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Friday, 21 January, 2000, 11:58 GMT
Public sector deficit surges

A freak month or has Gordon Brown got it wrong?


UK public finances took a turn for the worse in December, with a deficit of 9.2bn - more than twice what had been forecast.


There is something very unusual about the data
James Stewart
Weavering Capital

The official statistics show the December Public Sector Net Cash Requirement (PSNCR) to be the biggest monthly figure since March 1996.

Economists, who had been expecting a figure of 3.3bn, were perplexed over what had caused such a big difference.

James Stewart of Weavering Capital said: "There is something very unusual about the data. If there are no special factors, this will force me to revise my view of public finances in line with the Chancellor's in his March Budget."

Neil Parker of the Royal Bank of Scotland said the surprise figures were likely to hit the value of gilts: "But we should note that the PSNCR did not see any boost in tobacco duties this December as it had previously, nor did it get a boost from windfall tax receipts as it had in December 1998 and 1997."

Freak month?

The Office for National Statistics, which published the data, said the December deficit had been affected by large payments of interest on government debt, which fall due in June and December, as well as a sharp fall in tobacco duty receipts and the lack of any windfall tax payments.

The Chancellor, Gordon Brown, predicted in November that the public sector would have an overall surplus of 1.3bn in the fiscal year ending in March 2000, having previously forecast a 4.5bn deficit.

For the fiscal year to date, the government has borrowed a total of 4.27bn, compared with a surplus of 1.13bn in the same period of 1998.

The December deficit pushed up the country's overall debt level to 353.1bn, equivalent to 39.4% of gross domestic product, or total output.

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