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Pastimes : The Hot Button Questions:- Money, Banks, & the Economy

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To: maceng2 who wrote (531)	1/21/2004 6:30:49 PM
From: maceng2	Read Replies (1) of 1417

Blow to Brown as borrowing hits 20-year high By Philip Thornton, Economics Correspondent 22 January 2004 news.independent.co.uk Gordon Brown's public spending plans suffered a triple blow yesterday. New figures showed borrowing hit an all-time high last month, estimates of spending were revised upwards and the City gave a "thumbs down" to the Chancellor's economic forecasts. The Government had to borrow £13.2bn in cash last month, official figures showed. This was much higher than expected and the worst result since monthly records began in 1984. Experts at the Office for National Statistics, which compiled the figures, said there would not have been a bigger monthly total before that. December is always a bad month as payment on half of the interest on the Government's debt is due then. But public sector net borrowing (PSNB), the Treasury's preferred figure that irons out volatile cash payments, was £5.3bn compared with £4.5bn in the same month in 2002. This took the shortfall in the first nine months of the financial year to £36.1bn, just short of Mr Brown's forecast last month of £37bn for the year to March. The position was made worse by an unexpected revision for November's PSNB to £8.0bn from £5.5bn. The ONS said most of this came with higher spending by Whitehall departments. "Claims that the Treasury was getting on top of departmental spending in November were premature," said John Hawksworth, head of macroeconomics at accountancy firm PricewaterhouseCoopers. He said he expected the PSNB to hit £40bn in the current year, busting the Chancellor's £37bn target. Next year he said the shortfall would be even greater - another £40bn compared with the £30bn forecast. With a further overshoot in 2005-06, Mr Hawksworth said the cumulative shortfall would amount to £21bn compared with the margin of £14bn by which the Chancellor believes he will meet his "golden rule". "It will certainly be a very close run thing on the golden rule," he said. "It would not be of great economic significance but would be somewhat embarrassing for the Chancellor." The latest survey of City economists published by the Treasury showed all but two of the 24 banks to have published a PSNB forecast for 2004/05 said the Chancellor would miss his target. Yesterday figures come a day after two separate reports criticised the Government's spending plans. The Organisation for Economic Co-operation and Development used its annual assessment of the UK economy to warn that current spending levels were "excessive". It urged the Government to slow the rate of growth in expenditure on health and education and put up taxes to prevent a breach of the golden rule. Meanwhile MPs on the cross-party treasury select committee cast doubt on claims in last month's pre-Budget report that tax receipts would swiftly return to the levels seen before the global downturn. Yesterday's figures showed spending was rising at an annual rate of 9.5 per cent against a forecast of 8.3 per cent while revenues were rising at 5.9 per cent.

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