UK Sept PSNB 6.9 bln stg, biggest September deficit since records began in 1993

UK Sept PSNB 6.9 bln stg, biggest September deficit since records began in 1993

	Published : Thu, 18 Oct 2007 09:23 By : Agencies Print this Story

LONDON (Thomson Financial) - Alistair Darling, the new Chancellor of the Exchequer, is going to have his work cut out to hit the borrowing forecast he only made a week ago, following news that the government recorded its biggest ever September deficit.

The office for National Statistics revealed that public sector net borrowing, the government's preferred measure of the public finances, stood at 6.9 bln stg in September, the sixth month of the fiscal year.

That was up on the 5.7 bln the government borrowed in September last year and ahead of analysts' expectations for a more modest increase to 6.3 bln.

The September deficit was also the biggest recorded during the month since records began in 1993.

At the half year stage, PSNB stands at 25.7 bln stg, compared with 21.1 bln stg at the same time in the last fiscal year.

The half-year shortfall is the biggest since 1993/94.

In his pre-budget report last week, Darling forecast PSNB for 2007/08 of 38.0 bln stg. That was up 4 bln on the previous estimate in March.

The increase in borrowing was mainly due to an increase in central government investment.

Once that is stripped, the public finances look a little more healthy.

The current budget deficit, which strips out government investments, was 3.8 bln stg, compared with 3.9 bln stg a year earlier.

For the first six months of the fiscal year, the current budget is in deficit to the tune of 15.4 bln stg, up on 11.9 bln at the same time a year ago.

The current budget is used in calculating the so-called 'golden rule' of balancing the budget, excluding investment, across the economic cycle.

According to Darling, the current budget deficit is seen at 8.3 bln stg in 2007/8.

Elsewhere in today's release, an alternative, but more volatile cash measure of the public finances, also improved.

The public sector net cash requirement in September was 9.0 bln stg. That is up on 12.3 bln last September. Analysts had been expecting a higher cash requirement of 12.5 bln stg.

The statistics office also said net debt at the end of September stood at 516.9 bln stg, equivalent to 36.9 pct of GDP.

A year ago, net debt was 488.0 bln stg, or 36.9 pct of GDP.

The government's second fiscal rule, the sustainable investment rule, requires net debt to be below 40 pct of GDP. In his pre-budget report, Darling forecast bet debt to be 37.6 pct of GDP in 2007/8.

The Institute for Fiscal Studies said Darling has a 44 pct chance of breaching the government's self-imposed rule that debt must not exceed 40 pct as a percentage of national income in 2010/11.

pan.pylas@thomson.com

pp/rar/tfn-loc

The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.