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Total debt exceeds £1 trillion for the first time on record


Borrowing was lower than expected in December thanks to stronger tax receipts

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Total debt rose above the £1 trillion mark for the first time on record, official data showed on Tuesday but public borrowing was lower than expected in December thanks to stronger tax receipts.

Public borrowing fell to £13.71 billion in December, down from £15.91 billion a year ago, taking total borrowing to £103.3 billion for the financial year to date, falling from £114.6 billion in 2010/11, data from the Office for National Statistics showed.

The ONS said government tax receipts had been boosted by the bank levy imposed on financial institutions to recoup some of the costs of the financial crisis, while spending fell modestly.

However, public sector net debt excluding financial interventions rose to £1.004 trillion in December, the highest since records began in 1993. The ONS said it expected net debt to dip in January due to tax receipt inflows, but to rise again in February.

Weak growth and uncertainty about the knock-on effects of the euro zone debt crisis have already forced the government to admit it will take two years longer to eliminate its budget deficit than it envisaged when it came to power in 2010.

So far, markets have given the Conservative-led government the benefit of the doubt and most analysts reckon it will achieve its aim of reducing its overall budget deficit to £127 billion, or 8.4 percent of GDP, in the current 2011/12 financial year from £136 billion in 2010/11.

But that could change if the euro zone situation takes a turn for the worse and Britain slides into a deep recession.

Official data on Wednesday is expected to show the economy shrank by 0.1 percent in the final three months of 2011, in line with forecasts produced by the Office for Budget Responsibility, an independent body charged with producing the government's fiscal and economic forecasts at arms-length from ministers.

Such a small dip would not be enough to trigger a reassessment of Britain's prized triple-A sovereign rating, which will come as a relief to the government after the mass downgrade of euro zone nations' sovereign ratings by credit ratings agency Standard & Poor's earlier this month.

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Total debt exceeds £1 trillion for the first time on record
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