Ahead of Friday’s release of the latest GDP figures, the Office for National Statistics (ONS) had bad news for the government this morning in the form of the public sector borrowing estimate for December.
The statistics agency announced that public sector net borrowing last month rose to GBP15.4bn, from net borrowing of GBP14.8bn in December 2011.
Britain’s total public sector net debt, excluding the temporary effects of financial sector interventions, rose to GBP1,111.4bn or 70.7% of GDP in December 2012. This compares to GBP1,009.6bn (66.0% of GDP) at the end of December 2011.
With the economy struggling to recover from the financial crisis and despite a raft of cuts in many areas, government spending is rising faster than income. The data from the ONS shows that government receipts rose by 3.6% while spending was 5.4% higher compared with the same month a year earlier.
Economists have warned that if this trend continues there is a risk that Chancellor George Osborne will miss his borrowing target for the financial year, the Daily Telegraph reported.
Alongside this concern, the UK’s coveted AAA credit rating is on negative outlook with the three main ratings agencies and there is speculation in the financial markets that the country will lose its triple-A rating within the next few months.
David Kern, chief economist at the British Chambers of Commerce, commented that the weakness of the economy reinforces the case for Osborne adhering to the deficit cutting programme alongside new growth enhancing policies.
“To maintain confidence, he must persevere with real cuts in current spending and continue to prioritise capital investment,” Kern said.
On Friday the ONS will publish its GDP estimate for the fourth quarter of 2012. The figures are widely expected to show that the UK economy contracted in the last three months of the year, potentially putting the country at the start of what could be an unprecedented “triple dip” recession.