reduce debt levels to avoid long-term damage and a loss of confidence from the international community.
‘The question has never been whether there will be cuts, but where the cuts will be made.’
18 September 2009
Public sector debt has ballooned to 57.5% of gross domestic product, latest figures from the Office for National Statistics show.
The data, released today, shows that in August, the UK public finances were £804.8bn in the red – up from £632.8bn a year earlier.
When the cost of interventions in the banking sector is removed, the level of debt for August 2009 was £658.2bn, or 46.9% of GDP.
The budget for 2009/10 was in deficit by £52.9bn – up by £35.8bn on the same period a year ago. The public sector net cash requirement was £57.1bn – representing a leap of £48.4bn on a year earlier.
The ONS figures also show the effect on national income of the temporary reduction in VAT. The chancellor cut the rate from 17.5% to 15% last December, in an economy-boosting measure that expires on January 1, 2010. In 2008/09, the tax generated fell to £78.4bn, compared with £80.6bn in 2007/08.
Provisional figures for July 2009 show £7bn was raised – compared with £10.5bn for the same period in 2008. In August, VAT income was £5.4bn, down from £6.2bn.
Gemma Tetlow, senior research economist at the Institute for Fiscal Studies, said: ‘The Treasury forecasts that borrowing this year will be about twice as large as it was last year. Today’s figures reveal that borrowing over the first five months of this financial year has been two-and-a-half times as large as over the same months last year.
‘So, if the Treasury is to hit its forecast for the year as a whole, growth in borrowing will have to slow.
‘There are some good reasons to expect that this will in fact be the case, with additional revenue to be brought in from this month’s increase in fuel duties and the planned increases in stamp duty on residential property and VAT, due to happen on New Year’s Day.
‘But it remains to be seen whether this rebound will be sufficient to prevent borrowing from overshooting the Treasury’s Budget forecast for the year as a whole.’
Neil Rutledge, director in the government and infrastructure advisory team at accountancy giant Grant Thornton, said that Prime Minister Gordon Brown’s admission that the public sector would suffer spending cuts in the years ahead was the ‘inevitable culmination of the vast growth in public debt’.
He said: ‘Public sector debt will continue to remain at the top of the government agenda. It will be vital to reduce debt levels to avoid long-term damage and a loss of confidence from the international community.
‘The question has never been whether there will be cuts, but where the cuts will be made.’
