Brown wins pre-election boost from borrowing data
British Prime Minister Gordon Brown won a modest pre-election boost on Thursday as data showed borrowing undershot his government's target but nevertheless 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 vote on May 6.
Britain's 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 on Thursday.
The figure, which includes financial-sector intervention measures, was equivalent to 176 billion euros or 235 billion dollars.
The borrowing amount was 65.9 billion pounds higher than in the same period of 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).
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.
"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, he added: "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.
"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."
Citi analyst Michael Hart agreed that the public finances were in an "exceptionally" poor state.
"Even with this slight undershoot versus the budget (forecast), the UK fiscal position remains exceptionally weak," Hart said.
Cutting public debt, while not choking off recovery, is at the heart of campaigning ahead of next month's election.
Later on Thursday, the election campaign battleground will switch from the economy to foreign policy, as Britain's political leaders stage their second televised debate.
Brown, whose Labour Party is fighting to remain in office after 13 years in power, had taken 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 by 0.4 percent in March from February and jumped by 2.2 percent on a 12-month basis last month.
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 recession in late 2009 as GDP -- the value of all the goods and services produced in the economy -- grew by 0.4 percent in the three months to the end of December.
© 2010 AFP