Page last updated at 12:21 GMT, Thursday, 21 January 2010

UK government borrowing hits 15.7bn for December

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UK government borrowing hit a new record for the month of December of £15.7bn, less than analysts expected.

And total borrowing for the first nine months of the financial year was £120bn - the most since records began in 1946.

It shows the impact of recession on the UK's finances, with tax revenues hit, and extra spending on measures to help the economy and on rising benefits.

But economists say the government could still hit its borrowing target for the current financial year.

Total current expenditure rose 7.5% on the year before to £44.9bn in December.

Analyst Jonathan Loynes at Capital Economics said concern about the UK's finances and credit rating was unlikely to ease until "more decisive corrective action" was unveiled.

'Blow-out' slowing?

But there were signs that public sector finances were not deteriorating as fast as they had been, with current receipts in December falling by 0.4% on the previous year - the smallest annual decline since September 2008.

"It looks like the blow-out of the public finances is slowing down to some extent," said Alan Clarke, an economist at BNP Paribas bank.

"Pretty much every month at least for the past year, borrowing has exploded relative to the same month a year before, by an average of £7bn or so, and what happened today was the December figure was only £2bn higher than the same month a year ago. It's a rare positive surprise," said Mr Clarke.

"In addition it is likely that we will get more tax inflows from this [bank] bonus tax than was previously expected, so actually for the first time there is a chance that public borrowing might be a touch lower than the chancellor had projected in the pre-Budget report."

In his pre-Budget report Chancellor Alastair Darling projected full financial year borrowing for 2009/10 of £178bn.

The pound fell about 1% against the US dollar after the borrowing figures, although traders said other factors were also shaping the market.

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