British government borrowing soars to record high

New public sector borrowing in the U.K soared to a record high of 22.3-billion pounds sterling last month, higher than analysts expected, and up from 17.4-billion pounds a year ago, according to the Office for National Statistics (ONS).

U.K. borrowing, which was driven upwards by increased spending on health care, defense and a bigger contribution to the European Union (EU), increases worries about the coalition government’s ability to cut the country’s hefty budget deficit.

In addition, the deficit on the current budget was at a record 19.8- billion pounds in November.
November's borrowing figures show why the government has had to take decisive action to take Britain out of the financial danger zone,” said a Treasury spokesman. These outturns are also in line with the Office of Budget Responsibility's latest forecast for borrowing to fall by almost 10-billion pounds this year compared to last, and for tax receipts to increase by over 7 percent year-on-year.

In addition, ONS said that public sector net debt now amounted to 58 percent of UK GDP.

Jonathan Loynes, chief economist at Capital Economics, said: Overall, there is nothing here to weaken the government's determination to see through its austerity programme. But we continue to doubt that the economy will weather the coming fiscal storm as well as it hopes.

Howard Archer, chief UK/European economist at IHS Global Insight, described the data as “truly horrible and much worse than expected in November.”

“This is dire news for Chancellor George Osborne to digest over Christmas and is likely to reinforce the government's belief that there must be no let up in the fiscal consolidation efforts,” Archer noted.

“Indeed, there is now a very serious risk that the government will miss its fiscal targets for 2010/11.Much will depend on how well growth holds up over the rest of the fiscal year, and any serious hit to economic activity coming from the prolonged bad weather will only make things harder.”

Archer also indicated that another serious problem for the government is that interest payments are rapidly increasing.

“The breakdown of central government expenditure shows interest payments were up to 4.5 billion pounds in November from 3.0 billion a year earlier,” he said.

“The government is highlighting this as a key reason to why the public finances must be improved as quickly as possible.”