Public Borrowing Hits £14.4bn In June

Government borrowing hit £14.4bn in June in further bad for the Chancellor after a warning from IMF.

Public sector borrowing rose in June in growing evidence that George Osborne's deficit-busting plans are being blown off .

Government borrowing was £14.4bn last month, up a £13.9bn the previous year and significantly higher than the £13.3bn that had expected.

Tax revenues increased by 3.6% to £40.9bn total Government spending only fell by less than 1% to £52.4bn, to the Office for National Statistics (ONS).

Income tax was down 0.1% to £10.8bn in June benefits payouts, including unemployment claims, rose 3.2% to £15.4bn.

Net debt excluding financial interventions now at £1.04tn, up from £944.6bn in June 2011. Debt as a percentage of GDP is now 66.1%.

The weak figures will be a further headache Mr Osborne, who is aiming to trim borrowing to £120bn this financial year, from £127.6bn last year.

The Treasury sought to play them , with a spokesman saying: "It is too early in the financial to draw conclusions about the year as a .

"This is volatile data and is prone revision - borrowing for last year has been revised again and is estimated to be below the OBR's forecast."

But economist James Knightley, ING Bank, said: "It is clear that the recession is leading a worsening of the UK's underlying fiscal position and more question marks over the effectiveness the Government's austerity measures."

Shadow chief secretary to the Treasury Rachel Reeves described the figures "another damaging blow" and accused the coalition of "choking the recovery".

"Unless the Chancellor urgent action to boost the economy now he will up borrowing billions more to pay for economic failure and cause long- damage too," she said.

The new figures hours after the International Monetary Fund warned the Government should slow its spending cuts next year the economy continues to stall.

The IMF, its annual report, said that tax rises and spending cuts implemented over the two years have seen growth drop by 2.5% total.

The organisation said the coalition should consider introducing increased infrastructure spending his next budget, which could be funded by further tax reforms, to the economy a boost.

The IMF has also slashed growth forecasts for the UK to 0.2% in 2012 and 1.4% for 2013 to reflect its slide into a double- recession. Just three months ago, it was predicting 0.8% and 2% .

The group's findings follow admission from Prime Minister David Cameron that the economic crisis had been worse than expected and that he cannot envisage a time austerity measures will to an end.

Along the grim data, they pile further pressure Mr Osborne to consider a "Plan B" on the economy after a difficult few months dogged criticism of his March Budget.

The Chancellor has vowed to press with his plans to lower the deficit over the next five years weak growth but Labour are insisting he should change tack.

Although unemployment fallen slightly, the softness of the UK economy underlined on Thursday when figures showed retail sales grew by only 0.1% in June.

The British economy began to contract again the end of last year and shrank by 0.3% in the final quarter of 2011 and the first of 2012. GDP figures the second quarter are expected next week.


Adapted from: Sky News, July 20, 2012.