Brown wins boost as borrowing undershoots target
British Prime Minister Gordon Brown won a modest pre-election boost on Thursday after borrowing undershot his government's target -- but it also soared to a record high in 2009/2010.
Economists welcomed the news but warned that tax rises and spending cuts were required to fix the enormous debt mountain, whichever political party wins power in Britain's general election on May 6.
The public sector net borrowing requirement, the government's preferred measure of public finances, hit a record 152.8 billion pounds in the 12 months to March, the Office for National Statistics (ONS) said.
Finance minister Alistair Darling, whose Labour Party is fighting to remain in power, had forecast that borrowing excluding financial intervention would hit 167 billion pounds in 2009/2010.
The 152.8 billion pounds figure, which includes financial-sector intervention measures, is equal to 176 billion euros or 235 billion dollars.
The borrowing was 65.9 billion pounds higher than in 2008/09, as a record recession slammed the country's tax revenues.
The ONS added that state borrowing, excluding financial intervention, ballooned to a record 163.4 billion pounds in the 2009/2010 fiscal year. That was equivalent to around 11.6 percent of gross domestic product (GDP).
"March's public finances figures provided the government with a modest pre-election boost in revealing an unexpected undershoot of the budget forecasts for public borrowing in 2009/10," said Capital Economics analyst Jonathan Loynes.
However, "the big picture is that this is still the biggest budget deficit since the Second World War and on a rough par with that of Greece," he said.
"With all parties' fiscal plans based on extremely optimistic economic assumptions and unspecified spending cuts, a further sizeable fiscal squeeze will still be needed after the election, whoever is in charge."
Investec economist Philip Shaw said the public finances required urgent action.
"We would stress that the fiscal situation remains extremely serious and that a modest undershoot of official borrowing forecasts does not in any way remove the need for serious medium-term budgetary consolidation," Shaw said.
"However, recent figures have helped to confirm that the UK's public finances are not in total meltdown, as some had feared last year."
Cutting public debt, while not choking off recovery, is at the heart of campaigning ahead of next month's election.
Brown suffered a heavy blow on Wednesday from news that Britain's jobless total had struck the highest level since 1994.
Unemployment rose by 43,000 to 2.502 million people in the three months to February, under the International Labor Organization measure. That was the highest total since the three months to December 1994.
The government was given another headache earlier this week from news that the 12-month inflation rate jumped to bigger-than-expected 3.4 percent in March.
In a separate release on Thursday, data showed that British retail sales grew 0.4 percent in March from February and were up 2.2 percent on a 12-month basis.
Investors on Friday will focus on the first official forecast of gross domestic product for the first three months of 2010.
Britain escaped from a record-length recession in late 2009 as GDP grew by 0.4 percent in the three months to the end of December.
© 2010 AFP