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Government borrowing unchanged
Government borrowing remained unchanged last month, official figures revealed, amid growing expectations that the Chancellor will abandon his deadline to start lowering UK debt within three years.
Public sector net borrowing, excluding financial interventions such as bank bailouts, was £14.4 billion in August, equal to borrowing in the same month last year.
The stubborn figures will pile pressure on George Osborne, who is widely expected to announce in his autumn statement in December that the Government will be unable to start bringing down debt as a percentage of GDP in 2015/16.
The likelihood of the Chancellor dropping this target was heightened on Thursday night after Bank of England Governor Sir Mervyn King effectively endorsed such a move - on condition the global economy was growing slowly.
Public sector net borrowing in the financial year to date was £59 billion, the ONS said, excluding a one-off £28 billion boost from the transfer of the Royal Mail pension fund into Treasury ownership.
The Chancellor wants to record borrowing for the full year 2012/2013 to £120 billion, excluding the Royal Mail pension effect, compared with a downwardly revised £119.3 billion in the previous year. But Mr Osborne's chances of hitting this target are looking increasingly slim, according to most economists, as the ongoing recession impacts on tax receipts and Government spending.
If the Chancellor sticks to the debt target, he will be faced with announcing potentially large tax rises and further spending cuts in his autumn statement.
But Sir Mervyn, when asked on Thursday night about the supplementary rule on debt, indicated that he would not complain if the target was missed. He said: "If it's because the world economy has grown slowly, so we have in turn grown slowly, then that would be acceptable. It would not be acceptable if we have no real excuse."
Within the August figures, the picture was much the same as previous months, with Government spending outstripping tax receipts as income tax falls and spending on social benefits rises.
Total tax receipts were 1.8% higher at £41.4 billion while total expenditure increased by 2.5% to £52.5 billion. Income tax dropped 1% in August to £11.5 billion, while social benefits were 4.9% higher at £16.1 billion. Public sector debt was £1 trillion at the end of August, equal to 66.1% of GDP, compared with £955 billion, or 62.7% of GDP in August last year.