UK budget deficit reaches record level
March 20, 2009
The UK’s deficit widened to a whopping £8.99bn in February. This is a record level for the month, according to official data.
The data shows that tax receipts have fallen 10%. This made the UK government to borrow more. Unemployment has risen; firms have witnessed falling profits. This has hit the government revenue from taxes.
This fiscal year’s cumulative deficit is £75.2bn. This has increased the chance of government borrowing exceeding its own £77bn forecast for the year. The total debt is already equivalent to nearly 49% of gross domestic product (GDP). An economist at Investec, Philip Shaw, stated the deficit was ‘slightly wider than earlier expectations’.
He added:
“The escalation of public borrowing in the medium term is of great concern. There is going to be a significant pressure on capital markets over the next couple of years.”
According to him, public borrowing next year could well be in the region of £150bn. In longer term it would be “unsustainable”.
The finances have been hit as the UK government is being forced to spend money for the bailout of ailing banks. The Office for National Statistics stated last month that the debts of Lloyds Banking Group and Royal Bank of Scotland (RBS) would be added to the public finances as the government took stakes in the firms.
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