Total government spending in June hit £49bn, up from £44.2bn a year earlier
Opposition parties were last night piling pressure on the government over Britain’s deteriorating public finances after falling tax revenues from recession-hit companies and consumers pushed the budget deficit to its highest for any June on record.
With tax and spending at the heart of the political fight between now and the general election, the Liberal Democrats and the Conservatives called on Alistair Darling to come clean about the options facing the country in the next parliament.
The Office for National Statistics (ONS) said public sector net borrowing – the gap between the exchequer’s tax take and its spending – stood at £13bn in June, slightly lower than City forecasts of £15.5bn, but the highest June deficit since records began in 1993. The £41.2bn borrowing in the three months to June was higher than for the entire year before the credit crunch started, and brought the total deficit over the last year up to £107bn.
The ONS said the corporation tax take from UK companies was down 14.1% in June from the same month last year, while VAT receipts fell 15.9% and income tax dropped 3.9%. While tax receipts have fallen, more and more people are claiming unemployment benefits. Government spending on social benefits has shot up 9.7% in the year to June.
The Lib Dem Treasury spokesman, Vince Cable, said the figures suggested that “even the chancellor’s eye-watering prediction of £175bn borrowing this year could be an understatement”.
He added: “With such a mismatch between government spending and receipts it is clear that in the longer term these levels of borrowing are not sustainable. If the chancellor expects to have any credibility, both with the markets and the public, he must be brutally honest about how he intends to deal with levels of borrowing. However, such a commitment to deal with the deficit cannot come from salami slicing key public services, but through an honest debate about what the state can and cannot afford to do.”
Philip Hammond, shadow chief secretary to the Treasury, said: “Gordon Brown’s debt crisis is getting worse by the month. With borrowing at record levels, why can’t he finally be straight with people and admit there will have to be public spending cuts?
“In just the last month alone, Gordon Brown has increased every person’s share of the national debt by £213 each.”
A Treasury spokesperson said: “Our plans to halve the deficit within five years are based on cautious assumptions about share prices, unemployment and the loss of output from the shock to the economy built into the budget forecasts. The latest monthly figures for public sector borrowing are in line with our forecast.”
Public sector net debt as a proportion of GDP now stands at 56.6% – the highest since records began in 1974.
David Kern, chief economist at the British Chambers of Commerce, said: “It would be wrong to tighten policy while the recession continues, but maintaining Britain’s international credibility requires a robust plan for restoring our public finances over the medium-term. This must focus on curtailing public spending across the board, while avoiding damaging measures that would harm wealthcreating businesses.”