By Max Clarke
Public sector net borrowing decreased marginally for the year ending June, though net debt rose yet again to reach £944.3 billion, or 62% of the UK’s GDP.
“The borrowing figures for June were disappointing, and worse than expected," commented David Kern, Chief Economist of the British Chambers of Commerce.
"Total borrowing for the financial year as a whole will be larger than the OBR predicted at the time of the Budget. This is not surprising, as the OBR growth forecast is too optimistic."
The news comes despite increasing cuts and January’s VAT hike. Flat GDP growth along with subdued consumer confidence and a reduced high street spend are all eroding from the government’s revenue stream, whilst ‘factory gate’ inflation is impeding the manufacturing recovery. The result has led to increased borrowing despite intentions to reduce the deficit.
Continued Kern, “Making allowances for the lower growth, the government’s fiscal strategy is still on course, and it is important that the government perseveres in reducing the deficit. Stabilising our public finances must remain a key policy priority, and there is no justification for a Plan B. Economic growth, though weak, is likely to continue and reducing the deficit will improve the economy’s long-term growth prospects. However, in order to reduce the risk of a setback, the MPC must maintain low interest rates until the early months of next year. On its part, the government must implement policies aimed at supporting growth and empowering business to drive recovery.”
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