Page last updated at 13:55 GMT, Wednesday, 21 January 2009

RBS bail-out hits public finances

RBS branch
The government currently owns 70% of RBS

Britain's public finances took a big hit in December from the government's recapitalisation of Royal Bank of Scotland Group (RBS).

The public sector net cash requirement, which is the amount the government needed to borrow to fund its spending, hit 44.2bn, the highest on record.

Almost half of that came from bailing out RBS, with another 2bn spent on shoring up Bradford & Bingley.

Borrowing since April has been the highest since records began in 1946.


The public finances are "pretty bad", but not unexpectedly so, according to Alan Clarke at BNP Paribas.

"They are deteriorating pretty much in line with what you would expect, given lower tax receipts and increased government spending," he said.

BBC economics editor Stephanie Flanders said the figures were a reminder of how quickly things can get ugly in the budget.

The figure of 44.2bn was 27.5bn above the level in December 2007.

She predicted that even though the tax-take should pick up a bit before April, it is still unlikely that the government will meet its forecast for net borrowing for the financial year.

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