UK PLC Borrows Less As Tax Revenues Grow

There has been a welcome boost on the public finances for the Chancellor, as the economic downturn threatens his plans to slash borrowing. Britain's budget deficit narrowed by more than expected last month, with public sector net borrowing falling to £18.093bn from £20.36bn in November 2010. Analysts were forecasting a figure of £19.6bn but higher tax receipts, amid the new levy on banks and the increase in VAT to 20%, helped drive it lower. The figures revealed that the Government's tax haul in the month rose 7.1%, whereas its spending rose 0.8% as its austerity measures increasingly kick in. It is a positive development for the Treasury, given the pressure on credit ratings, as it looks to largely eliminate the budget deficit which stood at 10% of GDP last year.

But while George Osborne's largely on course to meet the full-year borrowing target of £127bn set by the Office for Budget Responsibility, forecasts that the UK economy is at risk of recession risks hitting tax earnings over the coming months. Net borrowing in the financial year to date is now at £88.3bn, which is £10.4bn lower than the previous year. But despite the progress being made, the Government's debt rose to a fresh record of £977.1bn, which is 62.8% of GDP.