By Marcus Leach
Fears that the UK could lose its coveted AAA credit rating were fuelled today (Tuesday) with the news that the government borrowed slightly more than expected in December.
Official figures revealed that UK public sector net borrowing, excluding financial interventions, hit £15.4 billion in December.
The Office for National Statistics (ONS) confirmed that today's figures marked a small rise from the £14.8 billion borrowed in December 2011.
The headline figure was slightly worse than expected - analysts had forecast borrowing of £15.2 billion - and now all three of the major credit ratings agencies have the UK's AAA rating on negative outlook, meaning they could downgrade its rating if performance deteriorates.
In his Autumn Statement in December, Chancellor George Osborne acknowledged public finances were taking longer to rectify than planned, and admitted he would be forced to extend austerity measures by at least another year.
The news on public sector finances comes days before economic growth (GDP) figures are expected to show the economy contracted in the final three months of 2012.
“On a comparable basis, public sector net borrowing for the period April-December 2012 was £7.2bn higher than in the same period of the previous year," David Kern, Chief Economist at the British Chambers of Commerce (BCC), said.
"While this highlights the continued pressures facing the government’s finances, at a time when the economy is stagnant and tax receipts are weak, it is important to emphasise that the cumulative excess in the nine months to December was slightly on November’s figures.
“Clearly, Britain’s structural deficit remains unacceptably high. But the weakness of the economy reinforces the case for adhering to the deficit cutting programme alongside new growth enhancing policies. The Chancellor is obviously facing serious challenges. To maintain confidence, he must persevere with real cuts in current spending and continue to prioritise capital investment.
“The Chancellor’s March budget must intensify measures that increase the supply potential of the economy. This means supporting exports, construction, and housebuilding in the short term, and supplementing this with effective medium-term initiatives, that will encourage private sector investment in infrastructure projects. Additional steps to increase the availability of credit to viable businesses willing to invest, are also urgently needed.”
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