 Analysts fear that the government is ill-equipped to cope with a slowing economy |
Britain's public finances got a boost from strong North Sea oil tax revenue, but are still weaker than a year ago, official figures show. The Office for National Statistics said the government swung into credit by �4.8bn in July after a revised net borrowing of �9.6bn the previous month. But the figure was still lower than the �6.4bn the government had in its coffers in the same month a year ago. Analysts fear the government will not meet its borrowing target for the year. The Budget forecast for net borrowing in the 2008 financial year was �43bn, with debt expected to be 38.5% of national income. At the end of July 2008, public sector net debt was �542.6bn - the equivalent of 37.3% of GDP. With borrowing at �19.1bn so far this year, more than twice the �8.4bn level of last year, analysts fear that Chancellor Alistair Darling will be forced to relax borrowing rules to prevent the UK from slipping into recession. 'Challenging outlook' "The outlook remains challenging for government," said Charles Davis, an economist at Centre for Economics and Business Research. "With borrowing and debt on a clear upward trend and the economy set for a period of minimal growth and even contraction, public finances look susceptible to further unscheduled borrowing." Under tax and spending rules introduced by Gordon Brown as chancellor when the Labour Party swept to power in 1997, public sector net debt should be no more than 40% of national income. But the stalling housing market, High Street slowdown and declining corporate profits mean the government's revenue from taxes is being squeezed. North Sea boost The ONS figures showed that about �4bn of the �9.9bn of corporation tax the government received in July was from North Sea oil firms - almost twice as much as last year. But corporate tax from other companies was down on 2007. The Treasury is considering relaxing its fiscal rules, dealing a blow to Gordon Brown's reputation as a prudent chancellor before becoming prime minister. Shadow Chancellor George Osborne said the figures showed that "borrowing is out of control". "Gordon Brown has failed to put aside money for a rainy day during the good years, and taxpayers will bear the price for his economic incompetence," he added.
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The outlook remains challenging for government
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