Borrowing down, but growth fears still high
Moody's cautioned Britain on the potential loss of its triple-A credit rating
By CFOWorld.co.uk | CFO UK | Published 10:50, 21 December 11
Public sector borrowing fell more than expected in November but weak growth and euro zone contagion still endanger the government's chances of balancing the books, official data showed on Wednesday.
The Treasury said on Wednesday that it was making "good progress" with its budget deficit programme after data from the Office of National Statistics showed the government borrowed less than expected in November.
"Today's figures show that the government is making good progress on deficit reduction, with borrowing between April and November over £10 billion lower than over the same period last year," a Treasury spokesman said.
"These figures demonstrate the coalition government's unwavering commitment to dealing with the debts it inherited, despite the economic uncertainty in the euro zone and the heightened turbulence in global financial markets."
The figures are a bright spot for the government after ratings agency Moody's warned on Tuesday that Britain had little fiscal leeway in the face of future shocks that could threaten its triple-A credit rating.
Public sector net borrowing excluding public sector interventions - the government's preferred measure - fell last month to £18.093 billion from £20.360 billion in November 2010.
The government is seeking to largely eliminate the country's budget deficit within this parliament, which peaked at more than 10 percent of GDP before the coalition came to power in 2010.
However, attempts to improve the public finances face huge pressure from stagnant growth and uncertainty about the knock-on effects of the euro zone sovereign debt crisis. Some forecasters think the economy could tip back into recession early next year.
A downturn would undermine the government's deficit reduction plans, eroding tax receipts and raising the bill for state benefits.
The ONS said the broader public sector net borrowing measure - which includes the cost of bailing out Britain's banks and some revenues from the sector-- fell to £15.231 billion in November from £18.4 billion in November 2010.
Worries about the economic outlook, high inflation and weak wage growth have eroded consumer and business confidence.
The Bank of England is pumping £275 billion into the stagnant economy to try to boost growth and prevent inflation from falling below its 2 percent target.
Most economists think it is all but certain that the central bank will extend its asset purchase programme once the current round ends in February.
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